Vietnam’s realty market sees opportunities from Sino-US trade war
Updated at Wednesday, 19 Dec 2018, 09:14
The Hanoitimes - As the trade war with the US escalates, many investors are withdrawing from China to neighboring countries like Vietnam.
Vietnam has experienced a rising demand for industrial land, housing for workers and other technical infrastructure from foreign investors, who have started to shift their production to the country to avoid adverse impacts of the US-China trade war.
According to Can Van Luc, chief economist of Bank for Investment and Development of Vietnam (BIDV), the trade war has triggered a shift in production locations and Vietnam is among leading destinations where the businesses will relocate.
Vietnam’s real estate market is forecast to keep growing in 2019
A survey by the American Chamber of Commerce showed that one-third of the US firms working in China has either moved out of the country or are weighing the shift to other foreign markets to avoid the impact of trade tensions. Enterprises from other countries working in China are also considering relocating their factories, and the Southeast Asia region, including Vietnam, is their ideal destination.
“This will increase demand for industrial land as well as housing for workers and other technical infrastructure,” Luc said.
Besides, investors are adjusting their portfolios over worries about risks that might arise from the trade tensions, Luc said, adding they might consider increasing investment in real estate companies, property projects and the retail segment in Vietnam through merger and acquisition deals.
Echoing Luc, Nguyen Thi Thanh Huong, general director of Dai Phuc Land, said as the trade war with the US escalates, many investors are withdrawing from China to neighboring countries like Vietnam.
Foreign investment into Vietnam will strongly increase in the next two years, Huong forecast, adding that this trade war will be an opportunity for industrial properties and storage houses. Development in these property segments will also affect positively several related areas, such as residential properties.
John Campbell, industrial services consultant of Savills Vietnam, commented that foreign and mainland Chinese companies are racing to secure manufacturing capacity in Southeast Asia. As one of the fastest growing industrial markets in the region, Vietnam is ready to accommodate the influx of foreign investors.
Ryan Severino, chief economist at US property services company Jones Lang LaSalle, also commented that as the trade dispute escalates, foreign investors are leaving China to save on manufacturing costs.
The trade friction will incite many large-scale manufacturers to set up their factory systems in Vietnam. Increasing land rent for industrial properties in China has put forward Vietnam as the next destination for investors, as it is near China and has reasonable labor costs, Severino said.
Bright outlook in 2019
Besides the supports from the Chinese investment inflow, Vietnam’s real estate market is also projected to keep growing in 2019 thanks to the driver from local buyers, experts said.
According to Marcus Sohlberg from Hong Kong-based Asia Property HQ firm, Vietnam has a population of nearly 100 million where 50 percent are aged below 30, and with a rapidly growing middle class. The country also faces a housing deficit, creating a bigger demand for low-end as well as high-end residential properties.
Besides, Sohlberg said, the relaxed regulations towards foreigners, along with comparatively low property prices, make Vietnam a preferred location among foreign buyers, especially from Hong Kong, mainland China, South Korea and Singapore.
Though Vietnam’s real estate prices have increased much over the past years, the average prices are still lower compared to places like Bangkok, Manila, Kuala Lumpur, Singapore, and Hong Kong. The average price per square meter in Ho Chi Minh City is some 18 percent of that in Singapore, and only 14 percent of the average price per square meter in Hong Kong. Hence, Vietnam will continue to be a lucrative destination for overseas investors.
In addition, there will see an increased supply, along with an increased demand, as more international developers enter the market, Sohlberg said, adding that the record-breaking increase of foreign tourists, as well as an increase in FDI and new office space, will fuel the increase of commercial property.