Vietnamese real estate attracts foreign investment in H1/2022

While the economy is undoubtedly still feeling the impact of the pandemic, the Ministry of Planning and Investment remains bullish on continued FDI inflows into the country, thanks to the solid post-Covid support policies outlined in Resolution 105/NQ-CP, 128/NQ-CP.  

According to the Ministry of Planning and Investment, FDI inflows into Viet Nam grew continuously throughout H1/2022. Total registered FDI, including newly registered, adjusted, and M&A, reached over US$14.03 billion. Real estate ranked second, with investments reaching US$3.15 billion, accounting for 22.5% of the total registered FDI. According to the General Statistics Office, in 2021, despite the complexity of the pandemic, registered FDI in Viet Nam reached US$31.15 billion, an increase of 9.2% compared to 2020. This indicates that foreign investors remain keen on Viet Nam's investment environment.  

Mr Do Duy Thanh, Investment Manager at Savills Ha Noi, said that real estate has always been a key economic sector with sustainable growth. Foreign investors are keen on a variety of real estate segments, including industrial, residential, hospitality, and healthcare. However, he notes that foreign investors might face challenges related to legal processes that must be overcome.

Positive FDI Inflows into Real Estate

Since the end of the financial crisis in 2013, FDI has increased markedly and steadily, and real estate investments continue to account for a notable proportion of this. In 2018, according to the General Statistics Office, real estate contributed nearly 5% of GDP, growing by 4.3%, the highest in 15 years.

Mr Do Duy Thanh noted that the real estate market will continue to be "an attractive piece of cake" for foreign businesses. He noted that two-thirds of FDI enterprises in Viet Nam's real estate sector are large enterprises, many of which focus on industrial real estate.

"It is likely that FDI inflows into Viet Nam will grow as foreign businesses become more familiar and confident with the Vietnamese market. Viet Nam had an effective response to the pandemic and has a high vaccination rate, meaning that it has stayed competitive. Recently, Viet Nam also signed two new-generation free trade agreements (FTAs), including the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the European – Vietnam Free Trade Agreement (EVFTA). It is emerging as an enticing market with a young and dynamic workforce and high-quality human resources. Viet Nam can easily compete with other countries in the region," Mr Thanh added.

Factors Attracting FDI 

He said that the expanding middle and upper classes, coupled with rapid urbanisation in big cities will continue to boost residential demands in Viet Nam. He also noted that resort real estate is a segment where smart investors can look for opportunities to enter, especially in markets like Phu Quoc, Nha Trang, and Phan Thiet.

In terms of popular segments, healthcare real estate, which is relatively new in Viet Nam, presents great possibilities to investors with the vision and ability to seize opportunities. Foreign investors also continue to invest in residential real estate and office real estate. What makes cities like Ha Noi and Ho Chi Minh popular is that the prices are still relatively competitive compared to neighbouring markets like Singapore, Shanghai, and Shenzhen. Industrial real estate promises to attract even more interest soon.

Mr Thanh highlighted that FDI inflows into the real estate market also face difficulties. Specifically, the total registered FDI in recent years was not converted to committed FDI due to legal issues related to the project development process, which delays implementation and construction. Another issue is the legal regulations for new real estate segments, including condotels and officetels, are not yet complete or clear. 

Sustainable Path for Foreign Investors

According to Savills Investment Department, to solve these challenges, foreign investors could enter into joint ventures with Vietnamese partners. This will make entry, legal processes, and project development smoother. However, this may come with challenges as the two businesses may not always have a common voice.

"Information on high-quality projects is often hard to find. Therefore, to understand the market and gain access to potential projects, investors can look to professional advisors with extensive knowledge of the industry. To attract foreign investors, the quality of projects and the reputation of investors needs to meet international standards. Streamlining legal and development processes should be prioritised by authorities," Mr Thanh added.

The Savills expert noted that the legal regulations for new types of real estate should be reviewed and foreign investment policies should also be adjusted to keep up with changes in the global economy. Transportation infrastructure also needs to be improved.

"Apart from completing and consolidating domestic laws and procedures, the FDI investor selection process should be carried out carefully. This can be done through the appraisal of foreign investors in terms of their financial ability, total investment capital, implemented projects, reputation, and investment criteria," Mr Thanh noted. 

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