Trends and Prospects of the Real Estate Capital Market in Vietnam

DNHN - The real estate market is going through many ups and downs as interest rates rise, narrowing the sources of capital mobilisation for businesses in this sector. However, experts believe that Vietnam is still an attractive market for foreign investors.

Current real estate capital flow trends in Vietnam

In terms of housing and commercial demand, population growth, rising incomes, and urbanisation driving demand for housing and commercial projects in Vietnam. This creates opportunities for investors and banks to provide credit capital for new real estate projects.

In particular, Vietnam has attracted a large amount of foreign investment in real estate projects. Political stability, economic growth, and favourable policies have created conditions for foreign investors. Real estate developers from countries such as South Korea, Japan, and Singapore have all come to Vietnam and invested in some quite large projects.

In addition, with the development of the real estate market, Vietnam has created conditions for domestic real estate companies to develop and expand. The volume of real estate transactions increased and large real estate projects were implemented. This also creates a demand for credit capital from banks and other financial institutions to support real estate projects.

One of the important factors driving the flow of credit capital into real estate is the need for a low-interest rate environment. To support the economic recovery after the 2008 financial crisis, central banks around the world have kept interest rates low, making borrowing more attractive and reducing borrowing costs. This boosted demand for credit and capital flows into real estate.

With population growth and rising incomes, the demand for housing continues to increase. This creates great potential for credit capital to flow into real estate, especially in developed urban markets. Digital technology is changing the way we buy, sell, and manage real estate. The development of online platforms and blockchain technology has opened up opportunities for credit capital in real estate. Digital technology projects such as PropTech and FinTech are creating new solutions for real estate transactions and related finance, narrowing the gap between buyers and sellers, and thereby promoting the flow of credit capital into the real estate market.

Commenting on this trend, Mr Neil MacGregor, CEO of Savills Vietnam, said that the major challenge for real estate investors in Vietnam at the moment is the administrative procedures, especially in dealing with land use fees and capital flows. However, the current interest rates on the market are quite low compared to previous years.

According to Mr Neil MacGregor, the changes in the legal framework have not yet been fully implemented, so local authorities are still hesitant in the implementation process. Typically, with condotel products, many local government agencies are still hesitant to grant certificates for projects despite clear explanations in the legal framework.

“The country’s strong economy is driven by a large population, infrastructure development, urbanisation, abundant foreign direct investment (FDI), and a rapidly growing middle class. If the legal framework allows, M&A real estate activities are expected to boom in the next two to three years. Most of the investment comes from Asian countries such as Singapore, South Korea, Thailand, Malaysia, and Japan. These are large capital flows that will support the real estate market in 2024”.

Prospects for capital flows for the real estate industry in Vietnam

Currently, Vietnam is continuing the process of rapid urbanisation. The increase in the urban population and economic growth will continue to create a great demand for housing and commercial projects. This creates prospects for the flow of credit capital into Vietnamese real estate in the future.

In addition, the development of industrial parks and new urban areas is an important goal of the Government. This development will create opportunities for investors and financial institutions to provide credit capital for projects in this field.

In particular, the Government has also implemented many support policies to attract investment in the real estate sector such as tax reduction, simplification of investment procedures, and improvement of the business environment. These policies will more or less continue to attract capital for Vietnamese real estate shortly.

It is worth noting that currently, the financial market is being developed and expanded, including the capital market and the asset market. This development creates new opportunities for investors and financial institutions to invest in real estate in Vietnam through complex financial instruments such as real estate investment funds, real estate bonds, and settlement funds…

Overall, the investment capital flow into the Vietnamese real estate sector is increasing and the prospects are very bright. Urbanisation, foreign investment, and supportive policies from the Government play an important role in attracting this capital flow. This will not only boost the development of the real estate market but also contribute to Vietnam’s economic growth.

Assessing the prospects of capital flows for the Vietnamese real estate market, Ms. Trang Bui, General Director of Cushman & Wakefield Vietnam, said that while the global economic context is experiencing many fluctuations, an emerging country like Vietnam has become a potential market attracting investment. But more importantly, the attractive profit margin in an emerging market like Vietnam is a key factor in foreign investors’ investment decisions”.

Ms Trang Bui said that looking back at the transactions in the recent period, it shows that the appetite of foreign investors is still focused on traditional asset classes in Vietnam, serving the main needs of “settling down, settling down” such as housing.

The expert said that 2024 will have many challenges, but we believe that this is still the right time for businesses to increase their acquisition or joint venture activities, especially those with strong financial potential. Because currently, the interest rate level has decreased, many new decrees and regulations to remove obstacles for real estate projects have been issued, along with many other positive solutions that the Government is implementing to improve transparency, compliance with the law as well as the general business environment. The new regulations will help create solutions for businesses to be more convenient in expanding the market and forming joint ventures.

Nha Ha