The large gap between the average prices of luxury products in Hanoi, Ho Chi Minh City, and other peer cities implies room for further upgrades
Strong demandMatthew Powell, director of Savills Hanoi, exemplified his point of view by indicating the fact that the number of high-net-worth individuals (HNWIs) in Vietnam has steadily increased since 2013, adding that the upward trend is expected to continue.
Meanwhile, the amended Housing Law, which allowed foreign property ownership in Vietnam, has been facilitating cross-border demand for prime property from regional peer countries.
Due to the revised law coming into effect from July 2015, a number of higher end projects have been able to quickly sell their quota to foreigners, with the majority of buyers from Taiwan (China), Hong Kong (China), and the Republic of Korea.
Foreign demand, fueled by the rapid growth of HNWIs in Asian countries, is expected to expand further, Powell noted.
In recent years, high returns have drawn foreign investors to Vietnam’s luxury residential market. As market returns are increasing with strong capital growth and a healthy rental yield, more international developers and operators are expected to enter the high–end segment in both Hanoi and Ho Chi Minh City.
These global players will bring along large capital flows and introduce new concepts of prime property to Vietnam’s residential market.
Branded residence, for instance, is an emerging model of luxury lifestyle products which have recently been brought to Vietnam by international hotel groups. Brand association with a well–known hotel provides the brand with benefits from the same qualities, hence offering an “edge” for branded luxury projects over non–branded ones.
New luxury concepts are increasingly pushing high–end products higher but there remains a long way to go for the country’s prime property to meet international standards of luxury. The large gap between the average prices of luxury products in Hanoi, Ho Chi Minh City, and other peer cities leaves room for further upgrades.
Technology disruption
Technology is rapidly evolving. Industrial 4.0 will bring new technologies to life and undoubtedly change the environment significantly. For prime property, as the price range is uncapped, there is more room for integrating new technologies in residential products, from designing to marketing and showcase to operation and management.
In the future, the Savills expert has high expectations for an architecture likely to adapt to human needs, rather than the other way around. He envisages a living, tailored space that is moulded to meet inhabitants’ needs, characters, and desires.
Worldwide, digital technologies are becoming more integrated within physical space. Interacting with the building management system, a smartphone app makes it possible for occupants to check in, order services, book facilities, and regulate their environmental settings with an unprecedented degree of personalization.
Nationally, the announcement of a smart city project in Dong Anh, Hanoi last April sent the residential market into a frenzy. Smart features have become a desirable quality for housing products, and a critical quality in the luxury sector.
However, the local luxury residential market is faced with a number of challenges as land remains scarce, especially in prime urban locations, which makes high–end property development difficult.
In addition, the process and procedures of land clearance and compensation, to licensing and bidding, can be a lengthy and complicated process, particularly for foreign investors. In fact, although a number of foreign developers are eager to enter the market, they are unable to secure land in attractive locations.
It is anticipated that attractive returns may drive investors to the luxury segment, but as the prime property market refines and evolves, developers and products will be filtered, Powell said, stressing that there will be both winners and losers.
With an abundant supply, the high–end sector will remain a buyer’s market, which means the key to survival for developers is staying at the top of their game and constantly keeping up with emerging market trends.