Vietnam: Dreamland in the making
July 02, 2009 - Vietnam
Vietnam's second home market, particularly the luxury segment, is still in its nascent stages, but the country's delicate mix of cosmopolitan luxury and old world charm has seized the attention of global investors.
You could easily pass an afternoon in Ho Chi Minh City sipping café sua da (strong Vietnamese coffee with a dollop of sweetened condensed milk) on Dong Khoi Street watching shoppers lug their wares from the nearby Louis Vuitton boutique.
Or you could meander the streets of Hanoi's Old Quarter, enjoying the French colonial architecture until you feel the need to rest with a cheap bowl of rice noodles at a local vendor's formica table.
Fold in the country's tropical climate and picturesque beaches and it becomes increasingly clear why the international real estate community is buzzing about this Southeast Asian country.
Vietnam's second home market is still in its nascent stages. "It really just started in the last two years," says Jill Chodorov, country manager of Sotheby Real Estate's Ho Chi Minh City office, "when one of the major developers here [Indochina Capital] built The Nam Hai."
The Nam Hai, an upscale resort in Hoi An in central Vietnam, has been the country's biggest success story, often cited by investors and buyers eager to tap into the Vietnamese market.
The resort launched operations in 2006, offering 40 pool villas priced between US$2.2 and US$2.25 million. At the time of writing, 36 had sold.
The Nam Hai's location is a key element to its success. Aside from being a popular beach destination, Hoi An is also a UNESCO world heritage site, protected for its slew of colonial buildings and ancient temples.
The steady stream of travelers and the time-share ownership offered made it an attractive investment for overseas buyers and fund companies. The resort also capitalised on reliable infrastructure.
Compared to other destinations in Vietnam, access to Hoi An from main hubs like Hanoi and Ho Chi Minh City is frequent, reliable and relatively convenient.
However, some like Marc Townsend, director of CB Richard Ellis in Ho Chi Minh City are sceptical of Vietnam's potential as a second home market.
Unlike some of his peers, Townsend does not view The Nam Hai as a harbinger of countrywide success.
"Vietnam is not known for its infrastructure like Malaysia or China," he says. "Until we get direct flights from Taipei, Seoul, Osaka, Singapore, Moscow and maybe even Beijing now with their tourist numbers, without that, its growth as an international second home market is limited."
Still, developers are keen. A new Six Senses Evason Hideaway is being built on Con Dao Island in Vung Tau, a historically low luxe beach destination popular for its convenience to Ho Chi Minh City.
The developer is once again Indochina Capital. Whilst Chodorov notes the new property is "on an exotic island, which appeals to people all over the world," Townsend is quick to point out "you can't have a one-star road to get to your 6-star resort.
The whole thing has to be seamless." Currently, there are four flights servicing Con Dao Island weekly from Ho Chi Minh City.
Infrastructure aside, there is also the global financial crisis to consider. According to a recent CB Richard Ellis report on Vietnam's second home market, over 40 investment projects have been approved in Hoi An and Phu Quoc Island (another relatively new beach destination off the eastern coast of the Mekong Delta), but the majority of them are on hold.
For buyers, a side benefit of the crisis is lower prices. Analysts and realtors have seen price decreases between 10-30 percent in the luxury market. Chodorov notes that she has seen downward movement mostly in the 10 percent range.
"Given the global economy right now," she says, "that's not so bad. It's a good enough drop to get buyers interested, but not so significant that it's causing developers to have issues."
David Clarkin, managing director of Refico Real Estate Group, a Vietnamese developer, views the future with a wary, but optimistic eye. "This year's going to be challenging," he says.
"What we don't know is how Vietnam will be affected by the global down turn. It's obviously being affected at some point, but the [International Monetary Fund] is still talking about 6.5 percent growth through 2009."
Refico's current project, The Sanctuary, began selling during a dismal turn in the market in March of last year.
Despite the severe domestic liquidity crunch caused by the government pulling free cash out of the market in an effort to curb rampant inflation, The Sanctuary did surprisingly well.
"Out of stage one's 32 villas, 26 sold, which quite frankly amazed me," says Clarkin. "The prices ranged from US$500,000 to just on US$2 million, so significant prices. But they've continued to sell, which is gratifying."
The Sanctuary is comprised of a number of beach villas in Ho Tram, also located in Vung Tau.
Clarkin believes the resort will be free of access woes thanks to the newly built highway that connects the beach town to Ho Chi Minh City. Ho Tram is also home to one of the most ambitious tourism investment projects in Vietnam - the MGM Grand Ho Tram, a 1,100-room entertainment complex complete with a Las Vegas style casino, spearheaded by Canadian developers Asian Coast Development, Ltd.
The majority of The Sanctuary's villas sold to wealthy Vietnamese. "Given world events, we haven't marketed off shore at all," Clarkin notes dryly.
In addition to local buyers, Chodorov, of Sotheby's, says, "I'm getting a lot of Vietnamese who live overseas who come back and want to invest and buy vacation and retirement homes."
Vietnamese clients in the market for second homes are generally equipped with enough capital to buy properties outright.
The industry will continue to welcome offshore investors and foreign buyers (indeed, the new Six Senses property appears geared almost entirely towards European sensibilities), but it won't rely on them to pull through whatever economic woes lie ahead.
Instead, realtors and developers here are hanging their hopes on cash flush Vietnamese buyers shopping for pristine beach views to go with their cups of café sua da.
report, Ho Chi Minh City, UNESCO