More foreign investors eyeing real estate

Foreign investors believe the real estate market in Vietnam still has huge potential Photo: Le Toan

With confidence riding high and the revised law on real estate due to take effect from July, foreign investors have recently begun pouring money into Vietnam’s housing projects, instead of tourism developments, as was previously the case.

According to the Foreign Investment Agency under the Ministry of Planning and Investment, foreign direct investment inflows to the real estate sector in the first quarter of this year reached nearly $203 million, most of which was earmarked for housing projects. FDI for the real estate sector accounted for 11 per cent of the country’s total registered investment capital and ranked the second after the manufacturing and processing sector.

Typically, Hamon Developments Corporation from the UK is expanding its real estate portfolio in Vietnam by having entered into a partnership with Son Kim Land, a local company, to invest in the $100 million Gateway apartment project in District 2, Ho Chi Minh City. Upon completion, Gateway will have four towers with 546 high-class apartments, located on an area of 1.1 hectares.

It is Hamon Developments’ third project in Vietnam, after the Nguyen Du Park Villas in Ho Chi Minh City and the Hanoi Business Centre in Hanoi.

Meanwhile, two Japanese real estate companies Hankyu Realty and Nishi Nippon Railroad have joined hands with Nam Long, another local firm, to develop the Flora Anh Dao apartment project in District 9, Ho Chi Minh City. The VND500 billion ($23.3 million) development includes 500 medium-class apartments, each covering an area of 54-67 square metres.

Toshihiro Matsuo, executive officer of the housing division for Nishi Nippon Railroad, has great expectations for Vietnam’s property market.

“The country has achieved a high annual growth rate, from 5 to 7 per cent. Moreover, the young population is still expanding. Therefore, further development and growth can be expected in the long term, and we believe that the real estate market in Vietnam has huge potential,” Matsuo said.

In Ho Chi Minh City, the housing demand has been growing rapidly, especially among the younger generation.

Matsuo added, “As far as location is concerned, Ho Chi Minh City is close to many other ASEAN countries. It is therefore suitable for us to collect information from neighbouring countries. We hope to expand our real estate business in Southeast Asia”.

Le Hoang Chau, chairman of the Ho Chi Minh City Real Estate Association, said that many foreign investors preferred housing to tourism properties.

“It is expected that the real estate industry in Vietnam will become even more attractive to foreign investors this year when the modified law on real estate comes into effect in July,” Chau commented.

One of the changes to the law is that investors will be allowed to sell or transfer their projects after they are granted land use rights certificates. At present, investors are required to finish building their projects before a sale or transfer.

“It becomes safer for foreign investors when they can invest in a real estate project that has a legal land use rights certificate,” Chau said.

Transparency and safety have lured more foreign investors to the field, he added.

Mathew Powell, Hanoi’s branch director of Savills Vietnam said that with many the positive signs shown in the real estate towards the end of 2014, and with the impact of the new law on housing, the housing market in general, especially the holiday home segment, will continue to improve.