Savills Vietnam reports on Asia- Pacific Investment in Q4/2016

SAVILLS ASIA PACIFIC INVESTMENT QUARTERLY
Q4/2016

Savills recently published the Asia Pacific Investment Quarterly Q4/2016 with comments on current trends in the real estate investment markets of the region.

Highlights:

• In Japan, tight cap rates and favourable refinancing conditions continue to put downward pressure on transaction volumes. The US election generated another tailwind for Abenomics, leading to a softer yen and stronger stock performance. This may be a boon for the property sector.
• China’s investment market has had a record year as the final quarter recorded a flurry of big ticket deals, particularly in Shanghai. Stricter capital controls on money leaving China are likely to result in more onshore activity for the foreseeable future.
•  In Australia, investors' focus has shifted from short-term gain to long-term value as rapidly growing cities supported by government spending are expected to provide plenty of opportunities. 
• In Hong Kong, the investment market was surprisingly buoyant in the last quarter of 2016 with a number of significant locally-driven transactions concluded.
• In Viet Nam, continued strong growth in the broader economy is translating into an impressive performance across all property sectors. 
• In Singapore, the flood of money chasing a limited pool of investible assets has relegated yields to a secondary priority.
• In Korea, 2016 investment volumes reached a record high due to active inbound investment from global investors. 

Vietnam

In the last quarter of 2016, we witnessed a burst of activity in the Vietnam real estate market, with strong interest from both foreign and local investors. Earlier in the quarter, one of the contractors for Ho Chi Minh City’s first metro line, Maeda, partnered with Thien Duc, a local developer, in a joint venture to develop an approximately US$30 million high-end residential project, Waterina Suites. This is the first property investment by the Japan based company after almost two decades being present in Vietnam. In the hotel sector, the global private equity investment firm, Warburg Pincus, joined hands with VinaCapital to form a US$300 million hospitality joint venture, aiming to become a major hotel platform in Vietnam and South East Asia. Shortly after its foundation, the platform acquired a 50% stake in the Sofitel Legend Metropole Hanoi, a five-star hotel in the heart of the country’s capital, from Vietnam Opportunity Fund (VOF) under VinaCapital, with a total consideration of approximately US$100 million. In November, Dubai based real estate developer Limitless, an affiliate of the Dubai World holding group, has resumed work on the US$550 million project Ha Long Star on Vietnam’s North Coast. The project features approximately 2,000 villas, townhouses and apartments along with retail outlets, leisure facilities and hotels in one of the most popular destinations on Vietnam’s hospitality map. On the coast line of Hoi An – a renowned tourist location in Central Vietnam – VinaCapital and its joint venture partners, Gold Yield Enterprises and Sun City Group, have started construction of the US$4 billion project HOIANA, aiming to have its first phase completed in early 2019. Once completed, HOIANA will be Vietnam’s largest integrated resort, with the first phase of this project featuring a 685-key New World Hotel, 100-key Rosewood Residences and Resort, and signature Championship Golf Course designed by Robert Trent Jones II, along with the largest casino in Vietnam.

In 2016, Vietnam’s economy was a highlight in the South East Asian region. Vietnam’s Gross Domestic Product (GDP) increased by 6.21% year-on-year (YoY), which makes Vietnam one of the fastest growing countries worldwide. In the same year, Vietnam attracted over US$24 billion in total newly-registered and additional Foreign Direct Investment (FDI), and achieved over US$15 billion of FDI disbursement, a record high 9% increase over the previous year. Vietnam’s property market continues to show its resilience, with consistent growth across different sectors despite the ups and downs of the global economy. Top-tier real estate companies, especially local players, are shifting their focus to low- to mid-end residential developments to attract more buyers, targeting the young workforce which accounts for the majority of Vietnam’s population. The trend is towards smaller units in locations with good accessibility, a full range of amenities, competitive pricing and favorable payment terms. This market movement is going to help the real estate sector in Vietnam to continue its sustainable growth trend moving forward.