Vietnam real estate market offers competitive yields: Knight Frank

By Tuong Thuy
Wed, August 24, 2022 | 3:19 pm GMT+7

House prices in Vietnam are much more affordable, and real estate sectors in the country provide competitive yields compared to other Southeast Asian countries, says Kevin Coppel, managing director of property consulting firm Knight Frank Asia-Pacific.

Do you think Vietnam’s real estate market is in danger of blowing up like the property market in China?

The fundamentals in China and Vietnam are vastly different. The Chinese property sector crisis was provoked by the ‘three red lines’ regulations introduced in 2020, which placed debt limits on real estate companies to curb rapidly rising housing prices. Before these regulations, Chinese developers used debt extensively and often borrowed more than what was needed for a particular project to fund other investments. They were confident of repaying these debts since demand had always outpaced supply.

In contrast, Vietnamese banks have limited capabilities to lend - 15% of bank capital to a single borrower and 25% to a group borrower (Law on Credit 2010, Amended 2018) - and investor equity must account for at least 20% of the total investment capital in a real estate project with a land usage area under 20 hectares. This reduces to at least 15% if a real estate project uses 20 hectares of land or more (Government Decree No.02/2022).

Furthermore, Vietnam is tightening credit right now as a cooling measure, with the State Bank of Vietnam in January 2022 seeking with its Directive No.01/CT-NHNN to compel direct lender capital away from sectors perceived as risky- like real estate - into production and manufacturing. The intent is for a draft amendment to Circular 39 to be ratified this year, which will further build on existing regulations, codifying further debt related ratios like loan to collateral and total debt ratios.

Major banks are also reporting that they are near State Bank of Vietnam mandated credit limits for commercial lending, which makes it difficult for real estate businesses to continue to borrow. This is a different approach compared to China, which allowed developers to borrow heavily.

Although Vietnam is currently experiencing rapid urbanization, similar to the socioeconomic trends seen in China in recent decades, the danger of a real estate bubble developing to the same extent in Vietnam is limited as long as policies that limit the potential for the market to “overheat” are implemented.

It helps that Vietnam adopted an inclusive growth model, where the growing need for affordable housing is being satisfied by proactive planning regulations that require a proportion of some developments to be allocated to both affordable and social housing. The prices of which are controlled in order to keep them accessible to much of the population.

What is your assessment of investment inflows into Vietnam's real estate sector compared to other Southeast Asian countries?

Real estate sectors in Vietnam generally command competitive yields compared to counterparts in Southeast Asia. Industrial and office spaces are still highly sought-after due to their solid growth trajectory, while residential, retail, and hospitality sectors are steadily recovering post-pandemic.

The positive growth trajectory relies on continued, strong economic growth, continued urbanization, a rising middle class and the development of mega projects in both major cities like Ho Chi Minh City and Hanoi and the surrounding key provinces.

What do you think about Vietnam’s current rules on foreign ownership in the housing sector, and how do they compare to those in other ASEAN countries?

In line with other countries in Southeast Asia, the most popular way to access the Vietnamese residential sector is through the condominium market. Like most of the region’s emerging markets, aggregate foreigner ownership limits are capped - at 30% in Vietnam (Government Decree No.99/2015), compared to 40% in the Philippines and 49% in Thailand (although at higher thresholds).

However, the main aspect in which Vietnamese regulations are tighter is in the tenure for foreign ownership, which is currently capped at 50 years; any extension will require a renewal payment to be made in an upfront sum, or annually.

The mechanism to calculate the payment for a renewal is not known yet. This can cause buyers to think twice as longer-term options are generally available in other markets (e.g., Singapore and Malaysia permit 99-year leasehold interests). While foreign ownership rules in Vietnam can still be considered reasonably restrictive, they have come a long way since the government took steps to liberalize the market in 2014. As in most countries, property ownership is politically sensitive and can have a broad socioeconomic impact. While the Vietnamese government will remain cautious, it has been proactive with reforms, and we expect it will continue gradually to liberalize the market as the economy develops.

 Source: Knight Frank

Source: Knight Frank

Compared to other ASEAN countries, house prices in Vietnam are much more affordable. With borders reopening, the gradual resumption of regional travel will boost residential sales, especially from South Korea (the biggest expatriate community in Vietnam), Singapore, and the Chinese mainland.

How does and will the UK-Vietnam Free Trade Agreement (UKVFTA) support the two countries’ economic, investment, and trade ties from your perspective as a UK consulting company?

According to Vietnam Customs, bilateral trade between Vietnam and the U.K. reached $6.6 billion in 2021, up 17.2% compared to 2020, while British exports reached $849 million, up 23.6%.

In the first five months of 2022, despite the ongoing impact of the COVID-19 pandemic and geopolitical tensions leading to disruptions in global production and supply chains, bilateral trade remained stable at $2.68 billion.

 A slice of the property market in Hanoi. Photo by The Investor / Trung Hieu.

A slice of the property market in Hanoi. Photo by The Investor / Trung Hieu.

As of May 2022, the sectors with the strongest investments in Vietnam are:

- Manufacturing and processing (120 projects and registered investment capital of nearly $1.6 billion, accounting for nearly 40% of total investment capital).

- Real estate (23 projects and total investment capital of $1.04 billion, accounting for 26% of total investments).

- Mining (seven projects with a total registered capital of $701.44 million, accounting for 18% of total investments)

Valid registered investment capital from the UK totaled $4.15 billion with 462 investment projects in Vietnam.

We have also seen some major investments in renewable energy, including:

- Shire Oak International Group with many solar power projects in Vietnam

- Enterprise Energy Group is investing in the Thang Long wind project off Ke Ga cape - Binh Thuan

- Mainstream Group is investing in the Phu Cuong wind power project Soc Trang

The collaboration with UK.firms will see mutual benefits for both countries through:

- Commitment to service and investment: Vietnam is committed to providing higher incentives for U.K. service providers and investors under the UKVFTA than the standards currently applied to other service providers and foreign investors under WTO commitments.

- Commitment to intellectual property: U.K. IP owners have access to a range of tools to strengthen their IP protection in Vietnam. For example:

+ IP owners can request the Vietnamese court to apply temporary, urgent measures to promptly prevent infringement at any time.

+ Customs authorities must actively participate in preventing IP infringement and must cooperate with IP owners to enforce IP rights.

+ Proportional monetary remedies may be provided as an alternative to other sanctions if the breach was caused by negligence.

- Commitment to taxation: The two sides agreed to immediately cut 65% of the number of tariff lines when the UKVFTA takes effect. This means an increase of up to 99% of tax lines to be cut after six to nine years.

Not only will the UKVFTA boost GDP growth, but also help diversify Vietnam’s sources of foreign direct investment, which has so far been dependent on countries within the Asia Pacific region and largely focused on electronics and real estate.

With a number of U.K. companies known for their expertise in pharmaceuticals, aerospace as well as renewable energy, Vietnamese firms will benefit from technology transfers and learn to create a more vibrant industrial base that will lead to more opportunities globally.

Comments (0)
  • Read More
SK Group pushes for potential investment in $2.2 bln LNG-fired power plant in central Vietnam

SK Group pushes for potential investment in $2.2 bln LNG-fired power plant in central Vietnam

A delegation from South Korean chaebol SK Group has held a second round of talks with Nghe An province authorities to explore investment opportunities for a $2.2 billion LNG-fuelled power plant project.

Energy - Sat, July 5, 2025 | 1:47 pm GMT+7

Vietnam GDP grows 7.52% in H1, 15-year record high

Vietnam GDP grows 7.52% in H1, 15-year record high

Vietnam's economic growth rate reached 7.52% in the first six months of the year, a record high in the period 2011-2025, the General Statistics Office reported on Saturday.

Economy - Sat, July 5, 2025 | 10:46 am GMT+7

Vietnam needs two-pronged policy approach to mitigate impact of rising oil prices: RMIT experts

Vietnam needs two-pronged policy approach to mitigate impact of rising oil prices: RMIT experts

A surge in global oil prices poses a significant threat to Vietnam’s economy and to cushion these impacts, the country needs a two-pronged policy approach, write Dr Vu Hong Nhung and Dr Phan Thanh Chung, lecturers at the economics and finance department, Business School, RMIT University Vietnam.

Consulting - Sat, July 5, 2025 | 8:54 am GMT+7

Vietnam's registered FDI tops $21 bln in H1, highest in 16 years

Vietnam's registered FDI tops $21 bln in H1, highest in 16 years

Registered foreign direct investment (FDI) in Vietnam hit over $21.51 billion in the first half of the year, up 32.6% and a record high since 2009, while disbursed capital reached $11.72 billion, up 8.1%.

Economy - Fri, July 4, 2025 | 8:50 pm GMT+7

Gemadept’s southern Vietnam port receives mega container ships

Gemadept’s southern Vietnam port receives mega container ships

Within just over two years of trial operations (from March 2023 to May 2025), Gemalink Port of Vietnamese logistics giant Gemadept in Ba Ria-Vung Tau has safely received 70 container vessels of over 200,000 DWT (up to 232,494.5 DWT) under partially loaded conditions.

Companies - Fri, July 4, 2025 | 4:54 pm GMT+7

Agro-forestry-fisheries exports near $34 bln in H1

Agro-forestry-fisheries exports near $34 bln in H1

Vietnam’s agro-forestry-fisheries exports hit $33.84 billion in the first half of 2025, marking a 15.5% increase year-on-year.

Economy - Fri, July 4, 2025 | 3:36 pm GMT+7

Malaysia’s data center operators struggle due to power cost hike

Malaysia’s data center operators struggle due to power cost hike

Malaysia’s data center sector is projected to grow at a 22% CAGR from 2023 to 2029 due to cost competitiveness, skilled workforce, and a robust digital ecosystem, according to a report by global investment bank ARC Group.

Southeast Asia - Fri, July 4, 2025 | 3:23 pm GMT+7

Tetra Pak inaugurates expanded aseptic packaging plant in southern Vietnam

Tetra Pak inaugurates expanded aseptic packaging plant in southern Vietnam

Swedish food processing and packaging giant Tetra Pak has inaugurated the second phase worth EUR97 million of its aseptic packaging plant located in the VSIP II-A Industrial Park in Ho Chi Minh City, bringing the total investment to EUR217 million.

Companies - Fri, July 4, 2025 | 3:16 pm GMT+7

Vietnam Prime Minister requests early removal of credit growth limits

Vietnam Prime Minister requests early removal of credit growth limits

Prime Minister Pham Minh Chinh on Thursday instructed Vietnam's central bank to urgently consider removing the administrative tool of setting credit growth quotas for individual banks, and shift toward a market-based control mechanism.

Banking - Fri, July 4, 2025 | 3:14 pm GMT+7

Vietnam GDP growth hits 7.3% in H1, highest in 17 years: Minister

Vietnam GDP growth hits 7.3% in H1, highest in 17 years: Minister

Vietnam’s GDP is expected to increase by 7.3% in the first half of this year, the highest level since 2008, said Minister of Finance Nguyen Van Thang.

Economy - Fri, July 4, 2025 | 2:31 pm GMT+7

Vietnam’s realty market may soon shift from undersupply to oversupply: experts

Vietnam’s realty market may soon shift from undersupply to oversupply: experts

The real estate market in Vietnam will soon face oversupply, a reversal of the supply shortage seen in recent years, according to economist Dr. Le Xuan Nghia.

Real Estate - Fri, July 4, 2025 | 11:29 am GMT+7

Vietnam’s benchmark VN-Index likely to reach 1,500 points on new US tariff: broker

Vietnam’s benchmark VN-Index likely to reach 1,500 points on new US tariff: broker

The VN-Index, representing the Ho Chi Minh Stock Exchange (HoSE), may reach 1,500 points in the coming time as the tariff agreement reached with the U.S. is expected to boost investor sentiment, according to Maybank Securities Vietnam (MSVN).

Finance - Fri, July 4, 2025 | 8:38 am GMT+7

Chinese materials major Kingfa on track to complete $80 mln plant in southern Vietnam

Chinese materials major Kingfa on track to complete $80 mln plant in southern Vietnam

Kingfa, China’s leading advanced materials company, on Wednesday held a topping-out ceremony for its $80 million plant in Dong Nai province, a key industrial hub in southern Vietnam.

Industries - Fri, July 4, 2025 | 8:23 am GMT+7

Vietnam’s stock market expects upgrading in September

Vietnam’s stock market expects upgrading in September

The State Securities Commission (SSC) is working intensively with ministries and stakeholders to settle remaining issues and improve foreign investor access, a critical step ahead of the expected review in September, Deputy Finance Minister Nguyen Duc Chi said at his ministry's (MoF) press meeting on Wednesday.

Finance - Thu, July 3, 2025 | 9:23 pm GMT+7

Vietnam's construction giant Coteccons plans $53 mln bond issue

Vietnam's construction giant Coteccons plans $53 mln bond issue

Vietnamese construction giant Coteccons (HoSE: CTD) plans to issue bonds worth up to VND1.4 trillion ($53.45 million) to the public this year as part of its 2025 capital mobilization plan, according to a company release.

Companies - Thu, July 3, 2025 | 8:12 pm GMT+7

Over $534 mln needed for central Vietnam city’s seaport infrastructure

Over $534 mln needed for central Vietnam city’s seaport infrastructure

Hue city in central Vietnam needs about VND14.05 trillion ($534.24 million) in investment for its seaport system during the 2021-2030 span, with approximately VND12.79 trillion ($488.05 million) for wharves.

Infrastructure - Thu, July 3, 2025 | 4:24 pm GMT+7