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VIP markets grow in importance

The VIP markets of Vietnam, Indonesia and the Philippines are rising as a new contender to the BRIC nations in terms of real estate development and investment.

December 2015

Vietnam, Indonesia and the Philippines – collectively known as the VIP nations – are emerging as an important area in the global real estate market. Covering a total area of 2,537,267 sq km and with a combined nominal GDP of USD 1.5 trillion it is easy to see why some analysts are comparing this region to the BRIC (Brazil, Russia, India and China) market.

“Emerging markets have suffered bouts of volatility in the past two years, which took away some of their lustre. The Asian part of the BRICs are arguably on a strong economic footing now, but China’s economy is undergoing structural changes which will see growth slow in the short term.

“We see more momentum in the VIP nations as they are part of the ASEAN economic bloc, which has set its sights to achieve deeper regional integration in the next few years. The VIP, as such, benefits from a supportive ecosystem that is absent from the geographically disparate BRIC nations. In addition, the VIP economies are building up their infrastructure, such as subways, and upgrading their sea and airports, which will remove current bottlenecks and accelerate economic growth as well as raise real estate values in these countries,” explained Sigrid G. Zialcita, Managing Director, Research, Asia Pacific, Cushman & Wakefield.

Infrastructure investment is seen as pivotal to the VIP success story. Ho Chi Minh City and Jakarta are both constructing subway systems that will improve accessibility and elevate real estate values in the cities. The Philippines is also looking to upgrade its airports and is building highways to ease congestion.

“Infrastructure projects, by improving accessibility and enhancing links, unlock the value of the area, which generally attracts private investments,” commented Zialcita.


According to Cushman & Wakefield’s Zialcita, the main investors in the VIP markets are domestic companies and investors. This is because of existing restrictions on foreign ownership, as well as a relatively opaque market that also deters foreigners. However, this could be set to change, as legislation is set to ease up in some VIP markets.

Policies restricting the ability of foreigners to buy residential property have been relaxed in Vietnam. In the Philippines, there is a cap of 40% of foreign ownership in a condominium project. In Indonesia, foreign ownership of properties is generally not allowed, with properties only available to lease on a right-to-use basis, for an initial 25 years, which can be extended for a further 20. However, the government is currently assessing this policy with a view to relaxing such restrictions.

“We see the relaxation of foreign ownership restrictions in Indonesia as setting the stage for a more vibrant real estate market,” said Zialcita.

According to Cushman & Wakefield, in Ho Chi Minh, the residential, logistics and industrial sectors hold the most potential. With manufacturers in Japan and South Korea looking to set up factories in Vietnam, well-located industrial properties or land for development are in demand. The lack of modern warehouses in the country is also a gap that presents the opportunity for developers to fill.

Offices in Manila will continue to ride the outsourcing boom that has lifted the Philippine economy for the past few years.

Meanwhile, in Jakarta, extensive investments in infrastructure, which will alleviate congestion, are tipped to benefit residential and retail developments most.


According to Cushman & Wakefield’s mid-year forecast report, Sustaining Positive Momentum – Asia Pacific 2015-2019, Vietnam is fast becoming the go-to place for manufacturing, setting the foundation for stronger growth of ancillary industries in Ho Chi Minh City and Hanoi.

Growth in the IT, finance, insurance, pharmaceutical/life science and fast-moving consumer goods (FMCG) sectors is leading to an increase in leasing activity. In Ho Chi Minh City, the CBD and fringe areas continue to see growth with favourable rental rates. In Hanoi, there remains potential for development in the CBD.

Furthermore, the Vietnamese government is currently investing heavily in major infrastructure projects including new highways, metro lines and airports throughout Vietnam.

“Vietnam remains a frontier market so it is fair to say that all sectors will enjoy growth over the medium to long term. We do anticipate the industrial and logistics sectors to out-perform other sectors as and when a number of Free Trade Agreements take effect, including the TPP, EU and ASEAN agreements,” said Stephen Wyatt, Country Head, JLL Vietnam.

From the Middle East, Wyatt explained that Vietnam is witnessing interest from Sovereign Wealth Funds from the region.

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