In early 2009 a well-known financial advisor and analyst based in Vietnam told Word that now (or then) was the time to invest. He expounded his reasons, but the key one was that the market was subdued. A subdued market means lower costs — labour, raw materials, rental, real estate and so on. Businesses, he continued, should take advantage of this and invest now while the going was good.

Retrospect is a fine thing, and looking back you can see his error. A subdued market means that no matter how cheap it is to invest, there is a lack of demand. And selling your goods and services in such circumstances is tough — as many businesses were soon to discover, very tough. The market was also on its way down. Which meant that what you bought today, particularly in real estate rentals, could well be cheaper tomorrow.


Yet what he said also made sense. If you could find a market niche — and at the time in Vietnam there were many — 2009 was the moment to enter it and establish yourself. The reason? Not only were set-up costs cheap, you would have time to get it right. The influx of competition you would get when the economy is booming would be slow to materialise.


From the Bottom Up


The start of post-Tet 2014 has been greeted with optimism — probably the most optimism to be heard since the credit crunch. Speaking to people in both Hanoi and Ho Chi Minh City, there is still some caution, but there is now a sense that we have hit the deepest part of the economic curve and are moving upwards. It has created a new buzz of activity that in the months running up to the Year of the Horse was strangely absent.


Yet as David Lyons, former country manager of real estate firm Jones Lang LaSalle, explained back in September 2013, last year there were already rumblings that the economy was about to change. The question was when.


Often seen as a barometer of the local economy, real estate fluctuations tend to ripple out to the wider economy after six to 12 months. This may be what we are about to experience this year.


“For the last eight months we have had a lot of foreign investors coming in and they have all done their own independent research,” he explained of the first part of 2013. “Every one of them without a question has come to the same conclusion — that the market in Vietnam is at the bottom.”


According to Lyons, where these investors differed was on when the market would actually rise. Some, he said, were thinking within two quarters — which would mean now — others said within three quarters, some thought not for another two years. “But they are deciding that now is the time to get in.”


Not So Premium


We have already started to see this investment ripple through, most visibly in food and beverage. But one new change with this growth is its focus. In the past, much of this country’s development was focused on the top-end — the premium market. Now the middle and bottom tiers of the market are also being looked after.


“It is retail shopping malls out of the centre of the city catering for non-premium customers that are starting to do well,” said Lyons. “So is residential — like the lower end E-homes created by the Nam Long Group. They do a concept where you can buy a brand new two-bedroom apartment for US$30,000 (VND430 million). They have gone for mass sales with small margins.”


He cites other successful low-end and mid-range projects that have been a success, concluding, “These kinds of projects give lower percentage returns but they turn over. The mid-range is okay as well, a little more risky but with higher returns. It is good to look at the low to mid-range.”
Which all suggests that now, rather than 2009, is the time to invest. — Nick Ross

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