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Real estate remains a safe investment channel in Vietnam

Real estate remains a safe investment channel in Vietnam

Friday 20, 08 2021
Despite the negative impact of COVID-19, real estate and logistics still attract investors domestically and internationally.

Real estate investment status

Data from provincial Departments of Construction showed that there were 29,949 successful real estate deals in the second quarter of 2021. The average number of deals was about 118% compared to the last quarter and about 101% compared to the same period in 2020.

There were 1,094 successful real estate transactions in Hanoi, about 20% compared to the number of transactions in the first quarter of 2021. In Ho Chi Minh City the number was 3,002 deals, about 87% in comparison with the first quarter. In the whole of Northern Vietnam, 6,384 successful deals were made, while in Middle and Southern Vietnam the number was 7,300 and 16,265, respectively. Successful deals were made mostly in the middle-end and high-end segments.

Real estate

The Ministry of Construction assessed that the absorption capacity of the market is better in the second quarter. In this quarter, no new real estate inventory was created from the primary market. Untransacted real estate inventory is almost only present in secondary investors, and some types of real estate such as tourism and resort real estate are being heavily impacted by COVID-19.

As for investment capital, the Ministry of Construction said that although the total direct investment capital of foreign investors decreased by 2.6% compared to the same period in 2020, the total newly registered capital, adjusted and contributed capital to purchase Shares of foreign investors in the real estate business in the first six months of 2021 increased by more than 35% compared to the same period in 2020, equivalent to 300 million USD.

Capital increased gradually from March to June 2021, from 0.6 billion USD to 1.15 billion USD. The accumulated registered capital into real estate tends to increase monthly. Therefore, it can be concluded that Vietnam remains a good FDI attraction into real estate.

According to the Ministry of Planning and Investment, in the first six months of 2021, real estate is the field with a strong increase in new establishment registration (up 44.8%). The number of companies returning to work in the real estate business is 831, up 19.6% over the same period in 2020. Despite many difficulties, many real estate companies continue to maintain their plans and target higher profits than 2020.

In general, the real estate market is still a good investment channel, preserving long-term capital and being safe. The above assessment is based on the following factors:

The Real Estate market

-       Bank interest rates are still low, inflation is well controlled.

-     Cash flow continues to invest in financial investment channels such as stocks, bonds, even virtual currencies. This is an unusual sign, but it also benefits the financial industry. The stock market continuously rallied, and there are more and more F0 investors.

-       The situation of scarce supply. There are opinions that this is a disadvantage. However, at this time, the scarce supply is the key to the development of the market. Products with transparent legality, good progress, and infrastructure draws the investors’ attention.

-       Difficulties in business in some industries are favorable for real estate. Deposit interest rates are low, people tend to invest in other more profitable channels, including real estate.

-       Technology helps the real estate business. The proof is when Hanoi and Ho Chi Minh City are under social distancing in accordance with Directive 16, meeting with customers has become difficult, but some sales staff are still able to sell goods.

Industrial real estate and logistics is attracting investors

According to the assessment of the real estate market by the Ministry of Construction, in the second quarter of 2021, the industrial real estate business remained stable in terms of both rents and occupancy rates.

The average occupancy rate in the main industrial provinces and cities in the North (Hanoi, Bac Ninh, Hung Yen, Hai Duong, and Hai Phong) is around 80%. If we include neighboring provinces (Thai Nguyen, Vinh Phuc, Quang Ninh, Ha Nam, Nam Dinh, Ninh Binh, Bac Giang), the occupancy rate of industrial park projects reaches 69%.

A recent report on the industrial real estate industry published by JLL Vietnam has also made a forecast that investment activities in logistics and industrial real estate in the Asia-Pacific region, including Vietnam, will double over the next 3 to 5 years, as investors look to increase market share dramatically. JLL Vietnam forecasts that the investment volume in the logistics sector will increase from 25 to 30 billion USD per year from 2019 to 2020, to 50 - 60 billion USD from 2023 to 2025.

JLL

The industrial real estate market is entering the next growth phase. The demand for industrial lands will increase in the latter half of 2021 and 2022 because of strong FDI inflows and capital to expand production. Especially, the participation of Foxconn and OPPO in the market will help attract suppliers and subcontractors, creating opportunities for the supporting industry in Vietnam.

On the other hand, the Government also has many supportive policies for investors such as tax incentives, including corporate income tax of 10% for 15 years for new investment projects in some specific fields, encouraging development such as renewable energy, information technology, software, environmental protection, etc.

Besides, the demand for industrial real estate increases, leading to better business results for some companies operating in the industry.

The development potential of the manufacturing sector, especially the e-commerce industry, will lead to a new growth phase of the logistics industry and industrial real estate of Vietnam.

Statistics showed that FDI registered in real estate in the first seven months of 2021 declined compared to the same period in 2020, but real estate is still appealing to foreign investors. Since the beginning of the year, the real estate sector has welcomed foreign capital inflows reaching 1.16 billion USD, coming from three forms: newly registered capital, adjusted capital increase and capital contribution, and share purchase. Real estate is still ranks third among the fields that most attracts FDI in the seven months of 2021.

Logistics emerged as the most attractive segment for FDI, accounting for nearly half of more than 30 real estate projects licensed for foreign investors, with a total value of nearly 538 million USD, equal to 46.78% of total foreign investment registered in the period. In which, investors from Singapore account for a large market share with 7 logistics projects.

According to the Ministry of Planning and Investment, Japan ranked second in the list of countries and territories investing in Vietnam with a total investment capital of 2.44 billion USD and an increase of 66.8% over the same period last year. Aside from the usual investment fields, Japanese investors tend to invest in real estate in recent years.

Forecasting the final months of 2021 and the long term, the prospect of Vietnam's industrial real estate market remains very positive, with strong demand from expanding domestic enterprises and additional investment from outside investors.

Source: The Industry of Ministry and Trade

Compiled by VietnamCredit

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