New realty-related laws enhance investor confidence in Vietnam: Savills
The recent enactment of new real estate-related laws is augmenting investor confidence in Vietnam’s stable and transparent legal environment, with foreign investors showing strong interest in diverse segments, says a Savills Vietnam executive.
Diverse investment appetite
Tran Thi Khanh Linh, associate director of investment advisory at Savills, has reckoned that the Vietnamese market continues to offer high growth opportunities, supported by steady foreign direct investment (FDI) growth and robust infrastructure development.
Those factors lead to a strong demand across all segments such as residential, industrial, and commercial, and have collectively enhanced Vietnam's attractiveness to investors.
“With the recent enactment of real estate-related laws in August, investors are now more confident in a stable and transparent legal environment. The streamlined legal approval process and clear definition of initial investment costs (land use costs) have significantly boosted the appeal of real estate investment projects,” Linh noted.
According to experts, investors have abundant opportunities to engage in M&A activities for promising projects or collaborate with local partners to develop large-scale ventures. The diverse market demand has attracted a wide array of investment preferences.
"Foreign investors continue to exhibit strong interest in residential real estate projects, on par with their demand for industrial parks and office buildings. Foreign investors consistently prioritize projects with clear legal status and readiness for development," Linh explained.
Specifically, most investors require projects that have approved 1/500-scale master plans, and many even demand a notice of land use fee payment. However, project legal approval processes have recently slowed down due to ongoing changes in real estate-related laws.
"As a result, the supply of residential projects has become quite limited. Foreign investors have thus shifted their focus towards industrial parks and office buildings, which are typically operational, have clear legal status, and are more readily available for M&A," Linh said.
Savills recorded that, in Q2/2024, Japan’s Nishi Nippon Railroad acquired a 25% stake in the 45.5-ha Paragon Dai Phuoc project from Nam Long Group (HoSE: NLG) for $26 million. Taiwan’s Tripod Technology Corporation bought a 15-ha industrial land lot in Ba Ria-Vung Tau province from Sonadezi Chau Duc.
According to Savills' Asia Pacific Investment Quarterly (APIQ) report for Q3/2024, Vietnam has shown some bright spots in investment activities amid a stable economic environment.
Stable investment environment
According to the World Bank’s latest report from late August, GDP is forecast to grow by 6.1% in 2024, up from 5% in 2023. Inflation is expected to be controlled at 4.5% in 2024, indicating economic stability.
HSBC and Standard Chartered Bank have raised their respective GDP growth forecasts for Vietnam to 7% from 6.5% and to 6.8% from 6% this year.
FDI continues to play a vital role, with registered FDI reaching $27.26 billion in January-October, an increase of 1.9% year-on-year. Realized FDI is estimated to have risen 8.8% to $19.58 billion.
However, despite these positive developments, Savills Vietnam observed that Vietnam’s economy has not yet returned to its pre-pandemic growth trajectory, with consumer spending remaining subdued.
“Vietnam’s economy is forecast to grow by 6.1% in 2024, with inflation expected to reach 4.5%. Foreign direct investment increased by 7% year-on-year [in Jan-Aug], supporting industrial real estate, while international tourism and the retail sector show promising signs of recovery,” said Troy Griffiths, deputy managing director of Savills Vietnam.
Steady annual growth in FDI is a key driver of industrial real estate in Vietnam. The country currently offers 33,000 hectares of industrial parks for lease, with an occupancy rate of approximately 80%. In September, T&T Group broke ground on a 41.7-ha industrial cluster in Hanoi, and High-tech Infrastructure JSC secured approval for a 105.5-ha park in the northern province of Bac Giang.
Despite a projected slowdown in domestic spending, the retail market remains strong due to limited retail space and a growing middle class. Aeon Mall is expanding, having opened Aeon Mall Hue (8.6 ha) in September, acquiring a 10.5 ha site in Thanh Hoa for its largest mall in the central region, and securing master plan 1/500 approval for the Aeon Mall Bien Hoa project (12 ha). Becamex IDC also broke ground on a seven-ha commercial complex in the Binh Duong New City project.
International visitors are returning to Vietnam, with over 11.4 million arrivals in the first eight months of 2024, up 45.8% year-on-year and already 1% higher than in 2019. The tally for 10 months is 14.1 million, up 41.3%.
By 2028, 191 hospitality projects are expected to add around 49,800 rooms; 75% of this new supply is in the mid-to-high-end segment, with 70% branded by international luxury hotel chains, positioning Vietnam as a key market in the region.
Despite the amended Land Law taking effect in August, the residential market remains quiet. In the same month, Cosmos Initia, TT Capital, and Koterasu Group launched the TT Avio project in Binh Duong, offering nearly 2,000 affordable apartments with tailor-made payment schedules to boost demand.
Vinhomes introduced the 385-hectare Vinhomes Global Gate in Hanoi, featuring over 4,100 low-rise units and 12,600 high-rise units, with an official launch expected by year-end. Skyworld signed an MoU to potentially acquire a 49% stake in a 10.25-hectare project in Binh Duong from GuocoLand.
Around 35,000 square meters of Net Lettable Area (NLA) office space will be added in HCMC in the second half of 2024 from three Grade B and C projects: Thaisquare The Merit, Vinatex Building, and CMC Tower B.
In Hanoi, two Grade A projects, Taisei Hanoi Office Tower and Heritage West Lake, will add 46,000 sq.m by year-end.
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