SKYLINE CHANGERS
PORT FOL IO
SKYLINE CHANGERS While regional competitors slow down, Ho Chi Minh City is sprinting forward, rapidly expanding in every direction while welcoming huge amounts of foreign investment. STORY MICHAEL TATARSKI
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ith its evergrowing skyline, hip young population and relentless traffic, Ho Chi Minh City (HCMC), or Saigon as it is still affectionately called, is a far cry from the classic Vietnam images of rice paddies and water buffalo. The booming economic heart of Vietnam, HCMC has grown at an average of about 9 per cent annually since 2010, helping it gain ground on other major cities in Southeast Asia. This robust expansion is evident on the streets, where Bentleys jostle with motorbikes at stoplights. A metro system is under construction and new high-rises dot the horizon. This influx of money, along with a recent relaxation of the country’s housing laws, are also driving growth in the city’s small luxury housing market, which has begun to take off in earnest after years of sluggishness.
N E W LEGISL ATION SPURS F O R E IG N DE M A N D On 25 November 2014, Vietnam’s National Assembly, the country’s legislative body, passed a longawaited amendment to the Housing Law, which made it much easier for foreign companies and individuals to buy property. Under the new law, which came into effect in July 2015, all that is needed to purchase Vietnamese property is a valid visa and a bank account within Vietnam. Foreigners can buy up to 30 per cent of the units within an apartment or condominium project, and 10 per cent of a landed villa development. According to Greg Ohan, business development director at Jones Lang LaSalle (JLL) Vietnam, this opened the floodgates – at least in terms of interest from overseas. “It didn’t mean that a bunch of foreigners came in, but it meant there was a really positive sentiment
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THIS SPREAD HOLM is situated in the newly developed District 2.
IT IS IMPORTANT TO KEEP IN MIND THAT HO CHI MINH CITY’S LUXURY HOUSING STOCK IS GROWING FROM A VERY SMALL BASE and a positive step towards opening the market,” he says. This coincided with the launch of several new projects in the luxury property market, which had been almost nonexistent previously. High-end District 1 properties such as The Avalon and The Lancaster were built before the 2008 financial crisis, and little has been added since. “For a while if you were looking for condos there were only two or three properties you could
buy or look at,” Ohan says. “This whole luxury residential market that’s growing has really popped up since the new legislation went into effect.” It is important to note, however, that these projects are still to reach completion.
G R O W IN G EA S T Much of this growth is taking place in HCMC’s eastern reaches, especially Binh Thanh District, District 2 and, to a certain extent, District 9. This can be attributed
to the construction of the city’s first metro line, which will connect District 9 to central District 1 while passing through Binh Thanh and District 2. The metro line is expected to go into operation in 2018. Improved highway connections have also drawn interest to this area. “The metro will change the way people live and work,” Ohan states. “If you look at District 2, when you went there five years ago there was nothing. There was
T H E P E A K
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P ORT F OL IO • P R OP E RT Y
“WHAT’S CRITICAL TO FOREIGN INVESTORS IS THAT THERE ARE ONLY A SMALL HANDFUL OF PROPERTIES YOU’D FEEL COMFORTABLE INVESTING IN, AND THE MAJORITY OF THOSE ARE DEVELOPED BY SINGAPOREAN, HONG KONG AND KOREAN FIRMS”
— Greg Ohan, Jones Lang LaSalle
one four-lane bridge, which has doubled [in size] since then … and we’re seeing residential and commercial businesses position themselves near the metro.” District 2 is home to two upcoming projects that will be among the first in the new wave of international-level luxury housing: HOLM and The Nassim. According to David Clarkin, joint managing director of Sapphire, HOLM’s developer, the gated compound houses 29 villas in Thao Dien, a leafy District 2 neighbourhood that is home to international schools, upscale restaurants and boutique shops. The compound is divided among 11 riverfront villas on the
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Saigon River, six pool villas and 12 garden villas, ranging in price from US$1.7 million to US$5.5 million. Clarkin shares that HOLM features 24-hour security, 100 per cent backup power, treated water and a promenade along the river. The project will be completed by April, and the fully furnished villas include the full range of luxury amenities that an investor would expect. The Nassim, a joint condominium project between SonKim Land, a local developer, and Hongkong Land, is also located in Thao Dien. The project is billed as “a new landmark of luxury,” according to the developers, and is slated for completion in the second quarter of 2018.
THIS SPREAD A new wave of luxury homes in District 2, including Nassim, is located along the city's first metro line.
The building will feature individual lifts for each unit and panoramic views of the Saigon River, with prices starting at around US$260 per sq ft.
SUPPLY BEGINNING TO GRO W, ALONG WITH P RI C ES While developments like HOLM and The Nassim are drawing attention from overseas investors, it is important to keep in mind that Ho Chi Minh City’s luxury housing stock is growing from a very small base. According to JLL Vietnam’s 2017 HCMC Market Overview, luxury made up less than 1 per cent of total apartment stock from 2011-2016.
T H E P E A K
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P ORT F OL IO • P R OP E RT Y
“What’s critical to foreign investors is that there are only a small handful of properties you’d feel comfortable investing in, and the majority of those are developed by Singaporean, Hong Kong and Korean firms,” Ohan says. In general, foreign investors are attracted to projects developed by foreign companies. Marc Townsend, managing director of CBRE Vietnam, shares that real estate service firms used to joke that there was no luxury in the city. “So, for 10 years there was no interest from Hong Kong in Ho Chi Minh City,” he says. Now, with new projects in the pipeline, “we haven’t seen any of that stuff finished yet, but investors are there.” CBRE’s most recent Vietnam market report notes that 2016 was a banner year for the city’s luxury segment, with 2,700 units launched, the most in a decade. The report notes that the segment has been dominated by local developers, which will continue as Vinhomes, the largest property developer in the country, nears completion of the enormous Central Park and Golden River projects in Binh Thanh District and District 1, respectively. Prices are expected to rise in this segment as well, potentially by as much as 15 per cent this year, according to CBRE Vietnam. This has impacted the market immensely, just like the amended housing law. “The real reason people started investing is because prices went up,” Townsend explains. “Developers also started changing their tune from 100-250 square metre units to 60-100 square metres, so if you had just gotten married you didn’t have to buy a 120 square metre unit. There was more choice and often a better-designed product.”
VALUE F OR MON EY Of course, a city can have viable projects and appropriate
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legislation, but if the numbers don’t add up then investors will stay away. Both Ohan and Townsend argue that Ho Chi Minh City offers superb value for real estate investors. “You can buy a very nice three-bedroom apartment for under US$600,000 here, and you can’t buy a shoebox for less than US$1 million in Hong Kong,” Townsend states. Ohan adds, “if you step up to the higher-end projects that Hong Kong investors are looking at, like The Nassim … that’s done really well with Hong Kong investors.” Yields are also high in Ho Chi Minh City, while resale prices are increasing as well. According to Ohan, average yields are about 8 per cent net, compared to yields of just 2-3 per cent in Hong Kong. Ohan cautions that while there is great value to be had in Ho Chi Minh City, it is important to make sure investors understand how to repatriate their money once it is made. “Getting your money is a major step and you really need to make sure you have the right team and the right consultants,” he advises. “If you’ve resold your property and you want to go through the process of repatriation, you have to go through the complete tax process, and in Vietnam there are very stringent procedures with banking. So as a foreign investor who isn’t based here it’s critical that you have a team of consultants working with you.”
HEADI NG SK Y WA R D The next year will be key in terms of luxury housing in Ho Chi Minh City, as the first international-level projects come online. Developments like HOLM and The Nassim are selling well, as is the Serenity Sky Villa. Developed by SonKim Land, this condominium tower is located in District 3, part of the new crop of projects situated outside of
“FOR 10 YEARS THERE WAS NO INTEREST FROM HONG KONG IN HO CHI MINH CITY”
— Marc Townsend, CBRE Vietnam
THIS SPREAD The HOLM development features both luxury highrises and furnished villas.
District 1. The building features 45 duplex units, almost all of which have a private pool, spread across 18 floors. Units range from one- to four-bedrooms and 753-2,616 sq ft, while prices start at US$372 per sq ft. Completion is planned for late 2018. With such developments coming online, along with huge openings expected in lower-end segments, Ohan expects rents to soften somewhat. “The average two-bedroom that used to rent for US$1,000 could be US$850-900 a month, because landlords are going to be competing for tenants,” he says. “You may not see resale prices dropping so much, but you’ll start to see as investors take possession of their property that rents may drop.” New luxury projects will
likely continue to cluster in District 2 thanks to infrastructure developments like the first metro line, in addition to Phu My Hung in District 7, a planned township south of the city centre popular with Korean and Taiwanese investors. Townsend says all of CBRE Vietnam’s foreign clients are buying in these two districts. “It’s all been down to the potential for capital appreciation, the ease of resaleability and the ease of rentability. It doesn’t really matter where you’re from, those are the key things,” he explains. With Vietnam expected to remain a strong economic performer in coming years, Ho Chi Minh City looks set to take off as an investor darling.
T H E P E A K
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SKYLINE CHANGERS While regional competitors slow down, Ho Chi Minh City is sprinting forward, rapidly expanding in every direction while welcoming huge amounts of foreign investment. STORY MICHAEL TATARSKI
5 8
T H E P E A K
T H E P E A K
5 9
P ORT F OL IO • P R OP E RT Y
W
ith its evergrowing skyline, hip young population and relentless traffic, Ho Chi Minh City (HCMC), or Saigon as it is still affectionately called, is a far cry from the classic Vietnam images of rice paddies and water buffalo. The booming economic heart of Vietnam, HCMC has grown at an average of about 9 per cent annually since 2010, helping it gain ground on other major cities in Southeast Asia. This robust expansion is evident on the streets, where Bentleys jostle with motorbikes at stoplights. A metro system is under construction and new high-rises dot the horizon. This influx of money, along with a recent relaxation of the country’s housing laws, are also driving growth in the city’s small luxury housing market, which has begun to take off in earnest after years of sluggishness.
N E W LEGISL ATION SPURS F O R E IG N DE M A N D On 25 November 2014, Vietnam’s National Assembly, the country’s legislative body, passed a longawaited amendment to the Housing Law, which made it much easier for foreign companies and individuals to buy property. Under the new law, which came into effect in July 2015, all that is needed to purchase Vietnamese property is a valid visa and a bank account within Vietnam. Foreigners can buy up to 30 per cent of the units within an apartment or condominium project, and 10 per cent of a landed villa development. According to Greg Ohan, business development director at Jones Lang LaSalle (JLL) Vietnam, this opened the floodgates – at least in terms of interest from overseas. “It didn’t mean that a bunch of foreigners came in, but it meant there was a really positive sentiment
6 0
T H E P E A K
THIS SPREAD HOLM is situated in the newly developed District 2.
IT IS IMPORTANT TO KEEP IN MIND THAT HO CHI MINH CITY’S LUXURY HOUSING STOCK IS GROWING FROM A VERY SMALL BASE and a positive step towards opening the market,” he says. This coincided with the launch of several new projects in the luxury property market, which had been almost nonexistent previously. High-end District 1 properties such as The Avalon and The Lancaster were built before the 2008 financial crisis, and little has been added since. “For a while if you were looking for condos there were only two or three properties you could
buy or look at,” Ohan says. “This whole luxury residential market that’s growing has really popped up since the new legislation went into effect.” It is important to note, however, that these projects are still to reach completion.
G R O W IN G EA S T Much of this growth is taking place in HCMC’s eastern reaches, especially Binh Thanh District, District 2 and, to a certain extent, District 9. This can be attributed
to the construction of the city’s first metro line, which will connect District 9 to central District 1 while passing through Binh Thanh and District 2. The metro line is expected to go into operation in 2018. Improved highway connections have also drawn interest to this area. “The metro will change the way people live and work,” Ohan states. “If you look at District 2, when you went there five years ago there was nothing. There was
T H E P E A K
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P ORT F OL IO • P R OP E RT Y
“WHAT’S CRITICAL TO FOREIGN INVESTORS IS THAT THERE ARE ONLY A SMALL HANDFUL OF PROPERTIES YOU’D FEEL COMFORTABLE INVESTING IN, AND THE MAJORITY OF THOSE ARE DEVELOPED BY SINGAPOREAN, HONG KONG AND KOREAN FIRMS”
— Greg Ohan, Jones Lang LaSalle
one four-lane bridge, which has doubled [in size] since then … and we’re seeing residential and commercial businesses position themselves near the metro.” District 2 is home to two upcoming projects that will be among the first in the new wave of international-level luxury housing: HOLM and The Nassim. According to David Clarkin, joint managing director of Sapphire, HOLM’s developer, the gated compound houses 29 villas in Thao Dien, a leafy District 2 neighbourhood that is home to international schools, upscale restaurants and boutique shops. The compound is divided among 11 riverfront villas on the
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T H E P E A K
Saigon River, six pool villas and 12 garden villas, ranging in price from US$1.7 million to US$5.5 million. Clarkin shares that HOLM features 24-hour security, 100 per cent backup power, treated water and a promenade along the river. The project will be completed by April, and the fully furnished villas include the full range of luxury amenities that an investor would expect. The Nassim, a joint condominium project between SonKim Land, a local developer, and Hongkong Land, is also located in Thao Dien. The project is billed as “a new landmark of luxury,” according to the developers, and is slated for completion in the second quarter of 2018.
THIS SPREAD A new wave of luxury homes in District 2, including Nassim, is located along the city's first metro line.
The building will feature individual lifts for each unit and panoramic views of the Saigon River, with prices starting at around US$260 per sq ft.
SUPPLY BEGINNING TO GRO W, ALONG WITH P RI C ES While developments like HOLM and The Nassim are drawing attention from overseas investors, it is important to keep in mind that Ho Chi Minh City’s luxury housing stock is growing from a very small base. According to JLL Vietnam’s 2017 HCMC Market Overview, luxury made up less than 1 per cent of total apartment stock from 2011-2016.
T H E P E A K
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P ORT F OL IO • P R OP E RT Y
“What’s critical to foreign investors is that there are only a small handful of properties you’d feel comfortable investing in, and the majority of those are developed by Singaporean, Hong Kong and Korean firms,” Ohan says. In general, foreign investors are attracted to projects developed by foreign companies. Marc Townsend, managing director of CBRE Vietnam, shares that real estate service firms used to joke that there was no luxury in the city. “So, for 10 years there was no interest from Hong Kong in Ho Chi Minh City,” he says. Now, with new projects in the pipeline, “we haven’t seen any of that stuff finished yet, but investors are there.” CBRE’s most recent Vietnam market report notes that 2016 was a banner year for the city’s luxury segment, with 2,700 units launched, the most in a decade. The report notes that the segment has been dominated by local developers, which will continue as Vinhomes, the largest property developer in the country, nears completion of the enormous Central Park and Golden River projects in Binh Thanh District and District 1, respectively. Prices are expected to rise in this segment as well, potentially by as much as 15 per cent this year, according to CBRE Vietnam. This has impacted the market immensely, just like the amended housing law. “The real reason people started investing is because prices went up,” Townsend explains. “Developers also started changing their tune from 100-250 square metre units to 60-100 square metres, so if you had just gotten married you didn’t have to buy a 120 square metre unit. There was more choice and often a better-designed product.”
VALUE F OR MON EY Of course, a city can have viable projects and appropriate
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T H E P E A K
legislation, but if the numbers don’t add up then investors will stay away. Both Ohan and Townsend argue that Ho Chi Minh City offers superb value for real estate investors. “You can buy a very nice three-bedroom apartment for under US$600,000 here, and you can’t buy a shoebox for less than US$1 million in Hong Kong,” Townsend states. Ohan adds, “if you step up to the higher-end projects that Hong Kong investors are looking at, like The Nassim … that’s done really well with Hong Kong investors.” Yields are also high in Ho Chi Minh City, while resale prices are increasing as well. According to Ohan, average yields are about 8 per cent net, compared to yields of just 2-3 per cent in Hong Kong. Ohan cautions that while there is great value to be had in Ho Chi Minh City, it is important to make sure investors understand how to repatriate their money once it is made. “Getting your money is a major step and you really need to make sure you have the right team and the right consultants,” he advises. “If you’ve resold your property and you want to go through the process of repatriation, you have to go through the complete tax process, and in Vietnam there are very stringent procedures with banking. So as a foreign investor who isn’t based here it’s critical that you have a team of consultants working with you.”
HEADI NG SK Y WA R D The next year will be key in terms of luxury housing in Ho Chi Minh City, as the first international-level projects come online. Developments like HOLM and The Nassim are selling well, as is the Serenity Sky Villa. Developed by SonKim Land, this condominium tower is located in District 3, part of the new crop of projects situated outside of
“FOR 10 YEARS THERE WAS NO INTEREST FROM HONG KONG IN HO CHI MINH CITY”
— Marc Townsend, CBRE Vietnam
THIS SPREAD The HOLM development features both luxury highrises and furnished villas.
District 1. The building features 45 duplex units, almost all of which have a private pool, spread across 18 floors. Units range from one- to four-bedrooms and 753-2,616 sq ft, while prices start at US$372 per sq ft. Completion is planned for late 2018. With such developments coming online, along with huge openings expected in lower-end segments, Ohan expects rents to soften somewhat. “The average two-bedroom that used to rent for US$1,000 could be US$850-900 a month, because landlords are going to be competing for tenants,” he says. “You may not see resale prices dropping so much, but you’ll start to see as investors take possession of their property that rents may drop.” New luxury projects will
likely continue to cluster in District 2 thanks to infrastructure developments like the first metro line, in addition to Phu My Hung in District 7, a planned township south of the city centre popular with Korean and Taiwanese investors. Townsend says all of CBRE Vietnam’s foreign clients are buying in these two districts. “It’s all been down to the potential for capital appreciation, the ease of resaleability and the ease of rentability. It doesn’t really matter where you’re from, those are the key things,” he explains. With Vietnam expected to remain a strong economic performer in coming years, Ho Chi Minh City looks set to take off as an investor darling.
T H E P E A K
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