Second Home Market

A new wave for Vietnam

July 2009

Presented by:
Marc Townsend
Managing Director
CB Richard Ellis (Vietnam) Co., Ltd.
 Agenda – Second Home Market
Definitions

ƒ What is behind the surge?

ƒ Where is it happening?
ƒ Who is buying the villas and condominiums?
ƒ How does it compare to other South East Asia
destination?
ƒ Is it sustainable?

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 Why do people buy a second home?

ƒ Capital gains
ƒ Investment property
ƒ Diversifications of risk
ƒ Future retirement

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 Vietnam Economic Situation - first half 2009

ƒ Inflation has lowered

ƒ Stock market has risen sharply
ƒ SBV lowered interest rate and maintained low
ƒ Increase of supply of rental apartments
ƒ Government stimulus package helped businesses
cope with the economic crisis
ƒ Residential sales in big cities on the rise
ƒ Confidence on the economy
ƒ No PIT for the first 6 months

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 What is second home?

• Not a primary home

• Provide additional income when leased out
• Part of a hotel/resort/golf club
• Mostly in a beachfront resort or in the mountains
• Could be leasehold title
• Often in a managed community
• Bought with discretionary wealth

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 Vietnam Economic Overview
2006 2007 2008 First 6 months 2009
Prelim. Estimates Latest figures
Growth 8.2% 8.5% 6.18%1 3.9%1
Rate (2.9%2 - 5%3 for 2009)
Lending 9 -12% 14 -16% 12.75% 10.5% effective
Rate Down from 21% in Q3 (since 1st Feb. 09)

Inflation 7.5% 8.3% 22.97% 10.3%4 y-o-y

7% for 20093
Trade US$-4.8 billion US$-12.5 billion US$-17.5 billion US$-2.1 billion1
Balance

Gold Price VND12.2 million VND16.1million VND17.8 million VND20.9 million

per Tael (Dec. 06) (Dec. 07) (31 Dec 2008) (26 June 09)

US$/VND 15,628 -16,000 15,948 -16,026 16,977 - 17,400 16,954

Official FX (31 Dec 2008) (26 June 09)
rates 19,000 (At the end of
2009)2
FDI US$12.0 billion US$21.3 billion US$64 billion US$8.9 billion1
(Jan – Apr 09)
US$20 bil. for 2009

CB Richard Ellis | Page 6 Source: 1Ministry of Planning and Investment 2BMI Q3/2009 Report 3Vietnam target 4GSO
 Stock Market: VN-Index
ƒ VN Index 448 as at 30 June, 2009 - Up 90% from 24 February low of 235

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 Commodities – last 6 months
Vietnam Gold

18%

Source: Giavang

Source: FT.com

NYMEX Crude

52%

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 Vietnam Economic Situation - 2008
FACTS:
ƒ Inflation increased considerably
ƒ Significant increase in construction costs
ƒ Drop in the stock market indices
ƒ Global financial turmoil (just beginning)
ƒ Oil prices start to increase

CONSEQUENCES:
ƒ Official base interest rate increased to 14%
ƒ Lending rate (VND) increased to 21%
ƒ Speculators disappeared from the market
ƒ International investors began to lose confidence

MARKET REACTION:
ƒ Adjust in prices and buyer interest for condos from the peak in 2007
ƒ Office rental rates dropped
ƒ Slow down in construction works
ƒ Withdrawal from investment projects by international investors

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 South East Asia sales Comparison
2 bedroom apartment
Price/sm Unit size (sm) Unit price

Vietnam $2,263 – $2,630 110 – 126 $248,968 - $333,053

China Beach1
Penang $1,000 - $2,000 110 – 200 $110,000 - $400,000
Malaysia 2
Phuket $1,282 - $ 4,618 135 - 191 $ 172,673 - $ 944,125
Thailand
Boracay3 $1,780 187 $333,000
Philippines
Langkawi $1,000 - $1,750 100 - 150 $100,000 - $260,000
Malaysia
All dollars figures are US$
1 Indochina Land Hyatt Regency Danang Residences
3 Playa Asya Boracay
CB Richard Ellis | Page 10
 South East Asia sales Comparison
3 bedroom villa

Unit size Land lots (sm) Unit price

(sm)
Vietnam 271 - 328 549 - 848 $324,000 - $625,000
China Beach1
Bali 315 - 680 565 – 1,200 $1,500,000 – $3,300,000
Indonesia2
Phuket 495 - 697 483 – 1,060 $1,298,173 - $ 2,065,275
Thailand
Boracay3 240 300 $360,000
Philippines

All dollars figures are US$

1 VinaCapital Ocean View Villas in Danang
2 Banyan Tree in Ungasan, Bali
3 Amihan Peak Villatels
CB Richard Ellis | Page 11
 What to look for when buying a second home?
Financial returns

ƒ Capital gains
ƒ Lease back opportunity
ƒ Management / Hotel operators
ƒ Investment strategy
ƒ Payment terms
ƒ Cost of maintenance
ƒ Hassle free management
Lifestyle

ƒ Location
ƒ Facilities
ƒ Recreation sports
ƒ Quality
ƒ Local services: club, restaurants, spa,
ƒ Family orientated
ƒ Golf
ƒ Privileges
ƒ Branding
CB Richard Ellis | Page 12
 What to consider when buying a second home?
Legal

ƒ Leasehold/Freehold
ƒ Management fee
ƒ Payment terms
ƒ Maintenance
ƒ Lease back/ Rental pool
ƒ Timeshare/fractional ownership
ƒ Investment strategy
ƒ Insurance

• June 2008, Resolution No. 19/2008/QH12 Pilot Scheme Permitting

Foreign Organizations and Individuals to Purchase and Own Housing in
Vietnam ("Resolution 19") was issued granting the right to eligible resident
foreigners to purchase one residential apartment in Vietnam
• June 2009, the Government of Vietnam issued Decree No. 51/2009/ND-
CP ("Decree 51") which provides Guidelines on the Implementation of
Resolution 19.

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 Target market
Local Foreigner

ƒ Investors already own many “second ƒ Ownership issues

homes” ƒ Remittance of capital gain
ƒ Status in society ƒ Tax on capital gain
ƒ Affordability ƒ Country risks
ƒ Resale value
ƒ Location

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 List of projects
NORTHERN REGION

Projects1 Number

Golf Club Resorts

Northern 3 1 970 villas
566 condos
Central 4 18 1,085 villas

CENTRAL REGION 511 condos

Southern 8 17 5,104 villas

1 Not all of the planned projects in Vietnam

SOUTHERN REGION

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 Projects launches: Name, Reputation, Quality
2008 2009
Northern Tuan Chau Resort
Central Indochina Land – Hyatt
Regency Residences,
VinaCapital – Ocean
View Villas
Southern Sanctuary Ho Tram, Casalle’ Hills Phan Thiet
Long Thanh Golf,
Laguna Long Hai,
Evason Hideaway
Con Dao, Sea Links
Phan Thiet

Total 882 villas 174 condominiums

196 villas
124 villas lots
CB Richard Ellis | Page 16
 Projects launched: Hyatt Regency Danang Residences
Developer: Indochina Land
Land area: 20 ha
Condominiums: 174
Size: 74 – 240 sm (1,2&3 bedroom)
Price from US$180,000 – US$890,000
Villas: 27
Price from US$ 1,230,000 – US$ 1,600,000

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 Projects launched: Ocean Villas – Danang Beach Resort
Developer: VinaCapital
Land area: 260 ha
Total villas in phase 1: 193
Villas: 30 (phase 1A)
Unit Sizes 275 sm (2 br) - 433 sm (4 br)
Land lots from 527 sm - 1,105 sm
Prices from US$320,000 - US$625,000
Expected completion: 2011
Official launch: August 29th 2009
Adjacent to Greg Norman designed golf course

CB Richard Ellis | Page 18

 Projects launched: Best Western Nha Trang Plaza Hotel

Developer: Hai Van Nam Co.

Land area: 4,827 sm
Total GFA: 85,000 sm
Condominiums: 238 units
Floors: 40
Expected Completion Q3/2010

Size: 117 – 256 sm (2 - 5 bedroom)

Price range: US$275,769 –
US$620,288

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 Projects launched: Mui Ne Domaine
Developer: Minh Thanh Construction & Trading Co.
Launched in 2004
Villas:
Phase 1 – 123 (completed and sold out)
Phase 2 – 17 (under offer)
Land lots:
Phase 1 from 278 sm – 1,281sm
Phase 2 from 830 sm – 2,945 sm
Price from US$ 524,000 – US$ 1,080,000

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 Projects launched: La Vallee de Dalat

Developer: Khanh Tam Development Co.

Villas: 6
Size: 614 - 677 sm (4 bedroom)
Land lots: approx.1,000 sm
Villa A – type (3 units):
Price: From US$1,350,000
Villa B – type (3 units):
Price: From US$1,250,000

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 Projects launched: Sanctuary Ho Tram

Developer: Refico Co.

Villas: 67
Expected Completion 2009
Land lots: 640 sm – 1,400 sm
Size: 370 -544 sm
Price: US$725,000 – US$1,650,000
Only villas type A & B available

Phase 1

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 Projects launched: Evason Hideaway Con Dao

Developer: Indochina Land

Residential Villas: 16
Hotel Villas: 35
Size: 542 – 671 sm (3&4 bedroom)
Land lots: 1,500 sm
Price from US$1,500,000 –
US$2,0000,000

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 Country Infrastructure
NORTHERN REGION
Airports: Ha Noi, Hai Phong
Road/Train/Ports: Hai Phong, Ha Long Bay, Cat Ba

CENTRAL REGION
Airports: Hue, Da Nang, Da Lat, Cam Ranh, Quy Nhon,
Tuy Hoa, Pleiku
Road/Train/Ports: Hue, Da Nang, Nha Trang, Quy
Nhon
New flight to Dong Hoi from HCMC from July 1st 2009.
Cam Ranh, Hue airport will be upgrade, Da Nang
airport under expansion.

SOUTHERN REGION
Airports: HCMC, Can Tho, Phu Quoc
Road/Train/Ports: HCMC, Vung Tau
New international airport in Long Thanh schedule for
construction in 2012. Phu Quoc airport upgrading to
international.
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 Weather comparison
COMPARATIVE MONTHLY SUNNY HOURS COMPARATIVE MONTHLY RAINFALL
hours mm
350 1400

300 1200

250 1000

200 800
150 600
100
400
50
200
0
0
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
-200
Ha Noi Da Nang Nha Trang Vung Tau Phu Quoc

Ha Noi Da Nang Nha Trang Vung Tau Phu Quoc

COMPARATIVE MONTHLY TEMPERATURE

oC
33
31
29
27

25
23

21
19

17
15
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Ha Noi Da Nang Nha Trang Vung Tau Phu Quoc

Source: General Statistic Office 2008

CB Richard Ellis | Page 25

 Seasons - Vietnam region
NORTHERN REGION
No. of projects 4
Weather: 4 seasons

CENTRAL REGION
No. of projects 22
Weather: 2 seasons, mostly monsoons in Nov – Dec

SOUTHERN REGION
No. of projects 24
Weather: 2 seasons – Dry: Nov – Arp; Monsoons: May - Oct

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 Hospitality market – Hotels & Tourism
DOMESTIC ARRIVALS TO MAJOR CITIES
IN VIETNAM
ƒ Local tourism increase
7,000,000

ƒ Foreign tourism slipping - 6,000,000

5,000,000

resulting in decreased 4,000,000

occupancy rate especially in 3,000,000

2,000,000

luxury segment 1,000,000

ƒ Ease of entering Vietnam – 2003 2004 2005 2006 2007 2008

Visa timing and costs Hanoi Hai Phong Quang Ninh Quang Nam Da Nang

INTERNATIONAL ARRIVALS TO MAJOR CITIES

ƒ Government introduce IN VIETNAM

tourism program to attract 2,500,000

more international tourist. 2,000,000

1,500,000

ƒ Airport and terminal 1,000,000

upgrade on going at 500,000

Danang, Phu Quoc and 0

Cam Ranh
2003 2004 2005 2006 2007 2008

Hanoi Hai Phong Quang Ninh Quang Nam Da Nang

Source: GSO

CB Richard Ellis | Page 27

 Domestic travel outnumber international
ARRIVALS TO HA NOI ARRIVALS TO HAI PHONG
10,000,000 5,000,000

8,000,000 4,000,000

6,000,000 3,000,000

4,000,000 2,000,000

2,000,000 1,000,000

0
0
2003 2004 2005 2006 2007 2008
2003 2004 2005 2006 2007 2008
International Domestic
International Domestic

ARRIVALS TO DA NANG ARRIVALS TO KHANH HOA

2,000,000
1800
1600

A rriva ls (th o u sa n d s)
1400
1200
1,000,000 1000
800
600
400
200
0 0
2003 2004 2005 2006 2007 2008 2001 2002 2003 2004 2005 2006 2007 2008

International Domestic
International arrivals Domestic arrivals

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2009 Government Decrees Take Effect
ƒ Personal Income Tax (PIT) – taxation changes all employee
benefits taxed (children’s school, housing allowance, car
allowance, etc.) and taxation rates change
ƒ New VAT rules
ƒ New Decree on Vietnamese/foreigner ownerships
ƒ No PIT on Capital Gains Tax from investment, stock trading
until end 2009

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 Impact on local population

ƒ Employment opportunities
ƒ Entertainments
ƒ F&B services
ƒ Medical services
ƒ Leisure
ƒ Cultures

CB Richard Ellis | Page 30

 Asia economic outlook - 2009
GDP growth
-3.1%
Clouds over growth but
positive prospect
Clouds over growth and
JAPAN dimmer prospect
SOUTH
KOREA -5.3% Recent deterioration
CHINA
and uncertain outlook
6.0 Continued deterioration
%
INDIA TAIWAN -5.6%
6.5 HONG
KONG
% -2.5%
THAILAND
-3.1% VIETNAM
PHILLIPPINES
3.5%
1.4%
-2.5% MALAYSIA

INDONESIA
SINGAPORE

-6.5% 2.8%

Source: IMA (April 2009)

CB Richard Ellis | Page 31

 Asia economic outlook - 2010
GDP growth
3.2%
Clouds over growth but
positive prospect
Clouds over growth and
JAPAN dimmer prospect
SOUTH
KOREA -1.0% Recent deterioration
CHINA
and uncertain outlook
7.0 Continued deterioration
%
INDIA TAIWAN -0.5%
7.5 HONG
KONG
% 3.6%
THAILAND
2.9% VIETNAM
PHILLIPPINES
4.9%
3.0%
2.1% MALAYSIA

INDONESIA
SINGAPORE

3.0% 4.5%

Source: IMA (April 2009)

CB Richard Ellis | Page 32

Quarterly Reports for Ho Chi Minh City and Hanoi

ƒ Economic Overview
ƒ Current Rents and Prices
ƒ Office
ƒ Retail
ƒ Hotel
ƒ Residential for Sale
ƒ Investment
quarterlyreports@cbrevietnam.com ƒ Serviced Apartments
ƒ Construction Costs
Available for each city,
in English or Vietnamese

CB Richard Ellis | Page 33

 www.cbrevietnam.com
Over 300 markets in more than 50 countries

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Thank You
CB Richard Ellis | Page 34
 Disclaimer

© 2009 CB Richard Ellis, We obtained the information above

from sources we believe to be reliable. However, we have
not verified its accuracy and make no guarantee, warranty
or representation about it. It is submitted subject to the
possibility of errors, omissions, change of price, rental or
other conditions, prior sale, lease or financing or withdrawal
without notice. We include projections, opinions,
assumptions or estimates for example only, and they may
not represent current or future performance of the property.
You and your tax and legal advisors should conduct your
own investigation of the property and transaction.

CB Richard Ellis | Page 35