Vietnam Real Estate Still Luring Foreign Investors

According to the statistics of the Ministry of Planning and Investment, in the first 8 months of 2013, Vietnam has attracted over US$12.63 billion of foreign direct investment (FDI), up 19.5 percent compared to the same period last year. Amongst total projects, there are 769 FDI projects newly licensed with a total registered capital of over US$7.4 billion (up 12.2 percent compared to the same period last year), and 297 projects for funding to expand more than US$5.22 billion, up 31.7 percent.

 

Among total 47 countries and territories investing in Vietnam in 2013, Japan still is seen as a top investor, with total new and extended registered capital of US$4.35 billion (up 34.5 percent of total registered capital), followed by Singapore with total registered capital of US$3.78 billion (up 29.9 percent of total registered capital) and Russia with US$1.01 billion (up 8.1 percent of total registered capital).

 

Vietnam has 18 sectors attracting the FDI, particularly in the real estate market. Real estate is ranked 2nd in the list, attracting total newly and extended registered capital of US$588.11 billion, which accounts for 4.7 percent of the total registered capital. The processing industry and manufacturing are ranked at the top of the list. Cumulatively, on August 20, 2013, among other valid projects, the real estate market had a total of 400 projects and a total registered investment capital of US$48.23 billion.

 

According to the representative of Vietnam Savills Real Estate Company, one of the reasons that the real estate market in Vietnam is attracting interest from foreign investors is the recovery of the economy. While the GDP growth impressively reached 5 percent and the inflation rate has been curbed, the interest rates have been adjusted down to 6 percent-7 percent per year. In particular, in Ho Chi Minh City, the remittances have reached approximately US$1.9 billion, up 3 percent compared to the same period last year.

 

Along with the business supporting policies of the Government of Vietnam such as the corporate income tax cut, lower celling interest rate for short-term, 50 percent VAT off for transactions apartments with a floor area of less than 70m2 and price less than 15 million per m2. The 30 trillion credit package launched to solve the housing problem for low income people are also considered a move to "warm" market.

 

In a total of 400 property projects attracting a total registered FDI of US$28.23 billion, Japan is at top of the countries and territories investing most in Vietnam's real estate market.

 

According to Mr Neil MacGregor, Managing Director of Savills Vietnam, at the workshop on introducing opportunities to the Japanese investors to invest in Vietnam market, which were held by Savills Vietnam during recent time, the Japanese investors said that they are very interested in the Vietnam market and strongly confident in the Vietnamese real estate as a good investment for the medium and long term.

 

Mr Adam Bury, Deputy Director of Capital Market Division of the CBRE Vietnam said that the investors of Japan and South Korea are still interested in Vietnam and are always looking for investment opportunities. The group are looking to buy existing assets as well as to capture development opportunities, particularly in urban areas. The Taiwanese Investors are interested in the real estate market in Vietnam, especially in the the segments of the 3-star hotels, the grade C offices and the international standard project. Currently, many large investors are trying to capture opportunities in the real estate market of Vietnam. In the second half of 2013, it is forecast that the real estate market of Vietnam would receive a large number of new investors.

 

The real estate experts said that Vietnam's real estate market has some advantages in comparison with other real estate markets in the region. While the commercial segment of the world's real estate is still in the downtrend, the segment of Hanoi and Ho Chi Minh City shows signs of "bottoming out" and begin to recover. This will gain advantages to attract capital inflows from foreign investors.

 

According to Phan Minh Tuan, the CEO of the Vietnam Construction Investment JSC, the group demand for the real estate of Vietnam is great. The group investors primarily own office buildings and use those as the headquarters for the companies and their businesses. Meanwhile, the investors and investment funds want to participate in categories like hotels, resorts, and some areas for the purposes of building industrial parks and attracting foreign businesses to invest, produce or rent. These projects' potential for stable cash flows always draw great attention of the investors.

 

Vietnam is still a developing country with a young population and high population density. Besides that, the stable political system will be considered a key factor to attract investment foreign investors and moreover, there are many investment opportunities in the real estate market. "This will help boost the effectiveness of M&A activities in the real estate sector", said Mr Neil MacGregor.