Nothing symbolizes Japan’s bubble economy, or its subsequent long slump, more than real estate. Now, after dropping by as much as 70%, real estate prices are ticking up, signaling a renewed Japanese economy.

A major restructuring of the nation’s financial system, along with an injection of foreign capital and the introduction of publicly traded real estate investment trusts, are driving the real estate revival, according to Wharton faculty and real estate analysts working in Tokyo. “The no-growth swamp is over. Not only is real estate coming back, but it’s coming back strong,” says Wharton real estate professor Susan Wachter.

For the first time in 16 years, land prices rose in Japan’s top three markets — Tokyo, Osaka and Nagoya — during the 12 months that ended in July. Commercial land prices were up 2.6% while residential property was up O.4%. In addition, new development is visible in Tokyo, rents are on the rise and investors are returning to the market.

Speaking at the fall members’ meeting of the Samuel Zell and Robert Lurie Real Estate Center at Wharton, Michael Pralle, CEO of General Electric’s $48 billion real estate unit, said Japan is his top pick among current global real estate hot spots, including China, India and Germany.

GE has been in Japan since 1998 and owns $3 billion in real estate assets, including 120 office buildings and 9,000 residential units. Last year, it formed a partnership with Shinsei Bank to increase its holdings. “We like Japan a great deal,” said Pralle, noting that GE is drawn to Japan by strong yields, attractive land prices that are still near 25-year lows, tax advantages and improving economic conditions overall.

According to Wachter, because real estate is viewed as a long-term asset, renewed confidence in the industry reflects optimism about the long-term prospects for Japan’s economy. “The structure of Japan, Inc. has been substantially reformed and there is no going back at this point.”

In addition to banking and other financial reforms, Wachter says a key element of today’s interest in real estate is the government’s willingness to abandon politically popular, but economically unjustified, public works projects in rural and agricultural areas. As a result, a drain on government spending has been eliminated, and more deserving projects in urban areas will receive more support. “There’s no more business as usual,” says Wachter. “This is a long-term structural reallocation that will not only affect Tokyo, but also the second-tier and even third-tier cities.”

The Rise of REITs

Another driver of the real estate recovery is the same cure that was used for the United States’ real estate crash following the savings and loan collapse of the 1980s: real estate investment trusts. Japan enacted new laws creating real estate investment trusts, known as J-REITs, in 2001. Now there are more than 30 J-REITs in operation with assets of $30 billion.

Nomura Real Estate Holdings raised the most money in an initial public offering of any Japanese company this year, trading up as much as 13% during its first day of trading in October. Nomura’s debut topped the record set a month earlier by the Nippon Commercial Investment Corp., a real estate investment trust of Pacific Commercial Management.

Andrey Pavlov, a visiting professor of real estate at Wharton, explains that because REITs can be exchanged at any moment, managers are responsive to the market. Better response to market conditions helps prevent disconnects between supply and demand that lead to boom and bust cycles in real estate. “REITs are a great source of capital because they provide fairly-priced financing and there is a lot of discipline due to that immediate and direct connection to shareholders,” says Pavlov.

Concerns are overblown that investors in REITs will be able to pull out abruptly if they unexpectedly need access to their capital, forcing REIT managers to unload long-term assets at what might be a low point in the market, he adds. “That’s typically not a problem. REITs get the money from investors to buy the assets but the REIT itself is unaffected. There is no cash flow change.”

REITs in Japan, and elsewhere, are a better way to finance real estate than bank lending, Wachter notes. Banks often structure deals with incentives or fees that encourage lending, leading to transactions that are often not aligned with market demand.

REITs also are structured with tax incentives that tend to draw international capital to Japan and other markets, she notes. REITs pool money from the sale of stock and use that to make investments in real estate. The shareholders then receive dividends paid out of profits earned by the REIT on rents or property sales. The dividends are not taxed.

For example, Nippon Building reported a 37% rise in net income to 9.85 billion yen ($84 billion) for the six months ending in June. The REIT paid out a record dividend of 19,391 yen, up from 17,046 yen for the same period a year earlier.

Wachter also points out that REITs are not closely correlated to the stock market and can provide balance for institutional portfolios, another draw for foreign capital. Finally, REITs bring transparency and better analysis to the market in which true value is often hard to gauge because shopping malls and office buildings, even homes, don’t come up for sale everyday. “Once the funds are large enough, then you can have analysis with an entirely new level of sophistication, which again brings discipline,” says Wachter.

The Japanese mortgage market is also moving toward greater securitization which will give investors another reason to invest, Wachter adds.

Following World War II, Japan created the Government Housing Loan Corp. (GHLC), to provide easy residential financing for homeowners. During the bubble years, as housing prices skyrocketed, Japanese homeowners were offered numerous types of exotic mortgages, including a 100-year mortgage to be paid off by the borrower’s grandchildren.

As part of the nation’s economic reforms, GHLC in 2001 was converted from an issuer of loans to a packager of mortgage-backed securities. By 2003, GHLC had securitized $8 billion in Japanese mortgages. Next year a new agency, the Japan Housing Finance Services Agency modeled on Fannie Mae in the United States, will begin securitizing loans written by private financial institutions.

Poised for the Future

Richard Georgi, a guest lecturer in real estate at Wharton and managing partner of Grove International Partners, a global private equity firm, estimates that Japan’s economy bottomed out in 2002 and 2003. While hopes of earlier recoveries based on fiscal and monetary stimuli were subsequently dashed, Georgi says the current optimism is deserved because the government and the Japanese people have made significant changes to their economic system. “We are now starting to see some emerging growth patterns that we think are sustainable because they are on the back of real reform,” says Georgi, who is based in Tokyo.

Rents are starting to tighten in Tokyo, which Georgi notes is double the size of Manhattan and four times the value. “This is a supertanker economy, so small changes can result in huge movements of capital.”

As the nation’s deflationary spiral comes to an end, interest rates will likely continue to rise. As that happens, investors sitting on yen-denominated Japanese government bonds will seek new asset investments. The capital-starved real estate industry will make an attractive investment, Georgi predicts, adding that the rest of the developed world has been in recovery for some time and is now priced high. Other countries, he says, will need to work off a real estate bubble created after the sharp interest rate declines that followed the September 11 terror attacks. “Japan is poised for future growth, although it is still at a low base compared to historic norms.”

Foreign investment has played a part in Japan’s recovery, but will not be a dominant force going forward, Georgi suggests. Changes in the nation’s postal saving system, he notes, could free up vast pools of household savings that will flow into real estate. “Foreigners are here, and they have been playing a role in injecting liquidity into the market. But the most important transformation looking ahead will be the return of domestic capital to the real estate market,” says Georgi.

Yasuhiko Watanabe, senior advisor at Mitsubishi Estate Co., says the Japanese real estate revival started in spring 2005. Vacancy rates for Class A office space in central Tokyo are now less than 1%, compared to 4% to 6% a year ago. Rents in the desirable Marunouchi district, located between Tokyo Station and the Imperial Palace, are up 20% from a year ago. “Probably we are now in a position to worry a bit about too much too soon,” he says.

Japan’s strong corporate comeback and infusions of domestic and international capital are feeding the real estate resurgence, says Watanabe, who also cautions that excess liquidity in the global economy could set off a financial crisis if the system experiences a shock. “The market could lose its steam if, for any reason, today’s high level of liquidity becomes vulnerable. Geopolitical risks as well as financial and economic risks might play a significant role in the outlook for the market.”

In addition to the new REIT investment vehicles, Eric Perraudin, managing partner of Japan Management Consulting in Tokyo, says ultra-low interest rates are contributing to the recovery. Investors can borrow 80% of the value of a building with a non-recourse loan at a rate of 2%. At the same time, building regulations governing the density of buildings have been eased, allowing developers to build more space on less land.

Pavlov warns that despite confidence in the real estate turnaround, the Japanese economy is still in a delicate state and policymakers will need to steer a careful course between stimulating growth and guarding against inflation. “As the economy picks up there will be more demand for real estate,” he says. “It is very important that, in the face of the up-tick in demand, there is sufficient availability of funding, whether its bank loans, equity investment or private investment. You don’t want to be in a credit crunch. Even if people want to buy and develop real estate, if they can’t get the financing, nothing happens.”

According to Pavlov, there is often a fine line between too little credit and too much. “Let me emphasize that you should never stimulate or encourage policy with the availability of cheap or under-priced financing. It has to be fairly priced,” he says. “But you want to make sure lenders and other sources of capital don’t overreact to the previous crash and stop lending altogether. There needs to be a golden balance between sufficient financing and not under pricing…. It’s not an easy thing to do.”

Perraudin notes that prices for commercial buildings have recovered about 30% to 50% from the bottom reached in 2002-2003. However, the gains are concentrated in Central Tokyo, Central Osaka and Nagoya. In other major cities, the market is flat, and small cities and rural areas are still experiencing declines. “Demand for real estate in central areas is limited,” he says. “Demographics are bad, with the Japanese population and workforce shrinking.”

He points out that land prices in some regions are still artificially high, propped up by subsidies for agricultural use and ownership of property by debt-ridden public institutions and governments.

John Percival, a Wharton adjunct finance professor, says that despite all the reforms that have been made in Japan, real estate is likely to remain cyclical. While companies and financial institutions have undergone major reforms, there remains more cross-shareholding between banks and other businesses than in the United States and much of the rest of the world. “Real estate is coming back,” says Percival, “but that’s the good news and the bad news. If there’s another bubble, then we’ll go through this whole process all over again.”

Source: Knowledge@Wharton

Dubai: Few property markets in the Middle East have experienced as much turmoil as Beirut.

After the withdrawal of Syrian troops in 2005, investor confidence in the city known as the Paris of the Middle East began to boom with UAE developers making several significant commitments earlier this year.

Just as the country was looking forward to a record year for foreign investment into the property sector, Israel’s brutal invasion set the market back decades and resulted in an estimated $30 billion of damage to its infrastructure and underlying economy.

The assassination this week of Pierre Gemayel, a leading anti-Syrian Leban-ese minister and Maronite Christian leader served as a grim reminder of the country’s domestic political uncertainty.

His death comes amid a political crisis in Lebanon, following the resignation of six pro-Syrian cabinet members.

Experts and property developers are still divided on whether the country can attract buyers for current projects or fresh foreign investment.

In June Dubai-based Damac Properties launched the $150 million La Residence by Ivana Trump, a 27 storey luxury residential tower planned for the intersection of Omar Daouk and Fakhreddine streets in Beirut’s downtown area.

During the invasion defiant Damac officials said the company’s strategy of investing heavily in the country would not be swayed by what they considered short term political issues.

Speaking to Gulf News, Hussain Sajwani, chairman of Damac Group, said the company still does not regret its decision.

“Obviously sales have slowed considerably. We sold around 35 per cent of the units after the launch, but for four or five weeks sales stopped completely.”

“We thought it would take six months from the initial launch to achieve 100 per cent sales but we are now estimating a year and will start a promotion campaign around Christmas time. One effect (of the war) has been to scare off speculators leaving only genuine end users who are committed to the country.”

Sajwani said Lebanon’s infrastructure has been sufficiently repaired so as not to hamper the supply of raw materials for building work and said the lack of new residential project launches in Beirut is making it easier to hire contractors.

“We had just completed the design stage and were going through the approval process (before the invasion) so we’re only a matter of weeks behind schedule,” he said.

The La Residence launch followed an announcement by privately-owned Abu Dhabi Investment House (ADIH) of the $600 million mixed-use Beirut Gate project.

Deyaar Properties, a subsidiary of Dubai Islamic Bank, invested in two luxury residential developments near Beirut, while UAE-based Reef Real Estate launched the $20 million Bhersaf Tourist Village in Bhersa, a mountainous area outside Beirut.

Ryan Mahoney, managing director of property agents Better Homes, is not convinced by developers’ tough talk of commitment to Lebanon’s property market and says investors have generally lost confidence in the Lebanese market.

“I find it hard to imagining that anyone will be pleased that they had invested in a country that has been so badly devastated and is still relatively unstable,” he said.

“People say it’s a matter of time before the market is back on its feet, but the biggest problem is that there is still a great deal of political instability and until this is settled, the physical rebuilding will remain a secondary issue.”

Mahoney said the only positives are that the current supply of property is low and high-risk investors would be drawn to deflated prices.

Rod Monger, a professor at the American University in Dubai and a licensed real estate and mortgage broker in the United States, was more positive about the Lebanon’s real estate future.

“All markets react strongly to disasters. So companies are investing and will continue to invest in Lebanon.”

Source: Gulf News

Predictions of cooling UK housing markets are driving investors to look to international property opportunities. Economists and analysts have recently warned of a cooling housing market due to increasing UK interest rates set against a global economic slowdown and concerns of a UK property market correction. Justin Modray, investment adviser at Bestinvest, says Germany, Australia and possibly Japan are currently thought to be good value.

There is also a natural bias from investors toward the US property market because of the country’s strong Reit structure, he says. The UK property market appears to be running out of steam, with the issue of yield compression affecting returns. These market conditions mean it is a natural progression for investors to look overseas, particularly because of the cyclical nature of commercial property, he says. Funds with a global mandate can look at where the country’s economic cycle is placed and take advantage of favourable global market conditions. However, it is important for investors to consider how their property fund works, Modray notes.

“Many investors like property as a way of diversifying their portfolio away from shares into bricks and mortar investments,” he says. “However, the risk is that many Reits invest in property companies linked to the performance of the stock market. This negates the benefits of diversification.” David Coombs, director of multi-manager investments at Barings, says he is currently looking at the German property market. His property fund, the Barings Multi Manager Property portfolio only invests in commercial property and currently has 30% invested in opportunities outside the UK. Coombs’ interest in international property growth is driven by his belief that high returns achieved in the UK commercial property market in recent years are unsustainable. In the past, commercial property was undervalued but future returns will need to be driven by value-added management and rental growth, he believes. The German commercial property market has potential for growth, and strong demand from overseas investors over the past six months supports this, he says.

Commercial property in France and Spain offers similar opportunities, he adds. Simon Ward, economist at New Star, believes the German and Japanese markets could be in the early stages of sustained recoveries. “Foreign housing markets offer mixed opportunities. Further weakness is likely in the US and frothy conditions in France and Spain could unwind on the back of tighter ECB policy,” he says. Meanwhile, Ward believes the MPC interest rate rise will lead to a cooler UK housing market for 2007, but not outright weakness. “Market activity and price gains will slow progressively during 2007, but the main downside risk is further interest rate rises,” he says.

“I think there is a reasonable chance of another 0.25% rise early next year. Factors likely to limit any weakness include stable to firm labour market conditions as economic growth remains. “Confidence may prove more resilient on this occasion, partly because the wider economy is doing well, but a slowdown in buying interest is likely in the New Year.”

Source: Investment Week

Many UK homeowners will be delighted with the near-9% house price growth notched up over the past year, but their counterparts in the Latvian capital of Riga really have something to smile about: prices are up 39% from 12 months ago.

Riga topped a new global house price league table published by the estate agency Knight Frank. Its turbo-charged performance put it well ahead of Bulgaria and Denmark, second and third on the list with annual price growth of 19% and 17.8% respectively. By contrast, the biggest loser was Hong Kong; a year ago Hong Kong was boasting annual price growth of 20%, but prices fell by 2.6% over the 12 months to September 30.

Only Germany managed a worse performance - prices there dropped by 3%. Liam Bailey, Knight Frank’s head of residential research, said: “Germany has been the poor man of Europe in housing terms for well over a decade, and any change in this position is still some way off.” Mr Bailey analysed the property markets in 32 countries. Japan, Portugal and Hungary also saw prices fall.

Explaining Riga’s strong showing, Mr Bailey said: “Latvia has seen, and is forecast to see over the medium term, economic growth above the EU average. Wage inflation, growing prosperity and access to less constrained mortgage finance have all contributed to rapidly rising prices.”

It is a similar picture in Bulgaria, where the market has benefited from an influx of Britons buying second homes.

All eyes have been on the US housing market lately, and the new data provides the latest evidence of a sharp slowdown, showing that the annual rate of growth has more than halved to 5.7%.

Knight Frank also found that the appetite for second homes continues unabated, helped by the relentless march of the low-cost airlines. “Looking ahead, we are upbeat about prospects in 2007,” said Mr Bailey.

Source: Guardian

Related:

• The Knight Frank Global House Price Index (2nd Quarter 2006)

Second homes abroad have trebled in a decade

BRITONS’ passion for a bolt-hole abroad has seen the number of overseas properties owned by UK homeowners treble in the past decade.

The value of foreign homes has also surged, hitting £71 billion in 2005, up from £29 billion in 1997.

The number of foreign homes snapped up by British buyers rose from 102,000 in 1995 to an estimated 300,000 in 2006, a study from Grant Thornton, the accountants, revealed.

The demand for foreign properties is such that 2 per cent of UK home owners now own a second home abroad.

Though Spain and France top the list of desirable destinations, the expansion of the European Union has seen an increasing numer of properties being bought in Eastern European destinations, including Bulgaria, Romania and Hungary.

The study concludes that a continued underpinning of UK house prices for the forseeable future should see the trend towards second home ownership continue — albeit at a slightly lower rate.

By 2025, the report says, up to 2 million British homeowners — or a tenth of total home-owners in the country — could own a property overseas.

Maurice Fitzpatrick, senior tax manager at GrantThornton, added however that the continued trend would be “heavily dependent on the strength of the UK property market and the wealth it generates”.

The study warns potential purchasers of second homes to be wary about the tax implications of purchasing abroad.

Often, it says, buyers are unaware that they are still subject to tax on offshore income and capital gains if they are resident in the UK.

They are often surprised too, it says, by the complexity of local tax systems.

“It is all too easy to be seduced into the attractions of overseas property ownership and to ignore the perils,” Mr Fitzpatrick said.

A combination of low interest rates, a booming UK property market and benign global economic conditions have helped to fuel the rise in foreign home ownership, the study found.

Cheap flights and the expansion of the European Union have also helped to make foreign ownership a reality for many people.

The typical second home-owner, it found, was either a pensioner, using their foreign property as their main home abroad, or an affluent person aged 45 or above whose second home was either an investment or a holiday home.

The study, which drew on the Government’s Survey of English Housing, found that 35 per cent of second home owners had a place in Spain, 24 per cent had a home in France, and 5 per cent in the US.

Source: Times Nov 18 2006

· Overseas homeownership up 300% in 10 years
· 1.3m nationals may live outside UK by 2025

Drive through almost any pretty French or Spanish town and there is bound to be a derelict villa asking for some love and attention. Just a lick of paint and the help of a few local tradesmen will transform a wreck into a holiday home for friends and family.

Today, a second home in the sun is now the boast of more than 300,000 people, according to a study of foreign home ownership - more than three times the figure recorded in 1995.

While Spain and France lead the list of destinations, Bulgaria, Romania, Hungary and the Czech Republic are rapidly gaining favour with Britain’s affluent homebuyers. Montenegro, which features in the latest Bond movie Casino Royale, is also on the shopping list of British bargain hunters. Budget flights, booming property markets and the rise and rise of the super rich pensioner have fuelled the boom, which is continuing to gather pace, according to the report.

By 2025, it says, there could be around 1.3m British nationals living in other countries.

A comfortable home with a better guarantee of sun is one of the chief reasons for taking the plunge, with 38% of buyers saying they will holiday in their new home or eventually use it as a place to retire.

Not everyone is aiming to move abroad. The study shows that four in every 10 buyers of foreign property believe it will be an investment either to supplement their pension or for their children.

However, the authors of the report warn that many potential buyers fail to investigate how much they will need to pay to buy and maintain their property and how much they will pay in fees and taxes.

They said the attraction of a warm climate, cheap cost of living and easy access to a second home overseas can blind buyers to many hidden perils.

Mike Warburton, of accountants Grant Thornton, authors of the report with City firm Lombard Street Research, said: “Purchasing a property abroad has important tax implications. Contrary to popular belief, you are still subject to tax on your offshore income and capital gains if you are a UK resident and live here. And, if the UK tax system is not complicated enough, the purchaser of a property abroad has to cope with a local tax system that may be culturally dissimilar to our own.”

The report says that today 2% of the UK population owns a property overseas. The typical owners are either pensioners with their main residence abroad, or affluent fortysomethings, usually aged over 45, who take their holidays abroad or use it as an investment.

Retired people like France and Spain less than the familiarity of an Anglo-Saxon environment and prefer Australia, the US and Canada.

A separate government report in the summer revealed that the number of families in England who own a second home in Britain or overseas had soared past half a million for the first time. The data revealed that in 2003-04, 298,000 English families owned a second home in England, 26,000 had a second home in Scotland or Wales, and a further 178,000 owned a property overseas.

Spain has long been a favourite of British holiday and retirement home buyers, and just over a third (35%) of all overseas second homes are located there, says the department. Another 24% are in France. Only one in 100 second homes abroad are in Italy.

Most buyers say the quick and cheap access offered by budget airlines is the initial temptation. Tanya and Steve Taylor of south London bought a small home near Barcelona for £50,000 three years ago. Since then a small renovation project has included putting £500 worth of solar panels on the roof. To cut C02 emissions on summer holiday visits with their three sons they also bought a second hand camper van on eBay to drive rather than fly, though flying is still part of the deal.

“We have to pump the water by hand and use lots of candles,” said Mrs Taylor.

At the other end of the spectrum, Mark Harrison, a Harley Street doctor, bought a ski chalet in Switzerland for £1m last year that allows him to ski straight on to the piste.

“It’s fantastic and is so much cheaper than other places in the four valleys, especially Verbier which is just next door, and similar places in France and Italy,” he said.

Mr Harrison, who has five daughters aged one to 11, will not be renting out his second home. “It’s an all-year-round resort which means we can go mountain biking in the summer.”

Over there

Most popular countries for second homes

1. Spain
2. France
3. United States
4. Bulgaria
5. Turkey
6. Cyprus
7. Greece
8. Italy

Source: Observer Nov 18 2006

International real estate news articles worth reading in the past week in our opinion:

Malaysia’s biggest property developers; Maxisegar & MK Land who account for 37 percent of outstanding corporate bonds worth $5.4 have had their debt ratings lowered by The Central Bank - Bank Negara Malaysia. [IHT]

In the US, Seattle’s metro area has been ranked as the No. 1 most desirable place to buy and own office property in the US by 600 real-estate professionals [Seattle Times].

Top international property consultancy, Colliers have been appointed by India´s leading real-estate developer, DLF Ltd., to offer retail development consultancy on its flagship shopping centres, Mumbai Mall and Mall Of India. The Indian retail real estate market has a predicted double digit growth rate, with more than 300 shopping centres expected to come on line by 2010 [AME Info]

In Hongkong, HSBC (Hongkong & Shanghai Banking Corp.) said it will cut its prime lending rate, to 7.75% from 8.00% revive HK’s moribund property market [MarketWatch]

India is looking forward to Morgan Stanley’s biggest ever property fund that is going to pour in US$8billion (US$2billion of which will be invested in India & China), [Moneycontrol India]

There has been suprising growth in The Czech Republic’s commercial real estate sector with office, retail, logistics & warehousing space experiencing record level rents and sales [Czech Business Weekly]

According to the Central Bank of Bahrain, bank credit to Bahrain’s private sector hit a record high in June with loans to construction and real estate growing 50 per cent from a year earlier. [The Peninsula - Qatar]

Have a great weekend guys!

Vietnam´s real estate market is picking up steam as the country moves towards admission into the World Trade Organisation (WTO), according to industry insiders.

The number of real estate transactions in the third quarter of the year increased 20% over the first six months of the year, and 25% over the same period last year. The trend indicates that the domestic real estate market is recovering from its long slump.

The prospect of a WTO safety net has inspired new waves of foreign investment in Vietnam, reviving the dormant property market.

“The news of Vietnam´s upcoming WTO membership has spread both at home and abroad,” said Tran Trong Hieu, director of the International Urban Development and Investment Co. “This has helped wipe out many foreign investors´ doubts about the country´s legal system.”

“Those of us involved in investment brokerage began to feel a higher comfort level from foreign
investors after Vietnam´s likely WTO accession was announced,” said Vu Quang Hien, director of the Property Management and Consulting Joint Stock Co (Citiplus).

As real estate investment requires large volumes of capital, investors want the government to ensure the security of their investments and protect their interests, Hien explained.

“When Vietnam joins the WTO, the country will have to abide by international rules that make investment safer,” he said.

Do Thi Loan, general secretary of the Ho Chi Minh City Real Estate Association, said that her association alone had received more than 20 delegations this year from such countries and territories as South Korea, the US, Australia, China, Singapore, Hong Kong and Taiwan.

Most were highly interested in real estate in Vietnam, particularly in major cities, said Loan, and many memoranda of understanding have been signed to develop office buildings, luxury apartments, shopping centres and housing for low-income earners.

Many foreign-invested real estate development projects that have been stalled for some years during the recent slump in the market have recovered on the new foreign investor confidence.

Nguyen Duc Kiet, deputy general director of Hong Kong´s Larkhall Group, said the group received an investment license from the Vietnamese Ministry of Planning and Investment (MPI) in 1997, and planned to set up a joint venture with a Vietnamese partner to build an office building in HCM City.
Following the 1997 Asian financial crisis, the project stalled and did not resume until 2005, Kiet said, at which time Larkhall became the sole investor.

“Investment in the project has grown from US$62 million in 1997 to US$125 million at present,” he said. “The scheduled completion date is now in 2008.” Truong Ngoc Dieu, administrative director of the Happy Square project of Taiwan´s Fei Yeul Group, said the group was licensed by the MPI to set
up a joint venture with a Vietnamese company in 1995 to build a $468 million complex which would have included an office building, a hotel and a shopping centre, but the project was postponed.

Development resumed in mid-2006 solely under the Fei Yeul Group without the participation of domestic partners.

Many new projects were also being developed, including the Gold Sai Gon Plaza, a joint venture with a Taiwanese company, and Sai Gon Sport City, fully funded by Singapore´s Keppel Lang. The Phu My Hung joint venture also planned a $16 million project to build an additional million square metres of apartments by 2010.

Real estate market experts believed that demand for office and apartment space would mushroom following WTO accession.

“We have received many investors from Tokyo, Singapore and Malaysia who have come to us expressing their desire to invest in Ho Chi Minh City property,” said MarcTownsend, CB Richard Ellis (CBRE) managing director.

Retail shopping centres have also attracted the attention of many investors, said Richard Leech, director of CBRE´s Hanoi office. Many new retail centres such as Hon Ngoc Viet in Nha Trang, the Opera in Hanoi and Hum Ho-Sai Gon in Ho Chi Minh City were under construction, he noted.

Market experts said that land suitable for the construction of large projects has become rare, creating opportunities for some domestic investors to sell or lease land use rights initially obtained for now-failed projects. Sensing the demand, the Asian Commercial Bank´s real estate company last week opened a property transaction floor in Ho Chi Minh City.

Source: Asia Property Report

Related:

• Vietnam property market to boom? [THANH NIEN News]
• Vietnam set to join the WTO today [Bangkok Post]
• Real estate market to see new wave of investment [VNEconomy]

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