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Far East prime property markets expected to take off 2010 and next year, report predicts

Buying top end condominiums and letting them to expats is proving increasingly popular in Vietnam where the number of investors is increasing, according to the new Wealth Report from consultants Knight Frank which examines locations around the world.
Vietnam has an established top-end apartment market in its capital Hanoi and a number of luxury beach front developments are opening along China Beach in Danang. Most prime developments in Hanoi are in and around the Hoan Kiem District and several new luxury villa and apartment developments are under way at My Dinh, seven kilometres from the centre, the report says.
A restricted supply meant the prime market was less affected by Vietnam’s recession and a period of rapidly rising inflation in 2008, according to John Gallander, head of Knight Frank’s new office in Hanoi.
Prices started to recover in the second half of 2009, but are still about 5% to 10% below their peak. Prices in Ho Chi Minh City can be more volatile, because of extra supply, he explains in the report. In Danang asking prices for luxury villas can reach $2 million in what is regarded as a small but growing market.
Although Cambodia is probably five to 10 years behind its neighbour Vietnam in terms of economic development, the country’s fledgling prime residential property market has already seen rapid price swings over the past few years, according to Tan Hong Kiat, head of Knight Frank Cambodia.
Speculation, driven partly by the return of wealthy Cambodians who fled the country during the Khmer Rouge era, combined with significant levels of investment by Korean developers, caused a spike in property values during the latter half of 2008 and the beginning of 2009.
‘Local people were buying land with the hope of flipping it to make a profit,’ says Tan. Although values have fallen back by as much as 40%, some of the prices being paid for the most expensive addresses remain ‘quite scary’, he adds. Apartments in Gold Tower 42, which will be Phnom Penh’s tallest building upon completion, are still making $3,500 a square meter.
The Boueng Keng Kang, Chamkarmon and Daun Penh areas of the capital Phnom Penh, with their attractive colonial architecture and boulevards, are Cambodia’s principal prime residential areas, but there is increasing development in the tourist town of Siem Reap that services the Angkor Wat temple ruins. The government is also trying to attract more investment to coastal towns like Sihanoukville.
In terms of overseas buyers, Cambodia does not yet have the equivalent of luxury second home coastal resorts like Thailand’s Phuket or a significant ex-pat community because ownership of buildings is currently restricted to a 99 year lease, the report points out.
Tan, however, said that draft legislation that allows foreigners to own strata properties in Cambodia has already been approved.
In Thailand investors usually opt for luxury apartments in central Bangkok and top end holiday villas in Phuket, the report says and investment opportunities outside these locations are limited. The Phuket and Bangkok prime markets are expected to gain ground in 2010 as the country’s economy recovers.
Foreign investment into Thai real estate is restricted when it comes to land purchasing and 2009 was not a very good year for the prime markets, says Phanom Kanjanatheimthao, managing director of Knight Frank Thailand.
Coastal resorts, such as Koh Samui and further flung islands, have tried to develop a luxury villa market to match Phuket’s, but none have really been that successful, says Frank Khan, head of residential for Knight Frank Thailand.
‘There have either been issues with land ownership or the infrastructures simply haven’t been good enough. People spending millions on a villa generally don’t want to be too isolated in case anything happens like a medical emergency,’ he explains.