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Colliers Vietnam 2014 Top 7 Real Estate Trends


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Colliers Vietnam forecasts the top 7 real estate trends for 2014.

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Colliers Vietnam 2014 Top 7 Real Estate Trends

  1. 1. VIETNAM | DECEMBER 2013 2014: For reports, join our group: or visit us at The Top 7 Real Estate Trends It’s the time of year to review your asset strategy going into the New Year as developed economies show signs of recovery. While recovery is on the horizon and the Fed will begin tapering as of January 2014, strong forward guidance of low rates reduces risk and helps to temper near-term volatility. Expect rates to stay low for 2014 and into 2015. With this in mind, when you’re allocating your assets and reconsidering your strategy look to Asia’s emerging and frontier markets for higher return opportunities. Asia will continue to lead the world in growth - 6% in 2014 and 5.5% in 2013. However, expectations for Asia should be revised downwards. As a rule, expect returns to shrink over the next several years across all markets and asset classes in emerging markets as they continue to converge with developed economies. 2013 was a stabilizing year for Vietnam and the risk reward environment is beginning to gain clarity. It has been a clean sweep across the board in 2013 as GDP, inflation, interest rates, forex reserves, having of NPLs, restructuring of the finance sector have all made gains. FDI continues to pour into Vietnam as the investment environment is improved and foreign firms can leverage industry experience to capture leads in the market. This will continue to strengthen exports, develop the support industries, buttress the currency, and lead to a rise in M&A deals. While the indicators are encouraging, there are still uncertainties that lie ahead such as the progress of financial restructuring, NPLs, forex stability, domestic demand, and the recovery of developed economies that will dampen foreign investments in the short term. The Eurozone is expected to expand by 1%-2%, US by 2%-3%, China by 7%-8%, and Japan by 1.5%. Colliers International | Accelerating success |
  2. 2. As we turn the corner into 2014, here are 7 trends to follow: 1. The economy is growing once again and GDP is forecasted 90% within 1.5 years. Both grades A and B will experience to grow by 5.7% in 2014 compared to 5.34% in 2013 and increased demand in the year ahead and should represent 5.03% in 2012. The services and industrial sectors are the left-tail of future demand riding on GDP and performance expected to expand payrolls and capital investments driving of the service sector. up the appetite for credit. Credit appetite and general economic expansion will push inflation up to 7.5% from 6.4% in 2013. Expect interest rate to follow suit across the board. 5. 2013 saw residential finally begin to thaw. Social housing has shown the most movement as demand outstrips supply. As confidence re-enters the market and home loans are gaining momentum, the mid-income segment has also 2. The VND will lose value to the dollar. VND will devalue seen an uptick in both Q3 and Q4. Both supply and demand further by 1-5% due to the rebound of major markets such for mid-income will be healthy in 2014 and we expect a as the US, China, and Japan. As foreign markets recover, thawing of the luxury sector by the end of 2014. their return-to-risk ratios improve beyond that of Vietnam and result in a net withdrawal of dollars. Strong foreign trade balance, FDI, and overseas remittances support the VND and help cushion the drop. 6. Finance reform will make significant gains in 2014 as the framework is clearly laid out. The VAMC, which has already made strides in acquiring NPLs worth close to US$900 million from 21 lenders, will be further supported by a legal Vietnam must focus on reducing country risk as well as framework to set up a debt trading market. Cross-ownership increasing the number of products to fill in a risk-return of financial institutions will be assessed via more stringent spectrum that currently has many gaps. There are many auditing and further consolidation will occur. ways to achieve these goals, such as securitization of Circular 02, delayed until June 1st, will cast light on the lending institutions, real estate (such as creating a market for non performing loans and setting up REITs of properties, mortgages, and loans), raising the ownership cap of protected sectors, and tackling the ease of doing business in Vietnam among other things. The VND will devalue steadily over the next several years until these are addressed unless leading markets struggle. 3. Property prices have begun to firm up and have shown strong downward resistance. Prices will continue to firm, and in certain classes, such as commercial retail, prices have already begun to rise. Strong demand for retail has kicked in 3Q and 4Q 2013 nudging rents up in prime locations with wide frontages and corner real estate. 4. Commercial office demand rises in the second half of the year and will apply upward pressure on rents and occupancy with relatively little new supply. The Vietcombank Tower will be the major source of supply in 2014, approximately 50,000 sqm NFA, and we expect occupancy to stabilize at KYNAM DOAN Investment Manager +84 1223 128 032 real balance sheets ++as it lays the guidelines in classifying assets and provisioning for risk. While driving forward reform, it will be an additional source of volatility. 7. There will be a proliferation of products such as corporate bonds and securitization of real estate that will be further supported by an increase in ownership cap, credit rating agencies, and improved oversight. Such a proliferation will encourage the country to convert savings into GDPproducing investments 2013 was year of stabilization. 2014 will a year of early growth and major reform. However, market fundamentals are still weak and the country must show strong commitment to economic reform or else risk falling into prolonged stagnation. We hope you prosperity in the New Year and let us know your expectations and how you plan to prepare for it. Happy New Year! COLLIERS INTERNATIONAL HO CHI MINH OFFICE Bitexco Office Building, Level 7 19-25 Nguyen Hue,District 1, Tel +84 (8) 3827 5665 Fax +84 (8) 3827 5667 Accelerating success