After the long, grinding downturn in Vietnam’s property market, some investors say now is the time to jump back in. Vietnam’s listed real-estate companies have bottomed out, said David Roes, CEO of Asean Investment Management, which has about 90 percent of its $10 million under management invested in the country. After a four-year bear market, “you’ve still got relative valuations in real estate that are incomparable to any other market,” he said. Listed real-estate companies often have 14 to 15 percent dividend yields and trade at 2.5 to 3 times earnings, sometimes with zero debt, he said.
In 2007, the country’s property market hit a wall after peaking with a bit of a “flipping frenzy,” which was crushed in the following years by double-digit inflation, lending rates above 12 percent and multiple devaluations of Vietnam’s local currency, the dong.
Why has Vietnam been cushioned from EM
David Roes, Chief Executive Officer at Asean Investment Management explains why Vietnam is one of the best performers among emerging markets this year. Credit for developers dried up and the dong devaluation boosted the cost of imported materials and labor, leading to many abandoned projects. But now Vietnam’s property laws are changing and the prices of undeveloped land purchased from farmers will no longer be set by the government, meaning the cost will rise and companies with existing land banks can realize value, he said. “The downturn has hit rock bottom,” agreed Jason Ng, a director at VinaCapital. Ng noted the government is planning to introduce new regulations allowing foreigners to purchase both apartments and landed properties and to permit them to rent out those properties. He also noted both developers and buyers of social housing will be offered preferential loan rates of around 6 percent (…)