Eyes on Vietnam: The quiet giant of Asian real estate is waking up

Vietnam is emerging as one of Asia’s most compelling property investment stories, write Knight Frank analysts.

Knight Frank Vietnam on June 19 released a report named "Vietnam Investment Guide". Our analysis offers fresh insights into the country’s economic resilience, sector-specific real estate trends, and why Vietnam is fast becoming a magnet for global capital.

The Southeast Asian secret is out

For years, Vietnam has flown just under the radar of many global investors. But with average GDP growth of 6% over the past two decades, a young and skilled workforce, rising urbanization, and massive infrastructure upgrades, the country is now in the spotlight.

Projects like Long Thanh International Airport - under construction near Ho Chi Minh City with a planned capacity of 100 million passengers annually - signal Vietnam’s long-term ambition to become a regional logistics and investment hub.

Adding to the appeal, Vietnam’s exports are rapidly moving up the value chain: high-tech products now account for over 50% of total merchandise exports, a stunning leap from just 8%in 2010.

Strategic property sectors in focus

Apartments

Market segments and buyer trends

Vietnam’s apartment market has experienced sustained growth over the past two decades, particularly in densely populated urban areas such as HCMC and Hanoi. These cities are the sector’s important apartment market, currently providing a cumulative supply of 700,000 units since 1995 across a broad spectrum from affordable to upper high-end segments.

This figure highlights a significant gap when compared to the combined population of over 20 million in both cities. Limited transparent land availability and ongoing legal complexities have contributed to a supply shortage in both major cities.

Due to the rising population coupled with limited supply, apartments have become highly favored over the years, with positive average absorption rates of around 80% at launching events, driving up current market primary asking prices to $3,000-4,000 per sqm.

The lack of new developments and increasing primary asking prices in HCMC and Hanoi have driven the apartment market toward satellite regions to address supply shortages and affordability.

Northern developers and buyers have shifted to Hung Yen, Bac Ninh, Ha Nam, while those in the South have expanded into Binh Duong, Dong Nai, Long An, and Ba Ria-Vung Tau.

Key players

Foreign buyer procedure: Foreigners are treated similarly to Vietnamese citizens when purchasing apartments if they hold a valid passport or are legally enter Vietnam.

Ownership

Vietnamese citizens are entitled to indefinite apartment ownership without limitation, whereas foreigners are allowed to purchase units within commercial housing projects only, with the ownership period is 50 years, renewable once for a period not exceeding 50 years if required. (Article 20, Housing Law 2023)

The quota of units available to foreign buyers is capped at 30% of the total number within any apartment project. Additionally, foreigners are prohibited from owning properties in areas related to national defence & security.

Reference rental yields and capital gains

Due to their earlier market maturity and higher property prices compared to neighboring areas, core cities such as Hanoi and HCMC achieved an average rental yield of 3-3.5%, while more affordable satellite areas such as Binh Duong experienced higher yields, staying around 4-4.5%.

Furthermore, capital gain rates in major urban areas displayed strong potential, averaging 10-15% per year, while neighboring areas recorded rates of 8-12% annually.

Divestment

Foreign individuals are permitted to resell their apartments in Vietnam to Vietnamese citizens, overseas Vietnamese, or eligible foreign entities and individuals. For foreign resales buyers, ownership is limited to the remaining duration of the original term.

Related taxes & funding (bank support)

When purchasing units from developers and resale owners, buyers are required to pay three major fees: VAT, registration and maintenance. Foreign buyers are eligible to meet essential financial criteria and can qualify for loan support, with a loan-to-value (LTV) ratio ranging from 50-70%.

Offices

Market segments and tenant trends

Total Grade A and Grade B office supply in Hanoi and HCMC has reached 3.7 million sqm. Grade A supply accounts for 27% of total current stock, primarily located in District 1 and the Thu Thiem New Urban Area in HCMC, as well as in the Midtown and West areas in Hanoi.

Over the past two years, the majority of new supply in these big cities came from green-certified office buildings, marking a significant developmental milestone for Vietnam’s office market.

In recent years, both the Hanoi andHCMC office-for-lease markets have witnessed a substantial trend of “flight-to-quality”. This is demonstrated by the positive absorption in new, high-quality offices.

Additionally, IT/technology and finance/banking/insurance are market drivers, with many large-scale transactions up to 10,000 sqm.

Key players

As a dynamic office market, HCMC has attracted a diverse mix of notable domestic and international developers, who account for 69% and 31% of the total office stock, respectively.

Meanwhile, local developers remain the key driving force for the development of the Hanoi office market, accounting for more than 80%of the total supply across the city.

Ownership

Office building ownership in Vietnam can be structured in various ways. These include arrangements for foreign investors through either long-term leasehold arrangements or acquisition via Vietnamese entities.

Current laws and regulations also permit foreign investors to own the structures and buildings on the leased land. These frameworks provide additional investment opportunities that further bolster the Vietnam office market.

Divestment

Both domestic and foreign investors are active participants in Vietnam’s commercial office M&A landscape, particularly in the major business hubs such as HCMC and Hanoi.

Divestment activity is typically driven by portfolio optimization, financial restructuring, or current market opportunities. This can occur through different methods, including direct sales, public auctions, and joint ventures.

Regarding office tenants, even thoughthey do not have ownership rights to the property, it is generally permissible for them to sublet or assign their lease to another party, sell or transfer their business operations, or terminate their lease in accordance with the terms and conditions of the lease agreement.

Additionally, while not commonly used, the long-term lease contract form (Strata Title) offers tenants greater flexibility in managing the leased premises, particularly if real estate business operations are allowed under the terms of their business license.

Related taxes

According to Law No. 48/2024/QH15 and Decree No. 180/2024/ND-CP, regarding office leasing activities across Vietnam, the value-added tax (VAT) is applied at a rate of 10%, applicable to both domestic and foreign companies. The common corporate income taxrate (CIT) for eligible entities is set at 20%, in accordance with Law No.32/2013/QH13.

Industrial

Market segments and tenant trends

As of 2024, the total supply of Vietnam’s ready-built property market reached over 15 million sqm, equivalent to a 2018-2024 CAGR of 15% per annum. Of which, modern supply recorded robust growth, accounting for 48% of total warehouse stock. This has enhanced the Vietnam industrial landscape with high-standard and flexible products.

Since the US-China Trade War and the Covid-19 pandemic, Vietnam has witnessed a significant shift ininvestment from Chinese small and medium-sized enterprises (SMES), particularly in the electronics sector.

In 2024, 40% of total major transaction value recorded for ready-built factory/warehouse came from electronics, followed by automobile/vehicle components and 3PLs.

Key players

With huge land bank advantages, local developers, such as Kinh Bac City, Sonadezi, TTC Dang Huynh and KCN, remain dominant in terms of marketshare, equivalent to 56% of the total existing supply.

However, due to the great potential of Vietnam’s industrial zones, many foreign developers have extended their portfolios to Vietnam through the acquisition of many development sites, spanning from north to south. Some notable developers include BWID, SLP, Mapletree, Frasers, and Cainiao and new brands in recent times, such as Mitsubishi and WHA.

Ownership

Ownership of a ready-built industrial property project in Vietnam typically involves a long-term leasehold agreement, in which the developer leases the land from local government or a private landowner and owns the entire buildings and structures.

Upon expiration of the lease term, the ownership of the buildings and structures may revert to the land owner unless otherwise agreed upon. However, investors may sub-lease or purchase long-term leasehold rights to a portion of, or the entire project, subject to the lease agreement and relevant laws and regulations in Vietnam.

Divestment

For the ready-built factory/warehouse (RBF/RBW) market in Vietnam, subleasing is considered a morecommon practice than property assignment. This option allows tenants to flexibly adjust the space requirement in line with their business performance, without terminating the original lease.

Especially in the face of macro-economic uncertainties, some manufacturers choose to lease part o rthe entire property to a subtenant to maximize the business efficiency. Additionally, developers are seeking divestment opportunities by selling properties with high expected yields; however, the market needs to narrow the expectation gap between buyers and sellers for transactions to take place.

Related taxes

According to Law No. 48/2024/QH15 and Decree No. 180/2024/ND –CP, the current value-added tax (VAT) applicable to factory/warehouse leasing activities in Vietnam is 10%. For the majority of industrial zones in Vietnam, enterprises are subject to a corporate income tax (CIT) of 20% during the first 10 years of operation.

This includes 2-year tax exemption and 50%-tax reduction for the next 4 years. Especially for high-tech, and supporting industries, the government offers a preferential tax rate of 10% for the first 15 years of operation, including four-year tax exemption and a 50%-tax discount for the following nine years.

Confidence from the ground up

“Vietnam is no longer just a low-cost alternative - it’s a strategic, long-term play,” said Alex Crane, managing director of Knight Frank Vietnam.

“The government’s reform agenda, especially under Resolution 68, is creating momentum by reducing red tape, supporting SMEs, and incentivizing innovation and technology. Despite global headwinds, the fundamentals here remain incredibly strong.”

Trends to watch

Global Minimum Tax

The Global Minimum Tax, set at a 15% minimum effective tax rate for large multinational companies with annual revenues exceeding €750 million, is expected to raise the effective corporate tax rates for major foreign developers in Vietnam.

We look forward to the Draft Decree providing guidance on the implementation of Resolution No. 107/2023/QH15 (Resolution 107), which was released for public consultation by Vietnam’s Ministry of Finance on November 12, 2024.

Net-zero plan

As part of Vietnam’s commitment to achieving net-zero emissions by 2050, as outlined in COP26, Vietnam aims to reduce its carbon intensity by 30% by 2030. From 2026, although green standards will not be mandatory by law, developers of new Grade A offices in HCMC and Hanoi are pursuing EDGE, LEED or WELL certification to meet tenant and investor demand for green buildings.

U.S. reciprocal tariff on Vietnam

Vietnam is expected to benefit from the second trade conflict and remains a key beneficiary of the ‘China+N’ diversification strategy. However, it is also among the countries most exposed to reciprocal US tariffs.

The reciprocal tariff on Vietnamese exports to the United States has dampened sentiment, pending clarity from bilateral talks set to conclude in Q2/2025. Meanwhile, investors are channeling funds into prime residential projects for defensive yield and capital upside.

Mergers of provinces and cities

Resolution 60 consolidates 63 localities into six cities and 28 provinces between 2025 and 2031. Larger jurisdictions should speed one-stop licensing, unlock bigger land banks, and channel infrastructure funds.

The first wave merges HCMC with Binh Duong and Ba Ria-Vung Tau into “Greater HCMC City”, while Long An absorbs Tay Ninh. Developers should track new zoning maps and note that some current incentives may sunset within two years of each merger.

The consolidation is expected to raise Vietnam’s position in the World Bank’s Ease of Doing Business ranking once fully implemented.