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Last updated: Friday, October 20, 2017

 

Foreign Capital Flows into Real Estate

Posted: Monday, April 24, 2017


In the first quarter of 2017, foreign direct investment (FDI) flows kept moving strongly into the real estate market, showing the rising heat and appeal of the Vietnamese property sector. According to Professor Dang Hung Vo, to avoid being sent to a disadvantage in the current context and trend, real estate investors must raise their professional capacity and management capacity, and grasp customer psychology and tastes.

US$7.7 billion of FDI in Q1, 2017
According to Jones Lang Lasalle (JLL) Vietnam, a research firm, FDI into Vietnam in the first quarter of 2017 reached US$7.7 billion, a jump of 77.6 per cent compared with the same period in 2016. The disbursed capital stood at US$3.62 billion, an increase of 3.4 per cent year on year. To date, there has been around US$2.9 billion from 493 newly registered projects and US$3.9 billion from 223 added FDI projects.

Among 71 countries and territories investing in Vietnam, South Korea retained its ranking as the largest foreign investor in Vietnam, with US$3.75 billion in newly registered capital, accounting for 48.6 per cent of the total, followed by Singapore with US$910.9 million. By industry, foreign investments mostly poured into the manufacturing and processing sectors with US$6.5 billion, and real estate with US$344 million, accounting for 84.9 per cent and 4.5 per cent of total FDI, respectively.

Professor Dang Hung Vo said FDI flows into the real estate sector are a good signal and a good way to go. The advent of more foreign investors will not necessarily cause domestic enterprises to slide into a disadvantage. It is actually an opportunity for domestic property firms to become more mature and gain experience and advanced technology from the world.

“For big corporations in the world, they usually have very strong capacity and potential when investing overseas. Thus, they only meet product quality requirements but also make their products even cheaper. This is indeed good to the State and people. To avoid being left behind in such a fierce competitive environment, property investors must raise their professional capacity and management capacity, and grasp customer psychology and tastes,” he said.

Necessarily strengthening policy framework
Mr Dang Van Quang, Director of Assets and Property Management at JLL Vietnam, said, in current industrial zones, despite the fact that the land fund is still quite large, many shortcomings remain unresolved, for example, infrastructure and supporting industries are poorly developed, administrative procedures drag on investment, while the property market lacks transparency, in addition to rampant corruption. Another impediment to FDI inflows in the past year was the failure of the Trans-Pacific Partnership (TPP).

Quang added that, in 2016, industrial property lost a big investor with US$1 billion of investment capital, that is, the US-based Apple Inc. Earlier, Apple had surveyed and planned to build a factory in Vietnam, but it could not agree with the incentive mechanism and some other causes. So, they moved the plant to India. Although Apple's US$1 billion is not as big as Samsung’s investment value, it is also a big regret for industrial real estate.

However, the real estate market in general and the industrial property in particular is still potentially attractive to foreign investors, with cheap labour, cheap land and cheap construction costs. In addition, it has the advantage of young population and high level of culture, notwithstanding low skills and workmanship. In the past time, the Government has also made pro-business policies which work effectively in practice. Political and economic stability also assure investors.

Remarkably, big foreign investors tend to move their facilities out of China due to various reasons. This will also be an opportunity for Vietnam and other countries in the region. However, the new destination of FDI flows out of China depends on many factors.

Luong Tuan








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