Appetite and hazards to run parallel in real estate

February 13, 2023 | 09:42
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Over the next couple of years, direct financial flow into commercial buildings and industrial estates could be boosted with the aid of new legislation and demand sources. Hoang Nguyet Minh, senior director of Commercial Leasing at Savills Hanoi, discussed this matter with VIR’s Quynh Trang.

As economic uncertainty on a worldwide scale has been decreasing recently, what do you feel about making an investment in real estate in Vietnam this year?

Appetite and hazards to run parallel in real estate
Hoang Nguyet Minh, senior director of Commercial Leasing at Savills Hanoi

This year could be considered more fortunate than 2022. Despite the presence of legal concerns, the commercial and industrial real estate segments continue to attract foreign investment. When implementing new merger and acquisition (M&A) operations and assisting in the execution and growth of initiatives, foreign investors will be required to evaluate and audit the capacity characteristics of the maintaining businesses and company owners.

This is to ensure that all deals meet transparency and legal requirements. The length of time needed to complete an M&A deal is often extended. This is also one of the key sources of capital that is slow to circulate, contributing to the inability to distribute funds in the following years.

When it comes to the housing market, international companies will continue to maintain a position of observation and expectation, but they will not ignore possible projects. At this time, there is a substantial amount of demand for housing on the part of both consumers and investors; nevertheless, there are far too many legal risks. Local groups do not have the self-assurance necessary to thoroughly handle licence concerns.

This includes authorising and certifying investment plans up to the point that they are provided, as well as obtaining construction licences and certificates of land use rights for the purchaser. The opening and sale of around 5,000 more units are going to be delayed until 2023 by the developers.

What do you think upcoming changes in the Vietnamese market will look like, and how will they affect the market?

At the moment, foreign investment is mostly concentrated in business and manufacturing districts. One of the most hopeful signals is that the developers of various industrial zones provide operating licences for foreign tenants. These zones include the hospitality and retail sectors, which are both making significant progress towards recovery.

Those who invest in real estate often have diversified portfolios of other investments. Since many residential real estate projects are still in the construction stage, local and international investors will be able to gain a consistent income flow via the purchase of commercial and service real estate.

The commercial and industrial real estate markets in Vietnam are poised to make significant gains as a result of China’s reopening. However, in recent years, happenings on China’s political scene have given rise to some cause for concern.

What expectations do investors have for the real estate sector in Vietnam?

Office, retail, and industrial real estate costs have recently become more affordable as compared to those in other countries located in the Asia-Pacific area. Considering Vietnam has low labour costs, a workforce of excellent quality, and a well-deserved reputation for providing staff who put in a lot of effort, investors from other countries have a lot of faith in the Vietnamese market.

For the sake of attracting foreign investors, Vietnam’s policies need to be more open. Assistance in establishing a business should be provided to foreign investors. The policy entails obtaining licences in order to be permitted to navigate, to purchase, to move money to the Vietnamese market, and to deploy and carry out the project.

Do you foresee an increase in the amount of money that will enter the market here this year?

The decline is happening globally, not just in Vietnam. In 2022, the affluent countries themselves had been going through a severe period of difficulty. As a result, this presents an excellent opportunity for investors from other countries, especially in the event that the yen and the won continue their recent trend of depreciation.

When that situation arises, investors from Japan and South Korea will look for opportunities to invest their money in a rapidly developing new market such as Vietnam.

As soon as the Vietnamese market is opened to be able to accept overseas funding sources and authorise the real disbursement of related projects, it will continuously attract new capital, which might amount to even hundreds of billions of US dollars.

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By Quynh Trang

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