Vietnam real estate: Where challenges meet opportunity

Its strong economic fundamentals and growing middle class make it an appealing market for real estate developers and investors 

Vietnam’s real estate market has remained resilient during the pandemic, with foreign investments and domestic demand keeping it afloat. As the country moves towards economic recovery, the real estate sector is expected to play a significant role in this journey. 

However, the market freeze since mid-2022 in Vietnam, primarily in the residential real estate sector, has continued into early Q1 2023 due to legal bottlenecks, lack of capital access, corporate bond limits, and dampened investors’ confidence, according to David Jackson, the CEO at Colliers Vietnam and a member of the PropertyGuru Vietnam Property Awards judging panel. 

Nevertheless, he noted that “positive signs were recorded recently thanks to the government’s measures to correct the ills of the past, stabilise interest rates, launching the VND-120bln credit package and the national programme on social housing, and making legal amendments.” 

Although industry players were compelled to reevaluate their capabilities, risks, and opportunities for their investment portfolio, Jackson stated that those with resilience will reap long-term gains. 

Despite the challenges, the first quarter of 2023 saw around USD370 million in foreign direct investment (FDI) inflows into the real estate sector, mainly in residential real estate, office space, and retail properties. These inflows offer promising prospects for long-term investors, reported VietnamNet. 

With this positive prospect, efforts of leading industry players who represented Vietnam at the PropertyGuru Asia Property Awards Grand Final 2022, including Keppel Land (Best Mixed Use Developer – Asia), Gamuda Land (Best Retail Development Asia) for Artisan Park, as well as CapitaLand Development (Vietnam) (Best Housing/Landed Development – Asia and Best Eco Friendly Housing/Landed Development – Asia) for Sycamore, have started to pay off. 

Hang Dang, the managing director of CBRE (Vietnam) Co, Ltd. and another esteemed member of the panel, is expecting several opportunities from the inflow, including the economic growth rate that is expected to recover to nearly five percent in 2024 and reach eight percent in 2025 as per data from Oxford Economics. 

Since rapid urbanisation has increased demand for housing and commercial property, she said that investors can exploit these opportunities, especially in larger cities like Ho Chi Minh City and Hanoi. As an emerging market with a growing middle class of the younger demographic, the demand for housing and commercial spaces will grow, and long-term investors will have significant potential for growth and returns. 

Despite these opportunities, Hang said: “Foreign investors are mindful of the risks associated with investing in any emerging market, including Vietnam. These risks include political instability, regulatory changes, currency fluctuations, and legal disputes. They are cautious when investing in Vietnam’s real estate market and are careful to conduct thorough due diligence before making any investment decisions.” 

While the pandemic has caused disruptions, the market is predicted to rebound in the long term, and investors with a long-term view are likely to benefit, particularly capitalising on undervalued properties that have strong potential for growth, reported Business Times. 

With a strong economic foundation and a growing middle class, Vietnam’s real estate market offers potential for long-term growth and investment. As the country continues to recover from the pandemic, the real estate sector is expected to play a critical role in driving economic growth and development. 

Heard of award-worthy residential, commercial, or industrial projects in Vietnam? Nominate them for the 9th annual PropertyGuru Vietnam Property Awards on or before 1 September 2023.  

Gynen Kyra Toriano, Digital Content Manager at PropertyGuru, wrote this article. For more information, email: [email protected].