FDI in realty sector increases
Foreign direct investment (FDI) in the real estate sector is on the rise, as data show that foreign investors pledged some US$478 million for the sector in the first two months of the year.
Property has been among the top magnets for FDI, serving as a vital source of funding because capital flows from domestic banks have slowed in recent years, according to the HCMC Real Estate Association.
The association’s chairman, Le Hoang Chau, was quoted by the Vietnam News Agency as saying that FDI is not only an additional source of funding for the real estate market, but it also creates many opportunities and value for property firms.
Economist Nguyen Tri Hieu shared this view, noting that FDI in Vietnamese real estate has been increasing over the last three years. Singaporean, Japanese and South Korean investors have paid special attention to the downtown areas of major cities or areas near important transport facilities such as metros and elevated railways.
Several regulatory procedure bottlenecks have been removed, which is expected to attract fresh investments in the sector. Some businesses are also actively seeking new funds in replacement of bank loans.
Further, some businesses have significantly restructured themselves to be listed on the local stock market and have even partnered with foreign investment funds to launch projects.
According to industry insiders, foreign investors in Vietnam’s property market can be divided into two groups. The first is interested in cash-generating properties such as office buildings, shopping malls, serviced apartments and hotels in downtown areas.
Meanwhile, the second focuses on housing development. These investors are inclined to cooperate with local firms, especially those with available land, to develop apartments or villas.
Real estate advisor Jones Lang LaSalle (JLL) Vietnam said there is an FDI wave worth hundreds of millions of U.S. dollars ready to flow into the country’s property sector.
Vietnam is stepping up infrastructure development, including adding 2,000 kilometers of new expressways, metro systems in Hanoi and HCMC and airports. Therefore, it is not surprising that investors and property developers stand ready to pour money into this fast-growing market, JLL noted.
Tran Kim Chung, vice president of the Central Institute for Economic Management, explained that there remain some bottlenecks that emerged in 2018. Vietnam is increasingly integrating its economy into the world, while the fourth industrial revolution is also increasing its impact on the socio-economic landscape.
Therefore, according to Chung, the expansion of investment funds is of great importance and requires policies, such as the creation of regulatory frameworks, for condotels.
He added that financial policies on the property market do not yet exist. The trust fund could be the best possible solution, but it has yet to be adopted. It is also necessary to control the flow of FDI into the sector in a reasonable manner.
Experts expected the local property sector to continue recording growth in almost all segments, with industrial real estate appearing the hottest in 2019, driven by the relocation of factories from China and the positive effects of trade agreements.