South Korea becomes top VN investor

Monday, Nov 03, 2014 08:00

The Korea Electric Power Corporation (KEPCO) has shown interest in investing in the Song Hau 3 thermal power plant, a major project in the Mekong Delta province of Hau Giang.. — Photo nganhangonline

compiled Le Hung Vong

With investments of US$3.6 billion in the first 10 months of the year, South Korea has become the top foreign investor in Viet Nam this year.

A memorandum of understanding for a 1,200MW thermal power plant in the central province of Ha Tinh signed between Samsung C&T, a subsidiary of Samsung Group, and the General Department of Energy a few weeks ago marked a significant jump in Korean investment.

The Vung Ang Thermal Power Plant No 3 will be just one of several investments by Samsung C&T in the country.

In a joint communique released after a visit by Korean President Park Geun-hye to Viet Nam last year, the two governments affirmed co-operation and support for Korean firms investing in infrastructure in the energy sector – like a fuel depot in Dung Quat, a thermal power plant in the south, and an MoU between the Thanh Hoa People's Committee and Korean energy company KEPCO to speed up work on the Nghi Son Thermal Power Plant No 2.

KEPCO was the first to enter the energy sector in Viet Nam when it joined hands with Japanese company Marubeni to build the 1,200MW Nghi Son plant. It was followed by Samsung.

In August KEPCO also sought investment opportunities in the Song Hau No 3 thermal project in the Mekong province of Hau Giang.

Korea's Lotte Group has shown interest in building the Quynh Lap No 2 thermal plant in Nghe An Province.

If all these fructify, Korean investors will be pouring billions of dollars into Viet Nam's energy sector.

Singapore ranked second behind Korea with investments of $2.6 billion, followed by Hong Kong and Japan.

According to figures from the Foreign Investment Department, FDI as of October 20 was worth $13.7 billion, nearly 29 per cent down from the same period last year.

But actual disbursement, as opposed to commitment, amounted to $10.15 billion, a year-on-year increase of 5.9 per cent, Do Nhat Hoang, head of the department, said in Ha Noi last week.

"That is the ‘real' investments in the country," he said.

Housing credit increases in August

According to the State Bank of Viet Nam, as of the end of August housing credit had expanded by 9.85 per cent, much higher than the overall credit growth rate of 5.82 per cent.

The property sector is also the second largest FDI destination after manufacturing, accounting for $1.2 billion or 11 per cent of overall investment, according to a report from CBRE Viet Nam.

The report says condominium sales is on the rise in the third quarter though at a slower pace than in the previous quarter. Apartment launches have been received positively as revealed by the large number of attendees and deposits being placed for 50-60 per cent of units.

"Recent positive sales results and busy launching events suggest that we have now arrived at a point where the worst of the market is behind us," the report says.

Preliminary figures show that sales increased by 8.6 per cent quarter-on-quarter – and 94.8 per cent year-on-year – to some 3,300 units.

But growth in sales of high-end apartments was relatively modest.

Investors buying high-end developments often try to avoid selling or buying houses during the "ghost month" between July 27 and August 24. In contrast, people who buy houses for their personal needs do so whenever they are able to raise money.

As sales and buyers' confidence improve, developers have become more and more confident about launching new products. Well-attended launches continued to be a feature in the third quarter though the number of new launches declined by 8.8 per cent from the previous quarter owing to "ghost month."

With 3,104 units launched, supply in the third quarter shot up by 95.8 per cent year-on-year. Most of the projects were launched in July and September to avoid the inauspicious period .

CBRE said there have been price improvements for the first time since 2011.

Thanks to improving market conditions, prices on both the primary and secondary markets started to show tentative improvements from the previous quarter. Primary prices increased by 1-4 per cent q-o-q and 1.2-5.4 per cent y-o-y across all segments.

The most noticeable improvement was in District 2 thanks to infrastructure improvements such as the metro line No. 1. Primary prices at some projects edged up 2-5 per cent and payment terms were shortened.

The same trend was seen in the secondary market though there was a variation in the level of price changes across segments. The increase in tenants looking for buy-to-let options supported high-end condominium sales prices.

In general, the high-end segment showed a more positive picture than the other segments as resellers found it easy to find tenants and were confident about price appreciation. In addition, housing is a favoured investment option for Vietnamese

Given the return of buy-to-let investors and increasing sales volumes, prices are expected to increase further.

The eastern part of HCM City continues to be the most sought-after area thanks to improving infrastructure.

For the serviced apartment sector, CBRE said limited new supply encouraged serviced apartment landlords to increase their one-bedroom options.

The third quarter of 2014 saw only one small-scale project with 14 units in District 2 come into the market . With such limited new supply, the market started to show some improvement. Both grade A and B rents stopped their downward trend and edged up by 0.3 per cent and 0.5 per cent quarter-on-quarter.

At the end of the review quarter, grade A rent averaged $31.60 per square metre per month and grade B, $25.09.

The third quarter also saw the return of deep-pocketed tenants . It was the start of the new school year and, as usual, the number of western tenants increased. Wealthy foreigners, mostly from Switzerland, returned with housing budgets ranging from $6,000 to $10,000 per month.

They were mainly looking for villas in District 2. It is also reported that some tenants from CBD (central business district) serviced apartments have started to rent in District 2, where housing is obviously cheaper but comparable in terms of quality.

This explains why CBD serviced apartments, who have increased their one-bedroom rates, had to adjust down the rents of their larger units. — VNS

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