Come fly with me: foreign investors to stay grounded.

Local investors will continue to be the main players in Vietnam's real estate market in the short and medium term, and they'll be seeking assets from foreigners looking to leave the market, an international conference heard in late July.

Yet, the Managing Director of CB Richard Ellis Vietnam told the Vietnam International Real Estate Conference in Ho Chi Minh City that more real estate assets will be offered for sale in the near future.

Vietnamese tycoons will look for land banking opportunities while the market is considered to be "at its bottom", and international investors would be wary of the market developing an unsustainable asset bubble, said some industry watchers.

Experts also presented an assessment of economic fundamentals that would impact the Vietnamese property market, looking in particular at the stock market boom that saw the benchmark VN Index rise sharply from a low in February.

Vietnam's stock market prices are generally expected to grow by at least 10% as the VN Index rallies, Asia's best performer this quarter, and prompted the government to resume sales of state-owned company shares. But market watchers are wary that increased stock liquidity will set off a long bout of volatility in both stock and property markets.

Thunder clouds on high? A real estate watching game.

Other factors for investors to watch include lower inflation and bank interest rates, as well as an increase in the supply of rental apartments and homes in big cities.

Foreign property funds with capital reserves in the country will also continue to find it difficult to enter the market, because country risk margins and low returns on completions make many potential projects unfeasible at existing property asking prices, attendees to the conference agreed.

Benefits for foreign investors

On the upside, Vietnam has introduced legal changes to benefit foreign investors. Overseas developers can now be assigned property in their own right and can bid for sites at government auction.
Additionally, foreign companies can acquire 100% of Vietnamese firms instead of the 30% cap maintained earlier.

Recent initiatives like the establishment of real estate trading floors and online information sites will also increase sales transparency to a point, analysts said, while the government's stimulus package has helped real estate businesses cope with the downturn.

Foreign investors were generally advised to look to longer-term developments.

CT's new plaza.

A series of new trade centres has opened, such as the Now Zone and Lotte Mart in Ho Chi Minh City, the Big C in Hue, the Garden Lifestyle Mall in Hanoi and Metro in Dong Nai.

A representative from the Ho Chi Minh City Real Estate Association (HoREA) advised investors to consider the potential of projects like the Ben Luc-Long An, Phuoc Long A, Phuoc Long B and Truong Tho residential areas, as well as a hotel and commercial centre project in Da Lat city.

from Nguyen Quoc Uy, Ho Chi Minh Office