How does FDI investment affect the real estate market?

DNHN - FDI investment has a profound impact on Vietnam's real estate market, especially during the first 9 months of 2024.

According to Savills' latest market report on office leasing transactions in Ho Chi Minh City in Q3 2024, up to 73% of transactions occurred with the aim of relocating to higher-quality buildings. The Finance, Insurance, Real Estate (FIRE) sector led with a 39% market share, followed by the IT sector at 31%, and manufacturing at 13%.

Notably, 75% of tenants were from foreign companies, mainly from the US, South Korea, and Japan, while domestic enterprises accounted for only 25%. This shift is becoming more apparent as green certification becomes a top priority in high-end office projects in Ho Chi Minh City, with 63% of the upcoming Grade A and B supply set to meet sustainable standards to attract major foreign tenants.

In the serviced apartment segment in the southern region, the main tenants are experts and staff working in Ho Chi Minh City, Dong Nai, and Binh Duong. Although FDI capital is driving demand for expert accommodation, total FDI in Ho Chi Minh City fell by 11% year-on-year, reaching only $1.8 billion. In contrast, Dong Nai saw a 41% increase to $1.3 billion, while Binh Duong also rose by 7% to $1.4 billion.

In the North, FDI is mainly concentrated in Hanoi and has spread to provinces like Phu Tho, Bac Giang, Thai Nguyen, and Vinh Phuc, thereby increasing the demand for housing for foreign experts. However, Savills' report indicates that neighboring provinces still face challenges in the supply of quality serviced apartments, causing the demand from foreign experts to remain concentrated mainly in Hanoi.

Mr. Troy Griffiths, Deputy Managing Director of Savills Vietnam, noted that although the FDI growth rate is slowing compared to previous years, partly due to fewer large investments in energy projects, especially liquefied natural gas projects, the trend of foreign investment continues and shows positive prospects.

The expert emphasized that new government policies have created a fresh atmosphere for the business environment, especially in the commercial sector. Successful anti-corruption efforts have laid a solid foundation for Vietnam's continued economic development, along with active participation by senior leaders, demonstrating the country's determination to attract foreign investment.

FDI inflows into provinces and cities such as Bac Ninh, Ho Chi Minh City, Ba Ria - Vung Tau, Binh Duong, and Hanoi have driven infrastructure development. Improved infrastructure facilitates urbanization, increasing the demand for housing, offices, and other real estate services.

FDI, particularly in manufacturing, especially high-tech, has driven the industrial real estate segment. New industrial zones have expanded, providing opportunities for many foreign companies to set up production bases. Along with this, the demand for high-end offices has also increased due to the presence of numerous multinational companies.

The increase in foreign experts working in Vietnam has led to a strong demand for serviced apartments, especially in areas like Ho Chi Minh City, Hanoi, Dong Nai, and Binh Duong. These apartments not only meet accommodation needs but also require high-quality amenities.

With the entry of investors from developed countries, sustainable development standards and green certification have become mainstream trends. High-end office projects are increasingly focusing on meeting these standards to attract international tenants.

Despite the great potential, some areas in Vietnam still face challenges regarding the supply of high-quality real estate. This is particularly evident in the provinces surrounding Hanoi, where the supply of serviced apartments remains limited, failing to meet the needs of foreign experts.

Thus, the shift from traditional sectors to high-tech has positively impacted real estate. Investment in electronics manufacturing and components has created a large demand for production facilities and modern workspaces.

Additionally, administrative reform policies and the government's efforts to improve the investment environment also play a key role. These not only help attract FDI but also build confidence for real estate investors both domestically and internationally.

Overall, FDI has been and continues to play a vital role in reshaping Vietnam's real estate market. Despite many challenges to overcome, with sustainable growth and supportive policies, this market promises to continue thriving in the future.

Phan Chinh