Real estate stable at 4th in FDI appeal

Vietnam attracted more than US$12 billion in both new and additional foreign direct investment (FDI) pledges in the first five months of 2017, up 10.4% year-on-year, according to the Ministry of Planning and Investment’s Foreign Investment Agency.

Of the sectors receiving FDI, real estate stood in the fourth position with 27 newly registered projects and 10 expanded projects with a total investment capital sum of US$560 million.

According to Felix Lai, investment director at Gaw Capital Partners, Vietnam is one of the markets with the most potential for foreign real estate investors.

“Vietnam’s stable economic growth, its large population and improving standards of living, and the high urbanisation speed are the main factors attracting foreign investors to the local real estate market,” Lai said at the Private Equity & Venture Forum held in Ho Chi Minh City recently.

Gaw Capital Partners is a private management fund based in Hong Kong with total assets of more than US$16 billion. 

In Vietnam, Gaw Capital Partners has acquired four big projects from Indochina Capital, and set up joint ventures with domestic developers – Tien Phuoc and Tran Thai Real Estate, as well as Singapore’s Keppel Land – to develop the US$1.2 billion Empire City in Thu Thiem New Urban Area of Ho Chi Minh City.

Andre Lim, general manager for the northern region at CapitaLand Vietnam, also said that Vietnam’s real estate

market has shown its immense potential, especially after the revised Law on Housing was enacted in July 2015, making it possible for foreigners to lease homes in Vietnam.

“Except for some limitations, foreigners now have nearly the same rights as Vietnamese citizens. They have the right to lease properties to live in, inherit, and mortgage. This is a big motivation for developers in the housing sector in Vietnam,” Lim said.

“Vietnam is one of the key markets of CapitaLand in Asia. The real estate market in Vietnam is backed by stable economic development, a growing middle class, and a young population – all of which means a high demand for housing,” he said.

CapitaLand is a leading Singaporean real estate group with a long-term development strategy in Vietnam. After more than 22 years, CapitaLand had SGD2.1 billion (US$1.5 billion) worth of gross assets under management, including 22 serviced residences, nine residential developments, and a prime commercial property.

Mira Christanto, senior portfolio manager of APG Asset Management Asia, also believes that with the favourable conditions, Vietnam’s real estate market will be the main destination for foreign investors, at least until the next decade.

Since 2016, Vietnam’s real estate market has been especially attractive for foreign investment. The latest reports from global property

consultants such as Savills, CBRE, and JLL confirmed that the market received some of the highest evaluations among the ASEAN members.

According to a recent report released by JLL, Vietnam was listed along with Thailand, Singapore, and Hong Kong as one of the places garnering the most interest from Asian and European investors because of the high benefits of investment in property.

These benefits were evaluated as more attractive than those provided by many other markets such as China and Singapore, where investor interest is waning.

Neil MacGregor, managing director of Savills Vietnam, cited that Vietnam is attracting considerable interest from foreign investors as a result of the booming economy, as well as the many untapped opportunities for investors looking at a range of different sectors.

“In regards to real estate, the Vietnamese market is somewhat counter-cyclical compared to other markets in the region. While Indonesia and the Philippines are now witnessing a downturn in their real estate markets, Vietnam is entering a recovery period,” MacGregor said.

Real estate is also set to benefit from the significant flow of FDI into manufacturing, leading to the greater demand for housing, retail and office space, in addition to the growth of industrial zones.

“Given the significant number of enquiries that Savills receives from overseas investors, we expect the strong FDI flow to continue in real estate, as well as the broader economy,” MacGregor said.

Investors from the Republic of Korea, Singapore, and Japan are leading the property market in Vietnam. Singapore, with a range of leading developers such as CapitaLand, Keppel Land, Mapletree, and VSIP are well placed in the market, while South Korean investors have been active in Vietnam for a long time also, with Lotte, Posco, and Daewoo laying strong foundations.

Meanwhile, Japan has been racking up investment also, with the participation of a range of big names such as Maeda, Mitsubishi, Kajima, Creed Group, Hankyu Realty, and Nishi-Nippon Railroad.