Singapore Developers Build On Vietnam’s Growth

Source : TODAY Weekend, December 22, 2007

A growing middle class seeking property in Vietnam will keep Singapore property developers there busy, even as its government plans a tax on capital gains.

Last month, the national assembly of the socialist country passed new regulations to tax capital gains - 20 per cent on stock trade gains, and 25 per cent on property profits - from January 2009.

“With regard to the recent proposal of introducing a capital gains tax for Vietnam in 2009, we believe it is unlikely to affect the buying sentiments of our homebuyers now,” said a CapitaLand spokesperson.

“There is a large pool of genuine homebuyers looking to purchase homes for themselves and their families.”

CapitaLand, which in October launched its first residential development in Ho Chi Minh City, pricing its units between US$1,200 ($1,750) and US$3,200 per square metre, plans to sell 2,800 more homes for mid- to high-end consumers in the next few years.

A spokesperson at Keppel Land, which has the largest exposure to Vietnam among Singapore developers, said: “The capital gains tax does not affect Keppel directly as it is a tax on the profit made by purchasers who on-sell their units.”

Indeed, the recent measures to cool the market, the spokesperson said, “will serve to provide greater stability and sustained demand in the future”.

Yesterday, KepLand closed at $7.25, after falling 45 cents between Nov 20 and Nov 30. CapitaLand closed at $6.15.

Vietnam, regarded by many as “the next China”, began adopting market practices in the 1990s; in January this year, it joined the World Trade Organisation. Its economy has grown at 8-9 per cent a year since 2004, with foreign direct investments reaching US$12 billion ($17.5 billion) last year. More than 200 stocks are listed on the Vietnam Stock Exchange worth a capitalisation of about $27 billion.

Vietnam has a sizeable middle class, estimated at 23 million people, or 27 per cent of the population.

Mr Gary Evans, head of HSBC’s Asia-Pacific equity strategy team, said Vietnam could experience a prolonged real estate market boom. “In the long term, Vietnam still looks to be short of most types of property, so it should stay a strong market in the foreseeable future.”

In Ho Chi Minh City, the supply of new homes will reach 20,000 in the near term but demand is forecast to reach 60,000 units by 2011, said property adviser Savills.

Some of the demand may be speculative, especially at the high end. Property consultants said an “overwhelming majority” of these buyers are locals, said Pacific Star analyst Mark Ho. The low GDP per capita of US$809 “raises questions on how much of the perceived demand is real”, he added.