FDI firm solution for Vietnam property developers: Savills

Vietnam keeps luring foreign direct investment thanks to its bright economic outlook, making FDI a reliable capital source for local real estate developers, Savills Vietnam said Tuesday.

Vietnam’s government and State Bank are making strong efforts to control inflation and stabilize the economy, which will ensure stable growth for mid- and long-term periods, said Neil MacGregor, managing director of the property services firm.

“The tightening of capital channels like bonds and bank credit will have certain short-term impacts on many domestic businesses, including manufacturing, services, and real estate. However, in return, we will see increased transparency in the capital markets, which will boost credibility in the eyes of foreign investors,” he noted.

The entire world has undergone various economic setbacks this year, including supply chain issues and rising inflation. Monetary policies have been tightened, and restrictions in the second half have increased further. The U.S. Federal Reserve has raised the target federal funds rate to 3.75% - 4%. These challenges are set to remain for the rest of 2022 and into 2023, putting huge pressure on Vietnam’s interest rate outlook, domestic exchange rates, and inflation.

The global economy is entering a challenging period as increases in prices and interest rates continue to threaten recovery prospects, according to the Global Financial Stability Report by the International Monetary Fund.

The State Bank of Vietnam has continued to be proactive and flexible with its monetary policies amid global uncertainties. The central bank has revised its fiscal and macro policies to curb inflation, support recovery, and adapt to domestic and foreign market movements. In September and October, the bank raised its rates twice.

“These are necessary to stabilize the monetary and foreign exchange outlook and to retain confidence in Vietnam’s economy,” Savills Vietnam remarked in a release.

According to General Statistics Office data, Vietnam’s credit growth as of the end of the third quarter reached 10.5%, compared to the 14% rate for the whole year targeted by the SBV.

The unused 3.5% for the fourth quarter, according to MacGregor, means limited domestic capital available for real estate firms. “Investors and developers are facing difficulties because traditional capital mobilization channels such as bonds, credit, and the stock market are being disrupted,” he said.

He suggests raising capital through FDI. “Vietnam has welcomed FDI for more than 30 years and received investments from 140 countries and territories. Manufacturing and real estate are the largest beneficiaries.”

According to the Ministry of Planning and Investment’s Foreign Investment Agency, from the beginning of the year to September 20, the total registered FDI in Vietnam reached $18.7 billion, decreasing by 15.3% year-on-year. Real estate was second after manufacturing, with a total of more than $3.5 billion, or 19% of the registered capital. This has doubled compared to the same period last year.

Savills Vietnam said it has so far this year welcomed Savills leaders and senior experts from around the world, including global CEO Mark Ridley, head of Asia Pacific Retail Nick Bradstreet, and more than 50 tenant advisory and representation experts from the U.S., the U.K., the Middle East, India, South Korea, and Southeast Asia. They all noted that foreign investors remain confident and interested in the Vietnamese market, particularly manufacturing, retail, logistics, office, and housing players.

“They see this as an attractive market to do business in because of its young and hard-working population and attractive investment policies,” MacGregor said. “The outlook remains positive and aligns with growth, thanks to the relatively low risk and controlled inflation. The coming together of domestic enterprises and foreign investors is a plus for the market.”