Vietnam’s Real Estate Still Attractive to Foreign Investors

The value of foreign direct investment (FDI) into Vietnam continuously increased in the first six months of 2022. Real estate was the second largest recipient of FDI funds, showing stronger foreign investors’ confidence in the Vietnamese investment environment.

FDI flows into many segments

Vietnam continues to be a leading light in FDI attraction. Real estate ranked second in FDI value with over US$3.15 billion, accounting for 22.5% of the total registered FDI funds. In particular, two-thirds of FDI property firms in Vietnam are large in scale, increasingly diversified in type and higher in quality, especially industrial property which is increasingly appealing to investors.

According to the General Statistics Office (GSO), in 2021, despite complicated COVID-19 pandemic developments, FDI into Vietnam still rose 9.2% year on year to US$31.15 billion. This showed that foreign investors are placing great faith in Vietnam's investment environment.

Mr. Do Duy Thanh, Manager of Investment Consulting, Savills Hanoi, said, not only industrial property but housing, resort and healthcare also excite foreign investors.

The increase in the middle- and upper-class customers, coupled with rapid urbanization in big cities, will further boost housing demand in Vietnam. Besides, despite being hit hardest by the pandemic, vacation property is targeted by smart investors who are seeking opportunities to enter this market, especially in Phu Quoc, Nha Trang and Phan Thiet.

In addition, the emergence of the healthcare property segment, which is still very new in Vietnam, will be a great opportunity. Moreover, foreign investors are paying special attention to residential and office estate. This trend comes from increasing customer demands while the price is still reasonable when compared to big cities like Hanoi and Ho Chi Minh City or to neighboring markets like Singapore, Shanghai and Shenzhen. In particular, the boom of industrial property is promised to become a bright spot in the real estate industry in the coming time.

FDI inflows to Vietnam will be even larger in the coming time thanks to higher competitiveness than other countries in the region. “Foreign companies still put their faith in the Vietnamese market as the country has contained the pandemic well and has a young, dynamic and qualified workforce," he added.

Legal and supply restrictions

Slow capital disbursement, incomplete legal systems and short project supply are barriers to FDI inflows in Vietnam.

Not all registered FDI funds are fully disbursed as pledged by investors due to various legal factors in connection with project development, leading to delays in implementation.

In addition, the absence of legal regulations on some new types of real estate such as condotels and officetels is hindering the development of vacation property in particular and the tourism industry in general. To solve the above problems, many foreign investors often cooperate with Vietnamese partners to form a joint venture to gain access to the market and get support in handling legal procedures for project development, said Mr. Thanh. However, the two sides in a joint venture do not always have a common voice.

The tight supply of real estate projects is a big cause of capital flow bottlenecks. High-quality projects are gradually becoming scarce and less widely publicized. For that reason, to understand the market situation and access potential projects, investors can look to professional consultants with extensive industry knowledge.

“In order to attract more foreign investors, project quality and investor reputation must be ensured. Therefore, ensuring legal processes and project progress should be top priorities,” he recommended.

Authorities should review regulations on new types of real estate, he said, adding that foreign investment policies should also be adjusted in a timely manner to match new regulations and catch up with global economic changes. Additionally, traffic and infrastructure quality also need to be improved.

Besides, while perfecting and consolidating domestic conditions, it is important to select foreign investors. This can be done by carefully appraising foreign investors for their financial health, total investment capital, business reputation and investment criteria, he noted.

By Huong Ly, Vietnam Business Forum