The young, dynamic workforce provides the country with an edge in FDI appeal
In the second quarter of 2022, Vietnam’s GDP has reached its highest value yet in 11 years at 7.72 percent, outperforming its more developed neighbours in the region, according to Cushman & Wakefield.
Foreign businesses have contributed to this growth, pouring in USD15.27 billion worth of foreign direct investments (FDIs) in the country or 97.4 percent of the reported amount in the same period last year, revealed the Ministry of Planning and Investment to VietnamPlus.
The real estate sector alone raked in USD3.15 billion or 22.5 percent of the total registered capital.
Savills Vietnam is predicting further growth in the coming months due to the increased confidence in the market as one of the best-performing during the pandemic with a young, vibrant labour force. The property consultant also uncovered that roughly two-thirds of businesses that have invested in the local sector are large-scale.
FDI disbursement in the period also surged 6.8 percent year-on-year to USD9.24 billion.
The top sector to attract foreign entities out of 18 segments is the manufacturing-processing industry, which gained USD6.98 billion and accounted for 45.7 percent of the total investment. Singaporean investors led the transactions with USD5.64 billion in total investments, followed by Japan with USD2.44 billion, and South Korea with USD2.05 billion.
Meanwhile, merger and acquisition deals have soared since the start of the year, with offices, homes, and industrial developments taking the lead.
“The Vietnam real estate market has been attracting great attention from foreign investors, especially for profitable projects,” said Trang Bui, the country head of Cushman & Wakefield.
“For domestic investors, the purchase of land for project development is of higher priority. Every sector of the property market is gaining attention from investors. That being said, we believe that residential and industrial will be the most attractive sectors for investors and developers from HCMC, Hanoi, and neighbouring provinces,” added Trang.
The industrial sector has accumulated the highest number of transactions in all sectors, amounting to 35 percent of the total transaction value with multiple deals. Frasers Property Vietnam’s Binh Duong Industrial Park, winner of Best Industrial Development at the 7th PropertyGuru Vietnam Property Awards 2021, will be one of the developments that will benefit from foreign investors’ growing interest.
As for the commercial sector, Viva Land’s acquisition of a Grade A office building in Hanoi from the Awards’ Best Sustainable Developer Winner CapitaLand Development (Vietnam) for USD550 million boosted the office M&A market. The housing segment also had a momentous period, with several major transactions this year.
To guarantee that the local real estate sector continues to flourish, Prime Minister Pham Minh Chinh communicated the need to remove ‘bottlenecks’ in the sector during an online conference with the People’s Committees of Hanoi, Ho Chi Minh, Da Nang, Hai Phong, and Can Tho, reported VietnamPlus.
During his presentation, he cited the need to develop a “safe, healthy, and sustainable real estate ecosystem without unreasonable credit tightening but strengthening inspection and supervision and state management.”
The Prime Minister encouraged the need for more tactical infrastructure development to motivate the sector and establish a new development space. He then appointed the Ministry of Construction to reexamine the current legal framework relating to the sector and recalibrate it to ensure that there are no rules that will impede the sector from achieving a durable and healthy environment.
To prevent market risks and ascertain the proper use of capital, the State Bank of Vietnam will restructure the sector’s credit system. Other agencies, such as the Ministry of Natural Resources and Environment were also instructed to work with the Ministry of Finance and the Ministry of Justice to ensure that the legal system relating to the auction of land use rights is consistent and suited to the current state of the market.
The introduction of such measures by the Minister should eliminate the shortcomings in real estate investment, building, and trade, and should lead to a more stable and sustainable future for Vietnam’s real estate market.
To find out who will nab the prestigious titles and represent their country at the Grand Final, visit asiapropertyawards.com/award/vietnam/ when we announce the winners on 21 October 2022.
Gynen Kyra Toriano, Digital Content Manager at PropertyGuru, wrote this article. For more information, email: [email protected].
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