Foreign investors take a shine to VN property market
In the year-to-date FDI in real estate has been worth US$5.9 billion, the highest level in a long time and second in terms of sectors this year with almost a fourth of total investment, the Foreign Investment Agency said in a recent report.
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“It’s not a new phenomenon, with foreign investment pouring into real estate in recent years, especially from the Republic of Korea, Japan, Singapore, and Hong Kong,” Nguoi Lao Dong (Labourers) newspaper quoted Le Hoang Chau, chairman of the HCM City Real Estate Association, as saying.
Vietnam’s political, economic and social stability is a key factor in its attraction to foreign investors, he said.
“Besides, the trade war between the US and China has made multinationals switch their investments, and Vietnam is a good place to invest.”
Major countries with a lot of foreign currency and low interest rates make huge investments abroad, he said.
“Vietnam has a big open economy … when compared with other nations based on the international trade agreements the country has signed.”
Big cities like HCM City have solicited investment in 190 infrastructure projects and plan to change the designation of 26,000 hectares from agricultural lands to services, industrial and urban lands, he said, pointing out these are very attractive to foreign investors.
“Besides, domestic real estate companies are looking for other capital sources instead of banks, and seeking foreign partners with deep pockets.”
Dr Su Ngoc Khuong, investment director at Savills Vietnam said: “The policy to encourage foreign direct investment, political stability and strong economic growth are reasons for strong foreign investment in real estate.”
The Government has prioritised infrastructure, making real estate one of the most attractive sectors for foreign investors.
Since 2017 the vibrant real estate market has fostered M&A deals with hundreds of millions of dollars waiting to be invested in housing, office and retail space, hotels and industrial parks.
According to a recent Savills report on M&As, a plethora of transnational M&A deals is making Vietnam an attractive place for investors.
Most of the foreign investment in the first half of this year has been in the 272ha smart city in Hanoi.
Many are looking for clean lands in HCM City but they need to be in good locations and with clear documents.
Economist Dinh The Hien said, “In the context of bank credit being tightened, foreign investment will help the real estate market develop.”
But he also sounded a warning: “Foreign investment in real estate is a good sign for the economy but authorities must monitor it to make sure the investment goes in the right direction -- investment not speculation, long-term investment not ‘surfing’ -- and is efficient.”
Financial expert Bui Quang Tin said 80 – 90% of funding for real estate still comes from banks.
“The State Bank of Vietnam has instructed all banks to reduce their loans to risky fields like real estate. Funding by banks will be limited and real estate enterprises must seek other sources.
“Foreign investment will stimulate the real estate market.”
Furthermore, after one year of clearing bad debts, many real estate projects have been revived and helped make the M&A market more vibrant.
Pham Lam, general director of DKRA Vietnam Real Estate Joint Stock Company, said: “Foreign investment coming into the real estate market is a very good sign because the market can benefit from the management skills and new technologies brought by foreign investors.
“However, foreign investors still face many challenges from the [poor] legal framework and mechanism.”
