Vietnam’s real estate market has long been perceived as non-transparent, even by the local people. Recently, the country saw an encouraging improvement in its ranking in the 2012 edition of the Global Real Estate Transparency Index and became the third top improver in the Asia Pacific region, behind Indonesia and the Philippines. While other peers in the region have also made great improvements in their transparency scores, in line with the global trend of being “back on track”, the improvement in Vietnam deserves attention.
The country is now positioned right next to the “Semi-Transparent” tier. A movement up into the “Semi-Transparent” tier in the next two years, which is likely, given the current pace of market developments, would afford the country the power to rebrand itself for foreign investors. If we see that happening in our next edition in 2014, one may find it noteworthy to see a country transform from “Opaque” to “Semi-Transparent” in less than ten years.
There are several reasons behind Vietnam’s improvement. First, market fundamentals data has become significantly more available, thanks to greater market penetration by real estate professional services firms. For example, Jones Lang LaSalle researchers constantly work towards increasing the company’s coverage of various real estate sectors by collecting and maintaining market-aggregated data series and databases of individual properties and transactions, which can be used by institutional investors to quantify market opportunities and risks.
Second, the increased penetration of both foreign investors and multinational corporate occupiers has led to a more competitive real estate marketplace. In particular, this has led to improved bidding and negotiating processes for real estate transactions, greater access to professional property valuation and better professional standards for project and facility management services for corporate occupiers.
Third, government efforts to improve the corporate governance of listed vehicles have led to moderate improvements in market transparency. A decent number of real estate firms are publicly listed in Vietnam, as is the case in many other markets. Since these firms are widely followed by the investing public, they usually have a major influence on investor confidence in the overall real estate market. Thus, a robust framework of corporate governance provides institutional investors with increased confidence in gaining control over the performance of their investments, either through direct real estate or real estate securities. The findings in the 2012 Index, which noted a moderate improvement in Vietnam’s corporate governance, are relatively in line with the results published previously in the Vietnam Scorecard Project – 2011 Report by the International Finance Corporation – a member of the World Bank Group.
Still, there is much to be done in Vietnam to improve market transparency, as most improvements witnessed over the last two years have been reactive in nature. Since the country is now on the borderline between “Low Transparency” and “Semi-Transparent”, market developments must be closely watched, and our research team at Jones Lang LaSalle Vietnam is doing exactly that.
