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Vietnam real estate attracts a large amount of Foreign Direct Investment

Top 10 business sectors that attract most FDI in Vietnam last 4 year

This year, Foreign Direct Investment (FDI) in Vietnam continues to grow strongly with impressive figures. Foreign investors, especially from Asia, are pouring billions of dollars into Vietnam. Among the sectors attracting the largest investment, real estate is considered as a shining star recently. It is the result of Vietnam’s government efforts to create a competitive economy in the integration period.

Surging Foreign Direct Investment (FDI)

In the last 30 years, Vietnam’s economy has witnessed a spectacular growth of FDI. According to the data of the World Bank, FDI flow into Vietnam only increased from 1990 and remained at a low level of approximately $ 2 billion before 2006. However, FDI in 2015 was $ 11.8 billion, increasing by about five times compared to 2006 ($ 2,4 billion). In total, Vietnam attracted 17,579 FDI projects worth $ 251.8 billion over the past 30 years, since the Law on Foreign Investment was issued in 1987. The impressive growth has made Vietnam become an attractive and potential market in the eye of investors.

FDI in Vietnam from 1970-2015 (Source: World Bank)
FDI in Vietnam from 1970-2015 (Source: World Bank)

The upward trend has continued in 2016 through the data of the Vietnamese Ministry of Planning and Investment. Initial figures from January’s FDI data showed strong year on year growth over 2015. Newly registered projects in 2016 reached a high of 127, up 186 % from the previous year. Total FDI from this period was also up over 100 percent. It exceeded 1.3 billion dollars and reached more than $11.2 billion in the first half of the year. Experts forecast that FDI will be still stable in the near future. Vietnam’s rapid pace of integration into global commerce will yield unparalleled opportunities and record foreign investment in the near future.

Attractive real estate market for investment

Vietnam real estate market is showing signs of flourishing. In 2016, Foreign Investment Department (Ministry of Planning and Investment) recorded that real estate was an important sector of FDI. It ranked second in the attraction of FDI, just behind manufacturing and processing industry. The number of foreign investors has increased sharply since the liberalization of Vietnam’s Housing Law on July 1st , 2015. Vingroup, a leading developer in the country, announced receiving 400 requests that ordered apartments from foreigners in the recent period, mainly bought luxury products (Landmark 81 of the Vinhomes Central Park).

Top 10 business sectors that attract most FDI in Vietnam last 4 year
Top 10 business sectors that attract most FDI in Vietnam last 4 year

The Vietnam real estate market had seen very sluggish growth leading up to 2015. This was caused due to the previous restrictions on foreign ownership, a speculative bubble from 2006 to 2008, etc. Tran Kim Chung, Deputy Director of Vietnam’s Central Institute for Economic Management, said that 2011 – 2013 was a crisis period when the price of real estate plummeted. A series of promotional discounts and investors’ supports even reduced by 50%, but the market was still gloomy.

After the new law on housing and real estate business in July 1st , 2015 allowing foreign ownership came into effect, Vietnam property market has recovered and heated up.  Primary residential prices rebounded by as much as 15 percent from 2014 to 2015. This trend is predicted to continue for the next five years at least. Many experts believe that FDI flow will continue in real estate, even with projects worth billions US dollars.

Potential investors

Potential investors in the real estate are mainly from Asia. Among them, Japan, South Korea and Singapore have topped the list for the largest direct investment in Vietnam recently. In 2016, the data from the Ministry of Planning and Investment showed that Korea accounted for 31.9% of the total investment capital in Vietnam with 5.62 billion US dollars. Typical successful Korean corporations are Lotte with Lotte Center or modern Lotte Hotels & Resorts, Keangnam with Keangnam Hanoi Landmark Tower, the highest tower in Indochina. Japanese ranked second with $ 1.92 billion, accounting for 10.9%.

Kajima Corporation of Japan, has formed a joint venture with Indochina Capital to channel funds worth of $1 billion into property developments in Vietnam over the next 10 years, or Creed Group has invested $ 200 million to River City. Besides, Singapore poured 1.73 billion US dollars, accounting for 9.8% of the total investment capital. Some prominent investors are Keppel land with Saigon Centre and Palm city, and Capital Land with The Vista, Seasons Avenue…

River City, a luxury project invested by Creed Group in District 7, Ho Chi Minh city
River City, a luxury project invested by Creed Group in District 7, Ho Chi Minh city

The stable and rapid growth of the economy, the progressive government policies, and the competitive advantages from free trade agreements have contributed to make Vietnam one of the brightest investment destinations in Asia. Specifically, with many strategic foreign investors, Vietnam real estate provides huge potential opportunities, becoming a lucrative profit-making sector.

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