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Mar 10, 2023 / 23:01

Vietnam named favorite investment destination for ultra-rich Singaporeans

The fast-growing Southeast Asian country is seen as one of the top value destinations for ultra-high net worth individuals.

Vietnam is one of the top five destinations for ultra-wealthy Singaporeans with a net worth of US$30 million or more looking to invest in overseas properties, according to Knight Frank's Wealth Report.

 Ho Chi Minh City ranks third for affordable luxury condominiums. Photo: Sunshine Group

The latest report shows that Ho Chi Minh City, Vietnam's southern metropolis, ranks third in the world for affordable luxury condominiums, behind Sao Paulo, Brazil, and Cape Town, South Africa.

It highlights why it is proving such an attractive drawcard for investors from nearby regional countries, the report noted.

Knight Frank calculates that, with one million dollars, an individual can own a 162-square-meter luxury property in Ho Chi Minh City, compared to a modest 35-square-meter one in Singapore.

Commenting on the findings, Knight Frank Vietnam Managing Director Alex Crane said: “Over 2022 we saw high levels of interest from overseas investors for the commercial markets in Vietnam, a noticeable proportion of which came from private capital, including the largest transaction Knight Frank brokered in the last 12 months.”

“We anticipate this trend will continue in 2023 but also envisage that local valuations will be under pressure from more pan-Asia competition as these private investors are also able to mobilize in similar emerging economies, or more mature economies where security and yield may look like a better bet than Vietnam,” he underlined.

According to the report, 2022 was the second strongest year on record for commercial real estate investment volumes amongst private investors, capitalizing on repriced assets and favorable currency positions, with 32% of Asia-Pacific’s High Net Worth Individuals reporting that they intend to increase investments in commercial property, surpassing the global average of 28%.

Private investors were the most active buyers in global commercial real estate investment in 2022, accounting for 41% of the total investment. Multifamily residential – or private rented sector (PRS) was the investment of choice, followed by offices and industrial and logistics combined.

In another report, Knight Frank also forecasted that Singapore's ultra-wealthy population is expected to grow by 268% in the 2016-2026 period.

Asia-Pacific region

In Asia-Pacific (APAC), high-net-worth individual’s (HNWI) allocation to commercial investment increased over 30% year-on-year (YoY) in 2022, accounting for over US$1.53 billion in commercial property investment - a significant uptick amidst a broader decline in investment volumes across the Asia-Pacific region, which decreased by 21.3% in 2022.

Neil Brookes, Global Head of Capital Markets at Knight Frank, said: “The ongoing repricing of assets and the stronger currency positions have allowed private investors to continue their dominance in the market.”

With debt set to be a key factor for all investors in the year ahead, private clients are well-positioned to take advantage of opportunities as they are typically less reliant on debt with ample cash reserves to secure prime assets quickly, he added.

Despite the expected persistence of macroeconomic challenges in many global locations, Knight Frank's High-Net-Worth (HNW) Pulse Survey indicates that property holdings are likely to increase. About 19% of HNWIs intend to invest directly in commercial property, with 13% set to take the indirect route. Healthcare-related assets topped the wish list for HNWIs in 2023 (35%).

While APAC HNWIs responded similarly to their global peers in the aforementioned questions, they are more optimistic about commercial property investment than their global peers. 

Accordingly, about 32% of APAC HNWI plan to increase allocations to commercial property (the global average is 28%). Although inflation will be a significant factor influencing investment decisions in 2023, some 26% of APAC HNWIs responded that it will not influence their investment decisions at all (the global average is 20%). Besides, about 43% of APAC HNWI indicated that capital appreciation is their biggest goal for wealth in 2023 (the global average is 31%).

Christine Li, Head of Research, Asia-Pacific at Knight Frank, said: “The inflation pressures in APAC remain more moderate compared to global markets, as most central banks in the region have pursued prudent monetary policies and maintained fiscal discipline. In addition, the expectation that APAC will lead the economic growth in 2023, has resulted in a more nuanced landscape emerging in this region.”