Vietnam real estate: big room for foreign businesses: Savills

With advantages from macro factors and an attractive market across most real estate segments, Vietnam is still a promising destination for foreign investors despite current market woes, according to Savills Vietnam.

The consulting firm said that Vietnam is appreciated for its open policies, creating a favorable investment environment for foreign investors. The government has succeeded in maintaining stable exchange rates and effectively curbing inflation, helping foreign investors feel secure in Vietnam.

Stable interest rates have made investment projects in Vietnam more attractive to foreign investors, it said, adding low interest rates have also promoted economic growth by stimulating shopping, creating great opportunities for foreign businesses.

In addition, the government has also implemented a fiscal policy that facilitates economic growth, including reducing value added tax (VAT) by 2 percentage points for most items, extending deadlines for tax and land rent payments in 2023, and reducing rental fees.

In 2024, the cabinet intends to maintain an expansionary fiscal policy and loosened monetary policy with the dual goals of ensuring budget revenue and supporting people and businesses as they recover to stimulate growth.

For the real estate sector, since last year, many decrees and resolutions have been passed to aid the market. These policies are expected to increase predictability and stability for the property market, while creating great opportunities for foreign investors to participate in investment projects.

According to Nguyen Toan, investment manager at Savills Hanoi Office, Vietnam has shown its stability not only in politics but also in the macro context, with the economy recovering strongly after the pandemic. Vietnam remains a notable destination for foreign real estate investors and developers in locations and segments with good development potential.

Attractive segments

The firm acknowledged that each segment in the Vietnamese market in 2024 will have investment highlights that attract foreign investors.

For the residential housing segment, foreign investors are seeking fresh opportunities to develop projects under their own brands in the context of scarce supply and high demand.

“Foreign developers boast advantages in brand, design ideas, and construction standards and quality, so their products, even in the high-end segment, always receive a positive response from the market," the report said.

For office real estate, according to Savills, the market has witnessed demand growth from energy, manufacturing, and consulting businesses, contributing to maintaining a stable occupancy rate. In particular, in big cities like Hanoi, Danang and Ho Chi Minh City, opportunities are open for foreign investors with tthe right finances and products that meet green standards.

In the retail sector, the participation of big players has shown the attractiveness of the Vietnamese market. Large investors are actively looking for land to deploy large-scale, modern service and commercial real estate projects, focusing on consumer experience.

For example, in early February 2024, retail real estate tycoon Central Pattana - a member of Thailand's leading retailer Central Group - said it was preparing to establish a legal entity in Vietnam to enter the market. Previously, THISO, a member of Vietnamese conglomerate THACO, after opening its third Emart hypermarket in Ho Chi Minh City, revealed plans to open a fourth in the North with the acquisition of 2.4 hectares of land in the West West Lake urban area.

Regarding the hotel segment, in 2023, Vietnam welcomed 120.6 million tourists, an increase of 19% year-on-year. The number of international visitors reached 12.6 million, three times higher than in 2022. Hotel occupancy rates and rental prices in Hanoi and Ho Chi Minh City both gained. On the recovery path, many foreign investors believe in the development potential of the hotel market and see now as the right time to enter.

"Previously, foreign investors with abundant financial potential prioritized investment plans to gain control, but now they are more open to different forms of investment, from financial investment to capital contribution and business cooperation, to fully tap the potential of the Vietnamese market,” it stated.

In addition, many foreign investors, after a period of market research, are looking at investment opportunities in areas outside the big cities.

Data from the General Statistics Office (GSO) showed that in the first two months of 2024, disbursed foreign direct investment (FDI) in Vietnam reached $2.8 billion, a year-on-year increase of 9.8%, the highest two-month figure in the past five years.

In particular, the processing and manufacturing industry took the lead with $2.17 billion, accounting for 77.5% of the total disbursed capital. It was followed by real estate business with $279.3 million and 10%; and production and distribution of electricity, gas, hot water, steam and air conditioning with $128.4 million and 4.6%.