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Vietnam Real Estate Report Q4 2010
Business Monitor International, Sep 2010, Pages: 72
Vietnam’s commercial Real Estate market has been overshadowed by a property glut. Rental rates fell by double-digit rates through 2009 – in each of the three cities for which the authors gathered data (Hanoi, Ho Chi Minh City and Da Nang) and across all three sub-sectors. Vacancy rates are generally running at around 30%.
Normally, in an economy that has been growing so quickly – that the authorities are tightening both fiscal and monetary policy in order to curb inflationary pressures – rents and capital values would fall until much of the vacant space is absorbed.
In early 2010, it was not clear that this process of adjustment was underway in Vietnam. The government had intervened to re-regulate the commercial Real Estate sector. Approvals for projects that have been proceeding slowly have been revoked. The aim of this measure may have been to prevent/discourage speculation in a country where inflation has been rising. More likely, it was a move to curb supply at a time that rental rates were under downwards pressure.
By mid-2010, though, it had become clear that the market was stabilising. The authors in-country sources indicated that Da Nang office and Hanoi industrial rents had increased dramatically since 2009. Elsewhere, rents tracked sideways or rose by single digit amounts. Looking forward, their sources anticipate that rents will continue to move sideways through 2011. They are less optimistic about the prospects for higher rents in Hanoi than in Ho Chi Minh City or Da Nang.
The authors view is that the government has allowed market forces to operate in at least some of the market. One of the key findings from their mid-2010 interviews was that yields had risen sharply in the office and industrial sub-sectors of Hanoi and Da Nang. The implication is that there has been a major adjustment in these sub-sectors – in the form of a slump in capital values.
It may well be that 2010 comes to be seen as the year in which the key trends in Vietnam’s commercial Real Estate sector became much clearer. A substantial over-supply of property is being absorbed – although official intervention is still preventing across the board adjustments in rents, yields and capital values. Conditions in particular sub-sectors remain volatile – but yields are in general likely to move sideways or downwards over the coming four years.
Key Features of This Report
This is the latest edition of a new series of industry reports that seeks to identify the key dynamics of the real estate sectors of 44 countries around the world, some of which are developed and some of which are, in every sense, emerging markets. The questions that the report seeks to answer for each country remain as follows: what are the main issues that will matter to actors in and around real estate development in the country concerned, both over the long and the short term? What are the main constraints that they face? What are the key insights that one garners when one compares the real estate sector of the country concerned with its peers in other countries?
In Q3 the authors introduced a very substantial new improvement to the reports. They incorporated data and qualitative observations provided by commercial real estate agents operating in the countries surveyed. As a result the authors gained a much clearer picture of the balance between demand and supply in each of three main sub-sectors – office, retail and industrial. They also introduced a new approach to the forecasting of rental yields, which is discussed in the methodology sector of this report.
In Q4, the authors have incorporated a lot of new data in relation to rents and yields in 2010. They gained this data by way of a new round of interviews with their in-country sources in mid-2010. In some cases, the latest information from their sources has caused them to make significant revisions to their forecasts for 2011-2014. They asked their sources to indicate what growth in rents is likely for 2011. They explain their answers in the Industry Forecast Scenario.
Vietnam Real Estate Report provides industry professionals and strategists, corporate analysts, real estate associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Vietnam's Real Estate industry.
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