Vietnam’s economic growth has been remarkable over the years. Gross Domestic Product (GDP) surpassed US$409 billion in 2022, more than triple of what it was a decade earlier. Given economic statistics demonstrating sustained growth, Vietnam has maintained its status as an enticing investment destination for foreign investors. By 2022, Vietnam recorded a cumulative total registered FDI of approximately US$438.7 billion, out of which cumulative direct investment in the real estate sector accounted for US$66.3 billion, according to Foreign Investment Agency (FIA). The trend has been reserved, and newly registered FDIs are forecast to hit US$36 billion by the end of 2023.
Figure 1: FDI by year (2012-2023F)
Source: General Statistics Office, Foreign Investment Agency
Registered FDI in Vietnam has faced headwinds in the recent three years (2020-22) due to the COVID-19 pandemic and increasing global economic volatility. However, the implemented FDI number has been steadily improving and set a record of US$22.4 billion in 2022, an increase of 13.5% y-o-y. According to General Statistics Office (GSO), registered capital inflow in 2022 was around 1.7 times higher than in 2012 and implemented capital was 2.1 times higher. The ratio of implemented capital to registered capital reached its peak in 2022 (at 81%), a record-high level over the past decade.
Among Vietnam’s industries, its real estate sector is often rated second or third in FDI, after manufacturing. In 2022, the real estate sector attracted around US$4.45 billion in FDI with 75 newly registered projects, accounting for approximately 16% of overall FDI inflows.
Figure 2: Total registered FDI by industry (2022)
Source: General Statistics Office, Foreign Investment Agency
Figure 3: FDI of the Real estate sector by year (2012 – 2022)
Source: General Statistics Office
The FDI inflows in Vietnam, particularly in real estate, has become more diverse and of higher quality. We have seen foreign investments flowing into new asset types, coming from more diversified origins, becoming more demanding with higher requirements in sustainable factors, and requiring a quicker process from local partners and so forth.
- More investments in new asset types and widespread geographically:
- Industrial and logistics has emerged as the hottest sector over the past five years, with an increasing number of institutional investors entering the market. GLP announced the establishment of GLP Vietnam Development Partners with a total investment value of US$1.1 billion in six logistics centre projects with a total area of 900,000 sqm.
- Cold storage and data centre started to show on the radar of foreign investors. In the first half of 2022, Gaw Capital Partners completed the acquisition of land in the High-Tech Park of HCMC to develop a Level 3 Data Centre (IDC). Lineage Logistics LLC, the world’s biggest and most advanced temperature-controlled industrial REIT and logistics solutions provider, shared ambitions to grow business in Vietnam.
- The diversification of investment asset types has enabled investors to go beyond traditional metropolitan cities like HCMC, Hanoi and Danang. For example, in Dong Nai, Logos Property Services and Manulife Financial have joined forces to invest over US$80 million into a new logistics project spanning 116,000 sqm.
- Various capital source origins: There has been rising interest from European and US investors in Vietnam real estate market. For example, the Lego project, which involves an investment of over US$1.3 billion has propelled Denmark to the seventh position in terms of total registered investment by a foreign country.
- Sustainable or green investment: The trend is becoming more vibrant than ever. In March 2022, Lego marked an important milestone for Vietnam real estate in attracting “green” investment capital to the country with the construction of the company’s first-ever carbon-neutral project worldwide in Binh Duong.
The way forward
Despite promising growth trends, the country in general, and the real estate industry in particular, is still facing many long-term challenges, including:
- The prolonged anti-corruption campaign, hindering the approval procedure for real estate development since late 2018, would run the risk of discouraging foreign investment into the country.
- Legal frameworks and regulations remained complex and sometimes inconsistent among related documents, impeding foreign investors’ investment processes.
- Lack of clear land sources and complicated investment procedures.
- Shortfall in high-quality infrastructure is making foreign investors reconsider their project’s location.
- Lack of qualified local partners to cooperate and assist foreign investors in their value chain.
Looking forward, a sizeable amount of FDI inflows are set to enter Vietnam’s real estate market, and we expect the sector to continue to expand in the long term. However, Vietnam needs to hasten its reform and development in all areas, from improving infrastructure and labour upskilling to streamlining regulatory and legal reform, in order to leverage this investment flow.
More on 'Office' in 'Vietnam'
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- A new era of modern workplace in VietnamSeptember 25, 2018
