International investment continues to flow into Vietnamese real estate
International investment continues to flow into Vietnamese real estate
During the first six months of 2023, foreign direct investment inflows concentrated primarily on industrial real estate and a few large ventures.
Dr. Nguyen Van Khoi, president of the Vietnam National Real Estate Association (VNREA), stated on July 13 that the Vietnamese market continues to be a "vigorous lure" for international investors. According to the Ministry of Construction, foreign direct investment (FDI) in real estate surpassed $4.45 billion in 2022, up 70 per cent from $1.85 billion in 2021.
The most recent data from the Ministry of Planning and Investment indicates that Vietnam had attracted approximately $67.2 billion in FDI in the real estate sector as of July 12. With $16.3 billion, Ho Chi Minh City is the leading in the list, followed by Hanoi, Binh Duong, and Ba Ria-Vung Tau.
In the first six months of 2023, industrial real estate had an occupancy rate of over 78 per cent in the northern and southern regions. In cities like Ho Chi Minh City, Dong Nai, and Bac Ninh, the occupancy rate is between 87 and 90 per cent.
With a total registered capital of $19.1 billion, Singapore ranks first among countries and territories investing in Vietnam's real estate sector, followed by South Korea, the British Virgin Islands, and Japan, in that order.
However, the market remained in a state of "poor liquidity and limited supply" during the first half of the year, according to Khoi. This is primarily due to unresolved legal issues and restricted capital access.
Khoi stated that the volume of supply and demand for resort villas, townhouses, and shophouses remained low, primarily due to the pressure of rising interest rates. In addition, the price of tourism and resort real estate tends to decline by between 5 and 6 per cent by the end of 2022.
Neil MacGregor, managing director of Savills Vietnam said, "Finding capital for the real estate industry through FDI flows will be entirely possible due to investors' keen interest in the Vietnamese marketplace."
To assure FDI inflows in the future, it is necessary to eliminate obstacles. According to research by Savills Vietnam, there are currently three barriers that make it difficult for FDI inflow to enter the real estate market and for foreign investors to actively participate in Vietnam's potential merger and acquisition (M&A) market.
First, Vietnam's land-based legal system is relatively complex. Many provisions in the Law on Housing, Law on Land, and Law on Real Estate Business are inconsistent, and numerous issues have not been resolved, thereby impeding the growth of M&A transactions.
Second, Vietnamese small and medium-sized businesses were not adequately prepared for the real estate M&A process, resulting in difficulties with investment capital mobilisation and transfer.
Thirdly, buyers and sellers of real estate projects have various pricing strategies and approaches, resulting in price disparities for high-value properties.
According to VNREA projections, Vietnam's real estate market will remain sluggish until the end of 2023, reviving only in the second or third quarter of 2024. Thanks to the improvement of the legal environment, the outlook for economic growth is optimistic, with synchronous and modern infrastructure development and a variety of financial resources.
