Vietnam continue to hold strong appeal to investors more inherent risks and a complex and developing suite of hedging solutions available. While both yield spreads and economic fundamentals continue to reinforce appetite for real estate investment, the limited investible stock is limited, suggesting that interest is being driven more by longer-term potential than shorter-term returns.
Investors may find Vietnam’s existing yield spreads appealing on paper but its greater appeal is by far its longer term economic growth potential. Oxford Economics forecasts its GDP growth for both 2017 and 2018 GDP to be 6.65%, higher than other major ASEAN countries. Vietnam’s stable political environment and solid economic growth prospects provide a solid foundation for the next stage of growth in its real estate markets.
As rosy as the background looks, average real estate investment turnover from 2012- 2016 was just US$760 million per annum, meaning that there is a limited pool of investment grade assets.
While Vietnam has seen previous property cycles correct sharply, the fundamentals now appear more supportive for a sustainable upturn in the property cycle. Further liberalisation of the economy and removal of foreign holding limits on Vietnamese public companies are also favorable. Foreign investors may have opportunities to build up the stock of prime commercial assets over the next five to ten years.