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By Greg Ohan, Director, Vietnam, JLL
Vietnam, June 19, 2017 – With over 40,000 condominiums being launched in 2017 and 2018 in HCMC alone, is 'Bubble Trouble' on the cards for our already heated real estate market? Depending on who you listen to the answers vary. So where does the most desirable real estate investment location in the region today?
Real estate is a cycle – and every cycle has its waves. It's your ability to understand where we are in the cycle that will give you what you need. Like the repetition of seasons, breakfast, and that annoying friend who keeps asking you for money, real estate follows a pattern that can be observed and thus predicted. However, unlike the consistency of autumn or the regularity of pancakes, the real estate cycle moves at its own pace, and that is the true challenge to predict.
Vietnam's residential real estate market is well past its historic property bubble implosion of 2011 and buyers are riding a wave of streamlined access to credit, low inflation rates, and some of the highest economic growth rates in ASEAN. Playing no small role in the positive buying sentiment is a booming middle class, coupled with laxer ownership laws for foreigners. In 2015, the country opened up investments in real estate to overseas Vietnamese, foreign investment funds, and international firms operating in Vietnam permitting a Tsunami of investment to gather to momentum.
According to a recent Harvard Blog post, Real Estate typically moves through four phases before going back and repeating again. Those phases can be described as: Recovery: Expansion: Hyper Supply: &n Recession. It appears that Vietnam is showing signs of a buoy bobbing up and down in the waves between Expansion & Hyper Supply. If you were paying attention to American real estate in the mid 2000s, you'll recognize this era was characterized by skyrocketing prices, mass building projects, and by everyone and their brother wanting to buy real estate. For the sake of all let's hope investors and developers in Vietnam are not basing their numbers on the belief that rents will continue to rise and for speculators who have paid at or above market that a magical property fairy will allow them to "flip" their properties for a profit.
Everyone is a genius in a bull market. That said, this game of musical chairs will soon come to an end, the music will stop, and many people will be left without a chair. Just make sure you are sitting down first.
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