RichLane Residences

THE weekend of April 1 and 2 marked 2017’s first new residential project launch from Vietnam — RichLane Residences, Mapletree Investments’ maiden condominium project in Ho Chi Minh City. For the largely Singaporean audience, the most riveting fact during the 25-minute presentation by Marc Townsend, managing director of CBRE ­Vietnam, was that the starting price of US$95,000 (S$132,825) (RM421,610) for a studio in the high-end condo is equivalent to the price of a new Honda Civic in Singapore.

The 243-unit RichLane Residences is a 29-storey condo tower that is slated for completion in 1Q2018. The architect and interior designer are Singapore-based CPG Consultants and Ong&Ong, respectively. Adjacent to RichLane Residences is an Oakwood-branded serviced apartment block. Incidentally, Mapletree purchased a 100% interest in Oakwood, a US-based serviced residences and corporate apartments provider in February this year.

Both the RichLane Residences condominum and Oakwood serviced apartment blocks are part of Mapletree’s Saigon South Place Complex, an integrated development on a 4.4ha site in Ho Chi Minh City’s District 7 that is modelled after Mapletree’s HarbourFront precinct in Singapore, which features office towers and one of the city state’s biggest shopping malls, VivoCity.

The first phase of Saigon South Place Complex is SC VivoCity, a five-storey shopping mall with close to 692,000 sq ft of gross floor area (GFA). The mall opened in April 2015 and is 94% leased currently, with many of the tenants being international brands. The development is a joint venture with Saigon Co.op.

Within the second phase of Saigon South Place Complex is Mapletree’s first office development in Vietnam, Mapletree Business Centre. Tenants in the 17-storey Grade-A office tower include Standard Chartered Bank, Vietnamese food manufacturer Uniben, textile company Far Eastern Polytex and IT services company SCC UK. There are plans for two more office towers at Saigon South Place Complex.

‘Most attractive market in Asean’

The launch of RichLane Residences comes on the back of Mapletree Business Centre’s official opening on March 22. Singapore’s Prime Minister Lee Hsien Loong and Vietnam’s Deputy Prime Minister Trinh Dinh Dung were guests of honour.

Prime Minister Lee was in Vietnam on a four-day official visit from March 20. “Singapore is Vietnam’s top foreign investor so far this year, and we hope to have more investment projects in Vietnam,” he said. On March 23, six agreements were inked to expand cooperation between the two countries.

TownsendThe CBRE Asia Pacific Investor Intentions Survey 2017 found that Vietnam is considered the most attractive market in the Asean region. Of those interested in investing in Vietnam, 33% were attracted to the strong economic fundamentals that drive rental value growth.

In 2016, Vietnam registered its highest foreign direct investment inflow of US$15.18 billion, which spurred GDP growth of 6.2% y-o-y. This strong foreign investment into Vietnam is expected to continue in 2017, says CBRE, and is largely attributed to several factors.

Liberalisation of foreign investment policies

A key factor is the liberalisation of foreign investment policies in 2015, such as the implementation of Decree 60, which removed the cap on foreign ownership in public companies. The lifting of the 49% foreign ownership limit in public companies boosted foreign sentiment and capital inflow into Vietnam.

Another key factor is the potential asset value growth through yield shift. Hanoi and Ho Chi Minh City currently offer an attractive yield spread with room for capital values to grow further, says CBRE.

In July 2015, the government also relaxed the rules on foreign ownership of real estate. Foreigners are now allowed to buy investment properties. In the past, they could only buy one residential unit for their own use. And they had to sell the property within a year of leaving the country. Now, foreigners are allowed to purchase more than one unit.

However, the government has capped foreign ownership at 30% of the units in a condo or apartment project, and 10% for a landed housing project. In the past, foreigners were not allowed to buy landed property. “This was to prevent foreigners from flooding the market and driving up prices, making it unaffordable for local homebuyers, as seen elsewhere in major cities,” notes CBRE’s Townsend.

While locals can buy properties of freehold tenure, foreigners are restricted to properties with a 50-year lease, with an option to renew for another 50 years.

Boom is on

The relaxation of the foreign ownership rules essentially opened the floodgates and sparked a boom, leading to record condo sales in 4Q2015 and the whole of 2016. For instance, Keppel Land, which has been in Vietnam for more than two decades, said it sold more than 1,500 homes in the country in 2016, 63% higher than the 930 units it sold in 2015.

Meanwhile, Singapore’s largest listed property group, CapitaLand Ltd, sold 1,480 units worth a total of S$282 million in 2016, compared with 1,321 units worth S$226.5 million in 2015.

Last year, an average of 24 projects were launched each quarter in Ho Chi Minh City, while the number of projects launched in 1Q2017 was 21, which shows a slight slowdown in new launches, says Townsend.

Besides RichLane Residences, another project that may be showcased in Singapore later this month is CapitaLand’s Seasons Avenue. The project, launched in 2015, comprises 1,300 condo units across four 40- to 41-storey towers. As at end-2016, 696 units were snapped up. Seasons Avenue is scheduled for completion and handover of units by end-2017.

CapitaLand held a topping-out ceremony at Seasons Avenue in Hanoi at the end of last month. The development is one of the group’s nine residential projects in the country. Over the years, CapitaLand has developed more than 9,000 units there. Seasons Avenue is located in Mo Lao ward at the border of Ha Dong District and Hanoi’s new CBD. It is near a bus rapid transit station and the Cat Linh-Ha Dong Metro Line, which will connect the old and new CBD.

CapitaLand, Keppel Land invest further

In January, CapitaLand announced that it was acquiring a prime commercial site in Ho Chi Minh City’s CBD to develop its first Grade-A office tower with a GFA of 1.14 million sq ft. The development, on a 0.6ha site, will have a 240m-tall office tower with a retail podium on the ground and basement levels. The project will be linked to a planned metro station that will bring commuters from the CBD to the districts of Binh Tanh, 2 and 9.

CapitaLand plans to expand its footprint in Vietnam by acquiring more residential development sites in Vietnam — “possibly yielding 2,000 to 2,500 units this year”, according to CapitaLand president and group CEO, Lim Ming Yan in a statement on March 27. The group is also on the lookout for investment opportunities in offices, serviced apartments and integrated developments, he said.

Saigon Centre

The group, which entered Vietnam 22 years ago, has S$2.1 billion worth of gross assets under management in the country. “With more than 9,000 homes and about 4,600 serviced residence units across the country, Vietnam has become one of CapitaLand’s key markets, after China and Singapore,” said Lim. He also sees the possibility of a Raffles City integrated development in Ho Chi Minh City.

Another pioneering Singapore real-estate developer in Vietnam is Keppel Land, which ventured there in the early 1990s. Keppel Land has about 20 projects in the country — ranging from Grade-A offices and residences to shopping malls, integrated townships and serviced apartments — with total capital investment of US$2 billion. It has a pipeline of more than 25,000 homes, according to Linson Lim, president (Vietnam), Keppel Land.

In Ho Chi Minh City, Keppel Land opened its shopping mall in Saigon Centre last August. The mall, part of Phase Two of the development, is fully leased and anchored by the city’s first Takashimaya department store. Saigon Centre is a mixed-use development on a 2ha site in District 1 in the CBD.

In March, Keppel Land announced that it had increased its stake in the joint-venture companies for Saigon Centre Phases One and Two from 45.3% to 53.5%, and for the subsequent phases of Saigon Centre from 68% to 76.2%.

Besides Saigon Centre, Keppel Land is jointly developing Empire City at a prime 14.6ha waterfront site in the up-and-coming Thu ­Thiem New Urban Area in Ho Chi Minh City. The project will have a mix of premium apartment blocks, offices and retail complexes as well as an 86-storey tower.

Mapletree makes inroads

Wendy Koh, Mapletree’s regional CEO for Southeast Asia, has been travelling to Vietnam every week. “I spend a lot of time in Vietnam even though my portfolio is Southeast Asia,” she says.

Mapletree is also not new to Vietnam. It made its foray into the country 12 years ago with a logistics park project. Today, it owns and manages more than S$1.2 billion worth of developments — comprising mixed-use developments, office, retail, industrial, logistics and residential properties as well as serviced apartments — in Hanoi, Ho Chi Minh City, Binh Duong and Bac Ninh.

Seasons Avenue

Last June, Mapletree bought Kumho ­Asiana Plaza Saigon in Ho Chi Minh City’s CBD in prime District 1, reportedly for US$215 million. It was considered one of the most significant acquisitions by a foreign property group in 2016. The seller was Asiana Kumho Group, which owns Kumho Tire Co, a South Korean tyre manufacturer; and Asiana Airlines, South Korea’s second-largest airline.

Kumho Asiana Plaza Saigon is a prime 1.5 million sq ft, mixed-use development with offices, retail space, a hotel and serviced apartments managed by InterContinental Hotels Group. Mapletree is carrying out asset enhancement on the retail space, while the office, hotel and serviced apartments are still operating.

Districts 2 and 7 sought-after by expats

For retail investors in Singapore, the opportunities are in buying condo units, and the two most sought-after areas are Districts 2 and 7, says CBRE’s Townsend. This is because the international schools are located there.

For instance, the American School of Vietnam, Australian International School Vietnam and British International School are located in District 2. Meanwhile, District 7 is where the Canadian International School, Japanese School, Korean International School, Saigon South International School and Taipei School, as well as the Royal Melbourne Institute of Technology (RMIT) Saigon South campus, are located.

CBRE’s Townsend has been living in Vietnam for the past 14 years, and he and his wife, a Vietnamese citizen, have accumulated a portfolio of some 10 properties. Their focus has been on one- and two-bedroom units, although they also own a three-bedroom apartment.

“We always buy near the international schools as this is where expatriate families want to live,” says Townsend.

Yield play

Incidentally, RMIT is within walking distance of Mapletree’s RichLane Residences, which is another attraction for investors. The SC Vivo­City shopping mall is also adjacent to the condo tower. A metro station will be coming up near Saigon South Place Complex; however, the completion date has yet to be finalised.

According to Mapletree’s vice-president of investment and asset management, Darren Lim, three-bedroom apartments in the neighbourhood of Saigon South Place Complex, such as Riverpark Premier, are commanding rents in the range of US$1,900 to US$2,200 a month, while the asking rent for units at Riviera Point is US$2,600 a month.

Based on RichLane Residences’ asking price of US$250,000 for a three-bedroom unit, the yield is about 9%, estimates Lim.

The most sought-after units during the weekend launch in Singapore were said to be the studios and one- and two-bedroom units. Studios start from 45 sq m (484 sq ft) and are priced from US$95,000, while two-bedroom units start from 883 sq ft and are priced from US$180,000 to US$200,000. Beyond prices, views from the high-floor units also played a part in the purchase, notes CBRE.

Mapletree Business City

Residential property prices in Vietnam rose about 8% in 2014, and about 15% a year in 2015 and 2016. “Vietnam as a market and country is in a good place,” Townsend says. “There are some good things where, if I were an investor, I’d feel comfortable about.” One of those things is improvements in infrastructure, from the building of new highways and bridges to subway lines.

As for Townsend’s personal property portfolio, he estimates that it is achieving a blended yield of 8% to 9%, with net yields in the 6%-to-7% range. Incidentally, Townsend will be relocating to Zurich. Thanks to the change in ­Vietnam’s foreign ownership rules, he does not need to liquidate his portfolio when he leaves.

This article first appeared in The Edge Property Singapore, a pullout of The Edge Singapore, on April 10, 2017.

For more stories, download TheEdgeproperty.com pullout here for free.

SHARE
RELATED POSTS
  1. PEPS Malaysia inks MOU with Singapore Estate Agents Association for real estate knowledge exchange and networking opportunities
  2. How essential oils can refresh and elevate your home in the Tropics
  3. Pintaras Jaya bags piling contracts worth RM170mil in Singapore