Hanoi luxury condo market: a shining star
Hanoi luxury condo market: a shining star
Despite Hanoi property market has not showed off the recover sign yet, Richard Colville, senior portfolio manager for Residential and Asset Services of CBRE Vietnam still sees this segment as a shinning star.
Most recent discussion about housing has focused on the social segment and what impact the Vietnamese government’s VND30 trillion ($1.4 billion) loan subsidy programme will have on the market for this type of housing.
Meanwhile multiple mid-priced, half-built mass housing projects encircle Vietnam’s major cities like concrete skeletons: even the few that are completing and have reasonable sales volumes (such as Royal City or Times City) have suffered declines in value which leave a bitter taste in the mouth. The situation at the upper end of the housing pyramid is rather different and it now appears a suitable time to enter the market.
Hanoi’s elites, like in most countries, rarely feel the effect of the wider economic climate. Nevertheless they are careful when deciding how to invest their cash (and cash remains the preferred currency for real estate transactions here).
Price declines over the past few years mean that luxury properties are within the purchasing power of a greater number of people than ever before.
Given that many local Vietnamese regard renting residential space as a waste of money, now is an ideal opportunity to buy luxury property.
Additional demand from Overseas Vietnamese (who purchase properties in order to retain links with the home country) helps support prices, while even non-Vietnamese (who are now permitted to own condos) have started purchasing units within projects by trusted developers – all potentially increasing the of the market further.
Note that people with money outside the country may hesitate to bring money in due to perceived difficulties taking the money outside later.
The main competitor of luxury condos is landed housing: if they had to choose, most Vietnamese would aspire to own a house rather than an apartment due there are fewer regulations, no home owners’ committee to negotiate with and greater control.
However, in popular areas, houses with desirable land sites are rarely on the market, while existing buildings need to be renovated and demolished pushing up the total price of a landed property, and car access can often be difficult.
Conversely luxury condos normally have good access, bright views and come with amenities and facilities that would be uneconomic to install and maintain in a landed house.
The lifestyle and career of the luxury condo buyer often includes significant time spent out of town, therefore the added security of an apartment complex, where you can “lock and go”, combined with onsite maintenance and cleaning, matches the requirements of the segment.
Regarding the current market supply it is clear that developers have responded to the market slowdown by delaying or cancelling residential construction projects.
The attraction of owning a brand new property remains compelling, however with only one grade A project completing successfully each year between 2012 – 2014 means that choices are limited.
This helps create a pricing “floor” over time as supply of desirable apartments is constrained. Alternatively, premium buyers may consider buying into established high quality buildings with good facilities and reputation such as Indochina Plaza Hanoi, Golden Westlake, Pacific Place or Vincom Ba Trieu.
It is said that Hanoi’s housing market suffers from an overhang of unsold stock which will take one and a half to four years to clear at current absorption rates. However much of this stock is unsellable due to poor design, poor construction and poor location so can be disregarded.
Some developers have successfully converted such stock to serviced apartments which can return a reasonable yield – although these are a minority.
In general, scarcity of good property, and few new developments, means that the future is bright for the luxury condo segment.
Looking ahead to 2014 only one luxury condominium building is opening in Hanoi: the Hoang Thanh Tower. Located in Hanoi’s most exclusive district, and fitted out to international hotel standards of style and refinement, this property will offer its elite customers classic décor combined with modern lifestyle comfort.
With the capital’s economy continuing to grow at 8 per cent per year and confidence returning, purchases are likely to prove quality long term investments.
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