Vietnam property sector attracts more foreign investors

25 new real estate projects were licensed in H1 of this year with total capital of over $600 million. Some outstanding projects include Samsung’s 21-storey building worth $300 million in Hanoi. TNR Holdings and its Russian partner are also developing a $300 million complex project in the capital city. Meanwhile, SynGiencen, a Singapore-based financial group invests $18 million in DepotMetro Tower – Tham Luong project.

Marc Townsend - Director of CBRE Vietnam said the FDI flow into local property sector has mostly been on the essential demand of accommodation instead of retail, golf courses and hospitalities as before.

FDI flow into property sector made up 5.3% of total in the first half of 2016

Notably, Vietnam property market has allured interest from Japanese investors. Many projects, mostly mid-end housing developments, are being developed under the cooperation between Vietnamese and Japanese businesses.  

Besides, FDI flow has also been seen through a range of M&A deals. The seller of one had become the buyer of another in many cases. Townsend commented that means the M&A deal was asset transactions for benefit but not showing the proof of less attractive property to foreign investors. 

According to CBRE, international developers are becoming much more careful before pouring their money into local property market.

Head of Research at Cushman & Wakefield in Asia Pacific - Sigrid Zialcita said the Circular 06 dated May 27, 2016, tightening the use of short-term capital sources for medium and long term loans, would bring more FDI into property sector.

In her recent visit to Vietnam, Zialcita said with a higher risk weightage attached to property loans, one way around it is to raise equity base of a company. The necessary for capital injections is an opportunity for foreign investments to gain exposure to Vietnam.

According to Zialcita, Vietnam real estate market needs more transparency as long as a better legal framework for a more liquid market and more efficient prices in order to attract more FDI. In addition, housing developments also need to be better aligned to urban planning guidelines as well as overall economic objectives.
Reportedly, Vietnam ranks among the top in terms of greenfield FDI into Asia according to a recent study by Financial Times data division FDI Intelligence.

Vietnam gets favorable fundamentals such as demographic profile, growing middle class, rapid urbanization, stable political, rising incomes, etc to attract international investors. Thanks to a higher level of economic integration, the potential upside is also compelling.

Source: Vietnam Investment Review