» » » Vietnamese Realty: Huge Opportunities for Foreign Investors

VNRE - Although the global real estate market came to stagnancy over the past time, many foreign investors chose to pour capital into the Vietnamese market. Apart from barriers of the market, foreign investors still saw potential and huge opportunities of the emerging market, particularly in the field of real estate which is expected to bring in vast profits.

Fourth most attractive market in 2011

For potential and prospects in 2011, Vietnam is ranked fourth among the most attractive emerging investment destinations this year by the Association of Foreign Investors in Real Estate (AFIRE). Topping the list is Brazil, followed by China, India and Vietnam. The Vietnamese real estate market is at the initial phase of development. Compared with other countries, Vietnam’s total construction area still remains low in most fields; thus there are lots of opportunities for foreign investors here in the market.

Foreign investors came to Vietnam thanks to the active information showing the economy’s strong improvement. Vietnam has been experiencing the fast urbanization process with the population in big cities trending to increase.

According to experts, as the domestic economy is growing stronger, the demand of office and housing areas will increase in years to come, particularly in the centre area of Hanoi and Ho Chi Minh City, because the previous supplies were quite little and the quality was low while now the people’s living standard has been raised and the urbanization process is still continuing. Many apartments of the underway projects have been sold already on paper. The prices of luxury property segmentation were adjusted in some recent months but the average and low segmentations remained the strong sales particularly with the qualified products. It is predicted that investors will return the housing realty as a safe investment channel in the future as the gold price starts to fall down.

Continuing to upgrade infrastructures and transport system will also push up investors. The capital city is currently ideal destination of many investors and in the upcoming time is predicted to continue attracting more as the system of transport infrastructures is completed, for example highway routes; roads inner the city; road belts such as the ring road 3; Thang Long avenue; and the prolonged Le Van Luong road.

Hanoi’s planning is expected to be approved soon and this will be a premise for the capital city’s sustainable development. Accordingly, there will have more projects and the supplies will be more plentiful.

From 2011, the participation of realty speculators is forecast to fall in silence because the state starts tightening management rules. This will help Vietnam’s property market to grow transparently and soundly, convening investors.

With advantages of the emerging market, Vietnam’s real estate in 2011 and the years to come is considered to be fertile land for investors.

In the latest report on real estate market 2011 by CB Richard Ellis Co. Ltd. (CBRE Vietnam); the company quoted Reuters as saying that Vietnam was one of the three leading markets. Franklin Templeton Investment Fund is planning huge investment in the Vietnamese market this year.

The US’s Franklin Templeton entered the Vietnamese market in February 2008 via acquiring a 49 per cent share of Vietcombank Fund Management Co. (VCBF). Mark Mobius, Franklin Templeton’s manager in charge of emerging market, said that the fund was seeking for opportunities at the less-attended markets.

A large number of foreign investors into the Vietnamese real estate in recent years came from Singapore, including companies supported by the Singaporean government such as Keppel, Sembcorp, Mapletree and those with strong financial potential like Capital Land. Singaporean firms mainly poured capital into housing projects and industrial parks. Recently, both Capital Land and Keppel announced their intention to increase investments in the Vietnamese market. South Korean companies seemed to be less active in seeking new investment chances because they have been running the big-scale and long-term projects, which require big capital. European and American investors are fewer in the Vietnamese market due to they are focusing to settle with issues in their domestic market. In some recent months, Savills Vietnam saw more Japanese investors having paid attention to the Vietnamese market. The reason is attributed to the yen value remaining high and inefficiency in business activities in Japan.

Lots of challenges

Apart from difficulties relating to the legal framework, foreign investors still suffer from many other barriers as doing business in the Vietnamese market.

The first is difficulty in defining and getting access to the investment projects, along with stagnancy in settling procedures on land use right and site cleanse. These have caused difficulties for investors in assessing the demand and supply markets.

Another reason is influence of Decree 69/2009/ND-CP under which the cost of land usage and compensation fees are calculated based on the market price, leading to fluctuation to real estate firms because the land usage cost has not yet been confirmed until the final period of buying process.

In addition, the unclear legal framework and regular change affect the implementation of projects. The difference of land price table and the leasing duration of 50 years make the market less attractive and competitive than other international markets. In fact few of international credit organizations provide credit based on the duration of land usage. Finally, the lack of specific mechanism on a property right for foreign investors is damaging the Vietnamese realty market.

Prolonging the property time for foreign investors and applying the manner of partial property will help overcome the issue because it will enlarge the supply sources of international credit and boost not only short-term property projects but also long-term ones.

Reported by Dinh Thanh | VCCI News

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