The real estate sector in Vietnam remains an appealing destination for foreign direct investment (FDI), with FDI flow into this sector ranking second in the first half of 2022.

FDI Continues to Pour into Real Estate

While many sectors are still suffering from the impact of the pandemic, FDI inflows into Vietnam continued to grow in the first half of 2022 thanks to solid post-Covid support policies by the Government. According to the Ministry of Planning and Investment (MPI), as of June 20, foreign investors had invested $15.27 billion in Vietnam, accounting for 97.4% of the total recorded during the same period last year. 

The real estate sector ranked second, bringing in $3.15 billion, or 22.5% of the total registered capital. Cushman and Wakefield, a leading global real estate services firm, stated that Vietnam remains an appealing destination for industrial real estate investors due to its stable currency and an increase in free trade agreements.

According to the Ministry of Construction, the real estate market in the first 6 months of 2022 has shown signs of recovery and good development. Product absorption rates in most segments were high, and almost no new inventory was generated. Until the first 6 months of this year, the market has not seen an improvement in the supply of commercial housing, the supply of commercial housing is very limited with about 12,000 units. Meanwhile, the total number of transactions of apartments, individual houses, especially land plots increased sharply (estimated at 70,000 successful transactions). The market has regained its balance between investment, business activities, and buying and selling for use.

The Vietnamese market has welcomed many new projects from foreign investors right at the beginning of 2022. The highlight is Lotte E&C’s $900 million investment in its new smart urban project, “Lotte Eco Smart City Thu Thiem.” YSL Group is also developing an industrial land project covering nearly 300 hectares in Nam Binh Xuyen, Vinh Phuc. The project is geared toward green development and high technology, with stringent equipment and advanced science and technology requirements.

On July 14, CapitaLand Development (CLD), CapitaLand Group’s real estate development arm, also acquired a potential land fund to build a complex in Thu Duc City, Ho Chi Minh City, with a total revenue of around $720 million. The project will cover approximately 8 hectares and will provide 1,100 high-class apartments and shophouses to meet the growing settlement needs of Thu Duc City, which is being developed to become an economic and technological center.

Emerging Trends in the Market

According to Savills Vietnam, the real estate market will continue to be an attractive destination for foreign businesses. Two-thirds of FDI enterprises in Vietnam’s real estate sector are large enterprises, many of which focus on industrial real estate. The industrial real estate segment has many favorable factors, such as a large planned industrial land fund, competitive rental prices compared to other countries in the region, a stable political and economic environment, and FDI inflows continuing to flow strongly into Vietnam. These factors will create a driving force for the development of industrial real estate in the coming years.

It is worth noticing that resort real estate is a segment where smart investors will look for opportunities to enter, especially in markets like Phu Quoc, Nha Trang, and Phan Thiet. On July 20, a signing ceremony was held between Vietnamese realty developer Danh Khoi Group and Japanese conglomerate Tokyu Group for the development of the high-end resort project The Meraki in Ba Ria – Vung Tau. Valued at over $42.7 million, the project is part of the Aria Vung Tau resort complex in the Chi Linh urban area. The Meraki Vung Tau, featuring a 29-floor tower, is expected by Tokyu Group to be the driving force for their investment plan in Vietnam, which is considered to have the most vibrant real estate market in the region.

When it comes to popular market segments, healthcare real estate, which is still relatively new in Vietnam, offers fantastic opportunities to investors with the foresight and ability to seize opportunities. According to Forbes, the global healthcare real estate market has reportedly risen dramatically over the last two years, recording double-digit growth. According to a recent survey by Vhome, more than 10.6% of respondents in Vietnam were considering the project’s utility investment rates and ecological and healthcare space quality before making a purchase decision. After the fourth wave of Covid-19, homebuyers began looking for healthy living spaces with green, safe, uncrowded architecture and low construction density as healthcare demand rose. This resulted in the current development of this new market in Vietnam.

The demand for residential real estate in Vietnam will continue to rise as a result of the middle and upper classes’ rapid urbanization. Large cities like Hanoi and Ho Chi Minh City continue to attract foreign investors who are investing in residential and commercial real estate. The demand for space leasing from data centers, e-commerce, and other industries will be what drives the office market. Along with an increase in consumption and capital investment, the retail market also experiences many positive signs as the tourism sector begins to recover. Due to their still-competitive prices in comparison to nearby markets like Singapore, Shanghai, and Shenzhen (China), Hanoi and Ho Chi Minh City are enjoying a growing popularity.

However, the price level of apartments in the middle and high-end segments continues to be pushed up, especially in big cities due to new supply being increasingly scarce and the possibility of. apartment projects appearing in the future with a very high primary selling price compared to the regional average. In contrast, the real estate market in the surrounding localities such as Binh Duong, Long An, Dong Nai and Hai Phong has the opportunity to develop more vibrantly when the land fund is still large and there are many new projects. construction investment.

Considerations for Foreign Investors

Aside from opportunities, it is important to point out that FDI inflows  into the real estate market also face many difficulties and challenges. Specifically, because of numerous issues with the legal system surrounding the project development process, which caused delays in implementation, the amount of FDI registered to the market year after year was not distributed as promised.

Additionally, condotels and officetels are two examples of new real estate segments for which comprehensive and prompt legal regulations have not yet been released. This has led to a discouraging reaction from many foreign investors who showed great interest in the time before.

In the foreseeable future, the housing craze and real estate prices will continue to rise due to the scarcity of available land in big cities, where FDI is mostly invested. The fact that high-quality real estate projects are currently becoming scarcer and less well-publicized may also trouble new investors in Vietnam. Therefore, foreign investors can seek the advice of qualified advisors with in-depth knowledge of the industry to understand the market and gain access to potential projects, or even form joint ventures with Vietnamese partners.Understanding the needs and challenges that foreign investors face, Viettonkin is eager to assist and accompany you as you begin developing an investment strategy in the Vietnamese market. Contact us now to receive detailed and in-depth information from our team of investment, business, and legal experts.