City&Country: Cover Story-- Pushing on in Vietnam

The evening traffic slows to a crawl every day in Ho Chi Minh City (HCMC), Vietnam’s largest city that was once known as Saigon. In some ways, the gridlock mirrors the country’s current property market.

Only a few years ago, the local property scene was booming, but because of the government’s initiative to curb inflation by tightening loans and limiting funds, poorly capitalised developers are struggling to complete their projects.

Be that as it may, leading Malaysian property developer Gamuda Land, headed by managing director Chow Chee Wah, sees the opportunities in the looming storm clouds. It is pushing ahead with its new Celadon City integrated township development in HCMC and launched its first apartments on Jan 7.

Celadon City
Celadon City, which has a gross development value of RM6 billion, occupies 82ha (203 acres) of leasehold land. The mixed-use development is a joint venture between Gamuda Land and Saigon Thuong Tin Real Estate Joint Stock Co (Sacomreal) on a 60:40 basis. Sacomreal is the sister company of Vietnam’s second largest privately owned bank Sacombank. Sacomreal owns the largest real estate agency in Vietnam and has strong networking and distribution channels through its trading floor operations and overseas networking with the Viet Kieu (Vietnamese emigrants, many of whom had fled the country during the country’s political unrest).

The development comprises residential, commercial and institutional (education) components to be developed over nine years. The residential component features 7,800 apartments across four precincts — Ruby, Sapphire, Emerald and Diamond — that can accommodate 25,000 people. The apartments have built-ups ranging from 67 to 97 sq m and offer two, three or 3+1 bedrooms. Prices range from US$60,000 to US$130,000. The launch on Jan 7 consisted of 100 units in Ruby, and due to strong sales, another 120 units were opened for sale. Ruby features 1,500 units and Gamuda Land plans to launch these floor by floor to boost demand.

Construction on the first phase of Celadon City’s residential component has already begun and is expected to be completed in 18 months.

The commercial component is made up of a retail mall with a gross floor area of 80,000 sq m and net lettable area of 45,000 sq m. It has been sold to AEON Japan and will become the retail giant’s first flagship store in Vietnam. AEON Japan has invested some US$100 million in the mall, which includes the cost of land, design and construction.

As for Celadon City’s education component, negotiations are ongoing with both international and local institutions. Chow says four parties have so far indicated interest in taking up occupancy.

Green space
The first thing you notice about HCMC are the endless rows of shophouses and sore lack of greenery. The only available green space in the city are the modest parks found around it. Come nightfall, due to a lack of space at home, teens are forced to converge on these green spaces and, scarce as they are, these are becoming a much-needed place of leisure.

At Celadon City, Gamuda Land is dedicating 16ha for green spaces complete with park/recreational sports facilities. According to Chow, green space is a key promotional feature of the development. “The imbalance in Vietnam’s social and economic growth due to its rapid urbanisation has created the need for a quality living environment,” he says. “Hence, the incorporation of large tracts of parklands in the master plan as a unique feature of Celadon City and its positioning as a sustainable lifestyle township development.”

Other facilities in the township include a kindergarten, sports centre, primary and secondary schools and a cultural centre.

When Gamuda Land commenced construction of the project, it started with the roads and landscaping. Those who attended the launch on Jan 7 were evidentally pleased with what was being done in the development as families were seen frolicking within the grounds.

According to Chow, demand for housing remains strong in Vietnam despite its high lending rates. “We are positive about the demand for good and affordable housing,” he remarks. “Vietnam’s population is constantly growing and we are providing the people with a product that is value for money.”

The developer’s confidence is based on HCMC’s population of almost eight million. The Vietnamese are cash-rich people, preferring to keep their money at home than in a bank and making cash purchases, even of property, Chow points out.

Encouraging launch
Despite recent bearish reports about the property market in Vietnam, Gamuda Land was optimistic there would be buyers for its maiden Celadon City launch. Chow says he observed a constant flow of potential buyers to its sales gallery and show residence a few weeks before the launch. That, he adds, is an indication that the property market is “alive”.

“It is the feeling of uncertainty that holds back the purchase decisions of potential buyers,” he reasons.
On the day of the launch, there was a comfortable crowd in Celadon City and over US$1 million worth of property was sold. According to Chow, many other homebuyers have reserved units and asked to be allowed to pay after the Tet holidays — Vietnam’s Chinese New Year. The majority of the buyers were locals who were buying the units for their own use.

Based on the strong turnout and sales enquiries, Gamuda Land is confident that more locals will buy units in the development. “This was the first time Celadon City was officially unveiled to the market and we believe its unique concept will encourage potential homebuyers to make their purchase decisions soon.”

Gamuda Land is the property arm of public-listed construction group Gamuda Bhd. It has several premier developments, such as the Valencia, Jade Hills and Kota Kemuning townships in the Klang Valley and Horizon Hills in Johor Baru.

It decided to venture into the Vietnam market in mid-2006. “We wanted to expand beyond Malaysian shores,” Chow says. “However, at the time, not many countries were suitable for investing in. Thailand, Laos and Cambodia were politically unstable and India was just too big. So, Vietnam was the obvious choice.”

Gamuda entered Vietnam in August 2006 through a joint-venture project with local construction company Nam Long Investment Corp. According to Chow, it was just a “small involvement” for the developer to feel its way around and test the market. The development is located in District 7 of HCMC. The Tan Thuan Dong Residential Development comprises 14 semi-detached and six detached houses priced at US$1,150 to US$1,450 per sq m. The units have since been handed over.

In 2009, Gamuda Land began the rejuvenation of Yen So Park in Hanoi. The project involved the construction of a cultural park and a sewage treatment plant. Yen So Park has now become a part of Gamuda Land's development in Hanoi called Gamuda City. The 500ha Gamuda City has a GDV of more than US$3 billion and has a residential component comprising Gamuda Gardens and Gamuda Lakes and a commercial component consisting of Gamuda Central and Gamuda Plaza.

Gamuda Gardens and Gamuda Lakes offer 5,000 homes consisting of villas, semi-detached and terraced units and apartments. The terraced units and semidees have an average land area of 118 to 189 sq m and an average built-up of 175 to 293 sq m, and are priced from US$350,000 to US$800,000.

Gamuda Central and Gamuda Plaza meanwhile have a total gross floor area of 1.5 million sq m and a net lettable area of 1.1 million sq m. The residential and commercial components have a GDV of US$2.1 billion and US$800 million respectively.

Yen So Park has become a scenic 320ha landscaped space complete with gardens and lakes within Gamuda City. The park is considered the last "green lung" in Hanoi. Gamuda City is expected to be completed in 2015.

Market outlook
The construction of Celadon City was underway when Vietnam’s property market was hit by the recent tightening measures. There were even reports that the local property scene had become the hunting ground for foreign investors looking for distressed projects abandoned by ailing local developers.

According to Chow, Vietnam’s economy was troubled by inflation and the ensuing tightening of its monetary policy affected the property sector. “Since 2Q2011, the property market has softened due to the tightening of the country’s monetary policy. Resolution 11 of the State Bank Policy classifies real estate as a ‘non-productive’ sector and reduced its loan portfolio to 22% of the banks’ total loans at the end of 2Q2011 and further reduced this to 16% at the end of 4Q2011,” he explains. “This meant limited funds for both developers and homebuyers. Demand was also affected by the high inflation and lending rate which reduced purchasing power.”

The uncertain global economy too hurt market confidence with potential buyers becoming more cautious, Chow adds.

However, he believes the country’s current economic condition will not hinder some of the locals from making housing purchases as the drivers of such demand, like urbanisation, population growth and rising income levels, remain strong.

He is also confident that Celadon City’s unique lifestyle concept will make it stand out from the crowd and attract buyers. “The Celadon City master plan has a distinctive concept with superior product quality, which differentiates us from other developers. Gamuda Land views this as an opportunity to strengthen its market presence in Vietnam by expediting the construction work and being on schedule. This will definitely send a positive signal to the marketplace of our commitment to timely and quality delivery.”

There are also concerns of an oversupply of condominiums and apartments in the near future. “It’s not about the numbers but lack of quality supply in the marketplace as homebuyers in Vietnam grow more affluent, and about understanding their lifestyle needs,” remarks Chow. “Celadon City is well positioned to tackle this market as it offers the first integrated township development with a central park. It is the first and only township developed in what is known as a new urban zone in HCMC, with a green lung within the residential component.”

Danny Dao, director and head of the department of valuation, consultancy and research at DTZ Debenham Tie Leung (VN) Co Ltd, notes that even though the Vietnam property market has been sluggish of late, the cash-rich locals will continue to buy units in Celadon City because of its unique lifestyle concept.

“Only recently have the Vietnamese been looking at bank loans and even then they are wary,” he says. “The Vietnamese are traditionally cash-rich, preferring to keep their money and gold under their beds! So even though the market is slow, we predict Celadon City to perform well.”

Target market
In 1986, Vietnam introduced free market economic reforms that opened the door to foreign investors. Since then, it has been working to bring foreign money to its shores, including from the Viet Kieu.

Gamuda Land has targeted Celadon City at two groups. One comprises young Vietnamese families from the surrounding areas looking to upgrade and improve their current living environment, and professionals and entrepreneurs in their late twenties to mid-forties who yearn for a change in their current lifestyle, which means living independently.

The other group consists of local investors and expatriates who want a comfortable living experience in HCMC. The Viet Kieu fall into this category. “The government is aware of the spending power of the
Vietnamese overseas and is working to lure them back,” says Chow. “This group enjoys the same privileges as local investors in the sense that if they purchase a property, it automatically becomes freehold, thus enticing them to further invest in the country.”

Celadon City is the first development to have implemented the Construction Quality Assessment System standard in Vietnam and one of the challenges for the developer is to educate the locals on quality standard delivery in property development and construction.

In the meantime, Gamuda Land has its hands full with its three developments in Vietnam — Tan Thuan Dong and Celadon City in HCMC, and Gamuda City in Hanoi. Still, it is on the lookout for other opportunities in the country, hoping to further establish the Gamuda brand there.


This article appeared in City & Country, the property pullout of The Edge Malaysia, Issue 895, Jan 30-Feb 5, 2012

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