According the latest report from international real estate management firm, Jones Lang LaSalle Vietnam, 2018 marks ten years since Vietnam’s real estate market declined and is five years into the real estate market recovery, which has seen FDI inflows into real estate that are concentrated in the high-end residential segment.
Ten years ago, CapitaLand and Keppel Land developed the first high-end real estate projects in Vietnam ~ The Estella and The Vista. At the end of 2007, the total supply of high-end apartments in Ho Chi Minh City approximately 1,700 units, of which about 1,000 units were from FDI projects and the average price of high-end primary units in 2007 was $2,800 per square meter (at an exchange rate of $1.00 USD = 16,112 VND)
Ms. Khanh Nguyen, Associate Director, Capital Markets at JLL Vietnam noted that, “This created a supply-demand imbalance that pushed prices beyond the affordability of homebuyers with real demand. During this period, the expected return on real estate investment projects by foreign investors was 30% to 35%, which is very high, leading to registered FDI in real estate, mainly from Asian countries.”
Since then, the market has seen the participation of other foreign investors including Frasers Property with a project in Ho Chi Minh City’s Thao Dien District 2 area; Hong Kong Land with its “The Nassim” development; and Mapletree which is developing the One Verandah project, also in HCMC District 2.
Other FDI investments have been in commercial real estate including both Grade A and Grade B office buildings in both Hanoi and Ho Chi Minh City. These commercial developments include the Central Building, Pacific Place and 63 Ly Thai To in Hanoi. In HCMC developments include M Plaza (formerly Kumho Plaza) and Me Linh Point Tower. Other developments in Ho Chi Minh City include South Korean companies GS Investments and the Lotte Group investing in the Thu Thiem urban area in District 2 and Daiwa House, Nomura Securities and Sumitomo Group from Japan investing in projects in District 7.
Traditionally, FDI investment in Vietnam has been in manufacturing, processing and real estate. Investment has been overwhelming from Asia, with investors from China, Hong Kong, Japan, Singapore, South Korea and Taiwan accounting for 73.9% of investment.
In second place is the European Union, which has accounted for 15.2% of Vietnam’s FDI investment total. Companies from the EU have invested in a variety of industries including design, electronics, furniture and home appliances. Their real estate investment has been limited, with most investments involved in acquiring building for their headquarters and showrooms for products that are normally, not in the central business districts of major cities.
In third place are US investors, ranking third in FDI capital. In the real estate sector there are few statistics as to past investments but there is an increasing interest in Vietnam from private equity firms who see Vietnam as an attractive investment destination.
JLL’s report concludes that Vietnamese government monetary policies are expected to stay neutral to support growth in FDI investment into the real estate market and it projects that the real estate market will continues to stabilize and grow.