Investment opportunities in real estate closely tied to infrastructure investment

DNHN - Currently, increasing public investment, particularly in infrastructure projects, is a strategic priority that the Vietnamese government is actively promoting for 2024. This is seen as a major opportunity for the real estate market.

Public investment plan of 657 trillion VND for 2024

At the 9th session of the State Committee for National Key Projects in the Transport Sector, Prime Minister Pham Minh Chinh emphasized that public investment plays an important role in leading and activating all social resources for development investment. In 2024, the country will allocate VND 657,000 billion for public investment, mainly in transportation infrastructure, with a goal to achieve a disbursement rate of at least 95%.

Along with the effective promotion of growth momentum, the focus on public investment disbursement, with transportation projects being put into operation, will help reduce logistics costs for businesses, lower input costs, increase the competitiveness of products, businesses, and the economy; and create new development spaces as infrastructure development opens up new areas for growth, especially in industrial development, urban areas, and services.

As of mid-June, the implementation of key projects has achieved very encouraging results.

For example, the Long Thanh International Airport has taken a clear shape. Recently, the project mobilized nearly USD 2 billion in domestic funds; issues related to capital, land, and materials have been resolved. Other projects, such as Terminal 3 of Tan Son Nhat International Airport and the expansion of Terminal 2 at Noi Bai, are being actively implemented.

Currently, the country has 34 major projects and 86 nationally significant component projects, key to the transportation sector, across 46 provinces and centrally administered cities. These include 5 railway projects, 2 airport projects, and the remaining are road projects, mainly expressways and ring roads around the capital Hanoi and the ring road in Ho Chi Minh City.

Real estate opportunities

According to Savills World Research's Impacts report, Vietnam increased infrastructure spending from 2.5% of GDP in 2016 to 6% in 2020, committing to a comprehensive national transportation network by 2045. This network will include 5,000 km of highways, a deep-water port, and two high-speed rail lines, with Long Thanh International Airport near Ho Chi Minh City serving 100 million passengers annually by 2035.

The research also emphasizes that many projects have driven real estate development in Vietnam's increasingly important tourism sector. For example, the 32-story Hilton Saigon hotel opened at the end of 2023. It is expected that there will be more high-end hotel and retail services in the city and surrounding areas once the airport becomes operational.

Additional cargo handling capacity will also make life easier for manufacturing and logistics businesses, leading to a demand for industrial and warehouse space.

According to Mr. Paul Tostevin, Director of Savills World Research, infrastructure projects can provide public benefits or improve economic activity, or achieve both goals simultaneously.

"Infrastructure projects create jobs - both during the initial construction phase and for businesses that emerge thereafter. These projects also increase mobility, travel capabilities, and access to services. Meanwhile, improving the power grid and digital connectivity facilitates business expansion," said Mr. Paul.

Infrastructure investment can also help countries achieve their climate goals through green energy projects, upgrading existing infrastructure to reduce carbon emissions, and carbon capture and storage facilities, among many other projects.

Opportunities for all segments

“The connection between efforts to disburse investment in infrastructure and real estate development is very close. Economic centers that are connected will attract skilled labor, create good business opportunities, and foster social growth. New port facilities create export opportunities. Ultra-fast broadband promotes the expansion of the digital economy,” the expert further analyzed.

New infrastructure often attracts new businesses and workers, forming clusters. Where infrastructure is developed, offices, warehouses, shops, and residential areas often follow.

According to Mr. Paul Tostevin, right from the early stages, a well-funded transport or energy project will provide reassurance to developers and real estate investors, allowing them to proceed with their plans. For those currently renting or potentially renting offices, retail, or industrial real estate, infrastructure investment reflects confidence in their area.

Additionally, the Director of Savills World Research also pointed out the risks surrounding infrastructure investment, mainly related to the long-term nature of each project. Therefore, political and economic conditions can change significantly over five or ten years, causing projects to be temporarily shelved, downgraded, or face financial issues.

Nghe Nhan