Hong Kong and Singapore Investors Seek Opportunities in Vietnam
Vietnam’s new laws for foreigners, released in July 2015, have already had great impact on the local housing market in the country.
Particularly, investors from within the region are amongst the first ones to actively seek investment opportunities in the country. Savills Vietnam has seen great interest and real demand from foreign buyers based in Singapore and Hong Kong. To better understand the reasons for their aggressive moves it is important to look at the local housing market in these respective countries.
Property markets in Singapore and Hong Kong have been heating up over the last decade due to ever-increasing demand from local and foreign investors. While Singapore is a preferred investment destination for buyers from Malaysia, Indonesia and mainland China, the market in Hong Kong has seen tremendous investment from the latter.
“Property markets in Singapore and Hong Kong have been heating up over the last decade”
To react to the social problems caused by the price increases - such as lack of affordability for first-home buyers - governments in both destinations have put cooling measures in place. These are now showing effect with a considerable drop in transactions, and prices are expected to drop in both countries.
In Singapore and Hong Kong the governments reacted as early as 2009 with a variety of cooling measures, which included:
- Increase of Buyer’s Stamp Duty (BSD) for purchases of multiple properties of up to 15% in Singapore and 8.5% in Hong Kong respectively, particularly for non-resident foreigners and entities.
- Seller’s Stamp Duty (SSD) on resale of properties with short holding periods in Singapore for periods of less than one year, which was later increased to three years. And in Hong Kong from two to three years.
- Limits on loan-to-value for multiple unit purchases, meaning that buyers could not leverage purchases by using bank loans. Especially relative to foreign buyers or those who purchased multiple units.
These measures were specifically introduced to curb property investment and speculation - particularly by foreign investors - rather than preventing irsthome buyers from purchasing units. The effects are finally starting to show with transactions and prices decreasing in both markets, and talks of a property market crises making the rounds. More importantly, the yield potential in these markets has declined due to the additional purchasing costs.
Photo by: Tri Nguyen
Taking into consideration that Hong Kong and Singapore investors are amongst the most active in the region, Vietnam is seen as one of the most attractive destinations for property investment in Southeast Asia. With excellent yield potential and prices at a fraction of those in Hong Kong and Singapore, investors can purchase multiple units at the value of one property in their home markets.
“Vietnam is seen as one of the most attractive destinations for property investment in Southeast Asia”
Savills Vietnam was among the first real estate agencies to take advantage of this by creating an international sales department to actively promote Vietnam’s properties in these key markets; in collaboration with Savills regional offices.
“We have seen great interest of local developers to market their projects abroad, and have scheduled a series of sales events in Hong Kong and Singapore over the year 2016. Our offices in both countries are excited to promote Vietnam’s properties given that the easing of restrictions allows foreign investors to take advantage of low prices and excellent yields in comparison to their local markets,” says the head of International Residential Sales for Savills Vietnam. “Since inception of the department we’ve transacted nearly US$20 million in sales to foreigners without bringing projects abroad. We are confident that this number will increase dramatically over the coming months.”
The opening of the Vietnamese property market to foreign investors is expected to draw more foreign investment into Vietnam from private and institutional investors.