Why is Vietnam's real estate a magnet for international investors?
Vietnam has appeared as an attractive destination for global property investors
thanks to the government’s more tolerance in housing ownership, favorable
policies including recently significant investment in smart cities, and
Ho Chi Minh City. File photo
A number of laws on amendments including Land Law, Construction Law, and Law on
Urban Planning (all in forve) draw a picture of the government’s master plan and
its supportive policies in real estate sector that enables investors to oversee
their profit margins.
Foreign housing ownership
The Law on Housing, which took effect in 2015, grants more rights to foreigners
who wish to own a residential property in Vietnam with the ownership up to 50
Statistics by CBRE Vietnam have shown that foreign homebuyers, particularly
Chinese buyers, are paying greater attention to high-end and luxury segments of
the condominium market in the economic metropolis of Ho Chi Minh City in the
first nine months 2018.
Chinese people made up to 31% of home transactions through CBRE in the city
during the nine-month period, followed by Vietnamese people with 24%, and South
Foreign buyers include people who currently work and live in Vietnam and
investors who have never set foot in the country. These new buyers are
interested in projects with prices as high as US$9,000 per square meter.
One of the main reasons for this trend is the investors' belief that Ho Chi Minh
City’s real estate market now is on pace to be comparable to Shanghai’s during
the last 30 years, an era where real estate prices have increased
Momentous investment in smart cities
Vietnam has approved a sustainable smart city development plan until 2025 and
with vision toward 2030 with an aim to enhance the quality and performance of
urban services such as energy, transportation, and utilities in order to reduce
resource consumption, wastage, and overall costs.
Under the plan, four chains of smart cities will be formed centering on Hanoi,
Danang, Ho Chi Minh City and Can Tho in order to utilize local potentials to
raise living standards of local residents and increase competitiveness.
By 2020, Vietnam hopes to complete the legal foundation for smart city
development, set up pilot projects in a number of cities, and by 2025, the first
phase of the pilot project on smart city development will be implemented.
The plan, accordingly, has cought significant attention from foreign investors.
At the ASEAN Summit last November, Japan affirmed its support for the
construction of eco-friendly “smart cities” in 26 pilot locations in ASEAN
member states. Three cities in Vietnam have been listed as pilot cities in the
ASEAN Smart Cities Network.
Ten ASEAN member states have drafted a framework for the development of these
smart cities and the details of the project are expected to be discussed further
as early as this October in Japan.
Through participation in the smart cities program, Vietnam aims to acquire
technical assistance and training to design and run a traffic control system in
Hanoi that can help direct emergency responses by firefighters, ambulances, and
In addition, with the adding of high-quality tourism and service activities, and
multi-purpose entertainment complex to the national’s master plan, the building
of culture and sports stations including horse racing venues is expected to draw
A beach in Phu Quoc island.
Over the past years, foreign capital inflows have been reportedly increasing in
different parts across Vietnam like the capital city of Hanoi, the northern
coastal city of Haiphong, the northern province of Quang Ninh, which is home to
the world’s natural heritage Ha Long Bay, the northern province of Bac Ninh,
which is home to a Samsung complex and hundreds of its Korean vendors, and
The central region becomes attractive destination with the world’s famous
beaches of Nha Trang, Phan Thiet, and Danang.
Dozens of big domestic and overseas investors namely Vingroup, Sun Group, and
French multinational hospitality company Accor have poured money into the
In a latest move, Prime Minister Nguyen Xuan Phuc has agreed to double
investment in Phan Thiet airport to VND10 trillion (US$435 million) following
the approval of the master plan on the national tourism site of Mui Ne.
After the investment, Phan Thiet will become one of three biggest airport in the
central region and expected to be the leading destination in the Asia-Pacific by
Part of InterContinental Danang. Photo: IHG
Notably, Danang, with the operations of one of the world’s most luxury resort
InterContinental Danang Sun Peninsula Resort which is always offering stay for
top leaders of the Asia-Pacific Economic Cooperation (APEC), has witnessed a
great deal of international property investors over the past years.
The southern region offers a series of localities, such as the country’s
economic metropolis of Ho Chi Minh City, Can Tho – the economic, socio and
cultural hub in the Southwestern, Long An and Dong Nai – both destinations for
foreign-invested industrial parks, especially Binh Duong – one of Vietnam’s most
dynamic localities with the presence of foreign giant corporations thanks to its
improved investment environment, and Phu Quoc – listed among the globe’s best
islands and well-known for its pristine beaches, verdant mountain ranges and
Obviously, favorable policies and a wide range of investment profiles including
hospitality and industrial real estate, Vietnam has proved to be one of the
world’s promising lands for global investors.
Vietnam’s real estate market is strongly supported by the fast growth of
middle-class population, the increasing number of international visitors to
Vietnam, and high profit margins.
Statistics by Nielsen showed that Vietnam’s middle-class population might reach
44 million by 2020. This populous class would result in rising demand for
housing in the years ahead, according to General Director Phan Cong Chanh of Phu
The number of foreign visitors to Vietnam grows 20% on average annually,
reaching roughly 15.5 million in 2018.
Following the growth of tourism, several international airlines have boosted its
presence in Vietnam as the Southeast Asian country’s aviation industry is the
world’s top five fastest-growing markets by the International Air Transport
Association (IATA). Remarkably, Vietnam is the fastest-growing aviation market
in terms of passengers in the 2016-2040 period, according to the Airports
Council International (ACI).
Thanks to Vietnamese regulations that allow citizens to buy and own houses, the
country’s real estate market becomes more attractive than in regional countries.
In addition, the property prices in Vietnam are lower than the rates in other
countries. As a result, the return on sales (ROS) varies among 15% and 20% and
more real estate investement trusts (REITs) see the opportunities in this market
as stated by Ngo Quang Phuc, general director of Phu Dong Group.
Su Ngoc Khuong, direcor of Investment Department at Savills Vietnam, said that
the government’s open policies on FDI, political stability, and strong economic
growth are the grounds for rising foreign investment in the real estate sector.
FDI into Vietnam and regional countries. Photo: UNCTAD, HSBC
Vietnam saw increasing merger and acquisition (M&A) deals in the real estate
sector over the past years. In 2017, the M&A value in this sector was about US$2
Dang Xuan Minh, general director of AVM Vietnam and Vietnam M&A Forum,
attributed the M&A deals to the determined privatization of state-owned
enterprises, the rise of domestic property developers, and a resolution on bad
Nguyen Thi Van Khanh, director of Investment Department at JLL, bets on a strong
M&A movement in the real estate market from foreign investors, mostly those from
Japan, South Korea, Singapore, Hong Kong, and Malaysia in the time ahead.
In 2018, fforeign direct investment (FDI) into Vietnam’s real estate sector hit
US$6.6 billion, accounting for 18.6% of the total foreign investment, according
to the Ministry of Planning and Investment.
Investment has been channeled to all five major property types namely office,
retail, industrial, residential, and hospitality.
FDI into real estate sector in Vietnam in 2017. Photo: MPI
2018 marked a 10-year period since the downturn of the real estate market and
nearly 5 years of market recovery.
Given the monetary policies are expected to stay neutral-to-accommodative to
support growth when FDI inflows are poised to channeled into the real estate
market in Vietnam, the real estate market is expected to continue stabilizing
M&A activities and other forms of direct investment will continue to reach new
records, according to JLL