HOUSING ATTRACTIVE FOR FOREIGN DEVELOPERS

The flow of foreign capital invested in real estate in the first four months of the year has been impressive, but the domestic market has not yet fully recovered. According to the Ministry of Planning and Investment, foreign capital into real estate in the first four months reached $1.68 billion, four times higher than the same period in 2023.

Bloomberg on May 9 published an analysis of the opportunities and potential of the Vietnamese real estate market. When the Asian commercial real estate market was mainly driven by China and Hong Kong with the explosive growth of the mainland economy, office buildings had impressive occupancy rates, the report said.

“However, the situation has changed. The economy of China is facing deflationary pressure and the unstoppable decline of the real estate market. This is the reason why investors gradually turn their attention to other potential markets in Asia, including India, South Korea, and Vietnam,” it said.

Bloomberg cited data showing that real estate rental prices in major Chinese cities could decrease by up to 6 per cent this year. Meanwhile, in Ho Chi Minh City, in the first quarter of 2024 prices increased by 6.6 per cent over the same period last year. This is partly a consequence of the China+1 business diversification strategy, it said.

Pham Thi Mien, deputy head of the Market Research and Consulting and Investment Promotion Department of the Vietnam Association of Real Estate Realtors (VARER), said that investment activities were being boosted by capital flows from Asian and Middle Eastern investors. In addition, many large investment funds are also actively approaching Vietnamese real estate businesses to seek cooperation opportunities.

“In addition to the industrial and residential real estate segments, in the first quarter, the office and commercial real estate segments have also begun to attract attention from investors,” Mien said.

Meanwhile, Sopon Pornchokchai, chairman of Thailand’s Real Estate Agents and Valuation Organisation, acknowledged that Vietnam’s real estate market was prominent in Southeast Asia.

“This advantage is compounded by the stability and impressive growth rate of the economy. In addition, a population of up to 100 million people and not yet facing a serious ageing period are plus points, showing that the potential customer portfolio is still considerable,” Pornchokchai said.

“Vietnam also boasts many large cities with room for development. This is in contrast to Thailand, where almost all key projects and works are concentrated only in Bangkok. Despite possessing many such advantages, Vietnam’s real estate prices have not yet reached their peak. This is an opportunity for investors who know how to seize the opportunity.”

According to German online platform Statista, Vietnam’s real estate market is worth $4.41 trillion in 2024 compared Thailand with $2.51 trillion.

Singaporean developer CapitaLand in March started construction of two large-scale developments, the Lumi in Hanoi and Sycamore in the southern province of Binh Duong. These two projects are CapitaLand in two largest housing projects in Vietnam, with a total of about 7,500 apartments and total value of $1.5 billion.

In February, Central Pattana Public Company from Thailand announced that its subsidiary, CPN Global Co., Ltd., had established a presence in Vietnam, engaging in real estate management to develop future projects on behalf of Central Pattana.

Mien from the VARER said that the housing segment was still an attractive choice for both domestic and foreign investors because of its attractive profit rate.

“If 15 years ago, foreign investment capital flows only focused on high-end housing with familiar names such as Keppel Land and CapitaLand, then now, the market has many new players joining the game such as Lotte Group, GS, Sumitomo, and many others,” Mien said.

In the past 35 years, there has been $66.4 billion of foreign capital poured into about 1,100 real estate projects in Vietnam. Singapore, South Korea, Japan, and Taiwan are the most active markets with long-term investment strategies in Vietnamese real estate.

Source: VIR