Vietnam attracted $3 billion worth of foreign capital into the real estate sector in 2017

Why Vietnam?

Besides profits, there are other reasons for foreign investors to eye the Vietnamese market, including a desire to expand in the international market or diversify investment portfolios in Asia.

Vietnam, with a high growth rate, population and demand for housing, has become a destination for many foreign investors. 

Singaporeans are the traditional investors in Vietnam’s real estate market, developing  villas, apartments and high-end office and shopping malls.  

But investors from Malaysia, Hong Kong, South Korea and Japan who scaled down their operations in the real estate crisis between 2011 and 2013 have returned.

The market has also seen many newcomers from China, who are believed to have powerful financial capability.

High-end market targeted

Though Vietnam is known as an attractive market with a strong rise of the urban middle class, most foreign investors in Vietnam target the high-end market segment. 

Analysts say this is the segment where foreign investors have experience and advantages, while they face competition from domestic investors in low-cost and mid-end projects.

However, in some cases, foreign investors are also looking for opportunities in the mid-end market segment. Japanese investors, for example, have joined forces with Vietnamese real estate firms to develop apartments targeting middle-income earners, young couples and migrants in HCMC.

Japanese investors have experience in designing small apartments at low costs.

Foreign investors are also interested in developing large urban areas and cities. Smart urban areas using advanced technologies is one investment trend.

Difficulties in seeking land 

With the 2013 Land Law, real estate developers, however, are having problems finding land. The State no longer implements site clearance, except in some special cases.

As a result, real estate developers have to compensate residents for site clearance. In many cases, investors and local residents cannot reach agreement on compensation methods. 

This is why foreign investors often cooperate with Vietnamese firms to develop projects. 
Under the most popular cooperation model, foreign investors take major responsibility developing projects, while Vietnamese companies are in charge of the land fund and legal procedures.

Forecasts about the real estate market in 2018 are all inclined towards optimism. The market is expected to witness further growth in many market segments thanks to strong demand.

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Kim Chi