Real Estate News September 2016

Here you will find a few headlines from the Vietnamese market:

Inter-bank rates hit record low 
According to the BVSC weekly bond news report between August 22 and 26, thanks to abundant liquidity, the inter-bank rates for all tenors last week reduced by roughly 0.5 per cent to 0.59 per cent per year for overnight loans, 0.59 per cent for one-week loans and 0.92 per cent for two-week loans. Early this year, the inter-bank rate averaged at 5 per cent per year.

VNREA: Real estate inventories drop
The total value of property inventories nationwide by mid-August had dipped by VND14.93 trillion (663.5 Million USD) or 29.34%, against December last year to VND36 trillion (USD1.6 billion). Residential land accounted for the largest part of real estate inventories, at nearly VND16 trillion (711 Million USD) or 4.4 million sqm. Low-rise housing projects came second with 4,951 unsold units worth a total of VND9.89 trillion (439.5 Million USD), followed by condominiums with 4,883 units valued at VND9.4 trillion (417.7 Million USD). Meanwhile, land for commercial purposes totaled over one million square meters worth VND3.255 trillion (144.6 Million USD). In Hanoi, unsold properties were worth VND5.82 trillion (258.6 Million USD), down VND923 billion (41 Million USD), or nearly 14%, against December last year and VND64 billion (2.8 Million USD) compared to June.

Economists still upbeat on Vietnam 
Despite facing numerous challenges, some international organisations remain optimistic about Vietnam's economic prospects for 2016 due to surging manufacturing and foreign investment. In its report on Vietnam's economy released last week, HSBC stressed, "These are difficult times for Vietnam. The economy is likely to miss the government's growth target of 6.7 per cent for 2016. But we find cause for optimism in the coming quarters. "We think that growth will be closer to the 6 per cent handle this year (our GDP growth forecasts are at 6.3 per cent for 2016 and 6.6 per cent for 2017. Vietnam's manufacturing sector activity continues to hold up well regionally.

No zoning plan changes for Thu Thiem
The HCMC government has turned down proposed changes to the zoning plan for a section in Thu Thiem New Urban Area even though the changes would pave the way for a US$4-billion project to go up there. HCMC Committee Chairman Nguyen Thanh Phong made clear the city government's disapproval of the proposed changes in a conclusion issued last week following a meeting with the Investment and Construction Authority of Thu Thiem New Urban Area (Thu Thiem ICA). Three U.S. investors - Steelman Partners, Cantor Fitzgerald and Weidner Resorts, and Vietnam's Imex Pan Pacific Co Ltd proposed developing a project in Functional Section No. 1 in the heart of the new urban area. They are active in the finance, banking, hotel and resort sectors. The HCMC government said the project did not match the scale-1/ 2000 zoning plan for Functional Section No. 1 and stressed the city would not adjust the approved zoning plan.

Vietnam’s M&As to hit a record high of $6 billion in 2016  
Foreign retailers are flooding into the country as consumer spending is set to grow 47 percent in the next four years.  Vietnam’s retail market has grown at roughly 10 percent per year in recent years. Retailers have seen Vietnam’s relatively young population and expanding middle class as the main drivers of robust retail market growth. Vietnam has thus seen a surge in M&A deals in the retail sector from Thailand, Japan, and Korea. Meanwhile, Vietnamese local businesses have also begun to pick up speed. Property giant Vingroup has decided to make retail business its core, said Chairman Pham Nhat Vuong, contributing to around 50 percent of the group’s total sales in the years to come, compared to the current 20 percent.

Ministry proposes tax cuts for firms that renovate apartments 
The Ministry of Finance proposed that the government should offer a preferential corporate income tax of 10 percent compared to the current popular rate of 20 percent for firms that are renovating deteriorating apartment blocks. This is aimed at attracting developers to participate in restoring unsafe old apartment buildings, which are a pressing problem in terms of living standards, safety and the urban landscape in major cities such as Ha Noi and HCM City. Firms must declare the income of each project separately to enjoy this preferential tax rate, according to the ministry's proposal.

Japanese firms invest in local property sector despite potential risks 
With a golden population structure and rising incomes, Vietnam has emerged as an attractive destination for Japanese businesses in sectors like retail, consumer goods and finance, and that they are keen on indirect investments here. Japan’s M&A activities in Vietnam can now be found in the real estate sector, which Japanese companies ignored in the past, as they are ready to take risks. Besides HCMC and Hanoi, Japanese firms are also paying attention to the central region, particularly Da Nang. Vietnam’s real estate sector remains risky in terms of pricing, speculation and a lack of transparency, however, it holds greater growth potential than some other markets as it has been recovering over the past three years.