FDI capital flow to the real estate sector soared to $5.5 billion in the first half of 2018.
Real estate is one of the favorite investment fields of foreign investors. In 2017, FDI capital into the sector reached a 7-year high with $3 billion worth of committed capital.
However, the record has been broken. The amount of registered capital in the first half of 2018 was equal to that of the entire 2017.
Where is the money going?
Singaporeans and South Koreans were the first foreign investors in Vietnam’s market, while investors from China and Japan have come in recent years.
According to Rong Viet Securities, the foreign capital mostly flows into the high-end segment with projects developed in Hanoi and HCMC.
As the land fund in the central area is diminishing, realtors have begun eyeing the suburbs.
Chinese CFLD Group is developing the Nhon Trach urban area project in Dong Nai province, while Sumitomo is joining forces with BRG to develop a smart urban area worth $4 billion, located on the Nhat Tan-Noi Bai backbone route.
Foreign investors have different tastes. While Singaporeans (CapitaLand and Keppel Land) target housing market segment, South Koreans prefer retail centers, and shopping malls, and Japanese have begun stepping up the development of office projects. Nomura, for example, has taken over Sunwah building on Nguyen Hue street in HCMC.
Real estate bubble?
“Vietnam’s real estate remains very attractive with upgraded infrastructure, so-called golden population structure and low average housing area per capita,” Rong Viet Securities said.
The presence of foreign investors, who have powerful financial capability and experience, will help the market take off.
This is also why many Vietnamese real estate developers have joined hands with foreigners. Nam Long, for example, following successful cooperation with Mizuki, Kikyo and Fuji, is moving ahead with the largest project so far – WaterPoint – in Long An province.
As there are many players in the market, less capable players will be eliminated. This will bring benefits to consumers as they have more options with higher quality.
ACB Securities estimated that 60 percent of households are capable of buying houses as their monthly incomes are higher than expenses.
The houses worth VND1-5 billion are affordable to households in Hanoi and HCMC. The apartment prices increased by 5-6 percent in 2017.
Troy Griffiths from Savills Vietnam disagreed with the opinion that strong capital flow may lead to a real estate bubble, saying that the risk is low.
Sharing the same view, Rong Viet Securities said the government has taken moves to prevent the explosion of the market in 2017 and 2018.