As foreign investors swoop into the market, home ownership remains out of reach for large swaths of Vietnam’s cities
Foreign investors pledged to invest $297.4 million in Vietnam’s real estate sector in January, according to General Statistics Office data.
The sum represented 20.9 percent of all foreign direct investment inflows, including new pledges and funds added to existing projects that month.
Investors are positive about the growth fundamentals of Vietnam’s property market and have set their sights on Hanoi and Ho Chi Minh City, the country’s two largest cities.
Meanwhile, home ownership remains out of reach for nearly a quarter of Ho Chi Minh City’s households due to a dearth of affordable supply, according to a new survey compiled by municipal construction authorities.
Many priced out of the market instead cohabitate with parents and relatives, the survey found.
Of the city’s 8.4 million residents, roughly 300,000 households (about 1.2 million rural migrants and 143,000 low-income natives) lacked access to affordable housing, rented or otherwise.
Meanwhile foreign investors, mainly from Japan, South Korea, and Singapore, have sought to secure a foothold in the market through mergers and acquisitions or by forming joint-ventures.
Such deals are expected to hit a new record this year, according to Stephen Wyatt, general manager of property consultancy firm Jones Lang LaSalle.
The number of M&As announced in 2015 increased 40 percent from 2014 representing a total value of $4.3 billion, according to data released by the Institute of Mergers, Acquisitions and Alliances.
A third of Vietnam’s 10-largest mergers and acquisitions during the past two years involved real estate companies.
There are many factors driving the foreign investment inflows in Vietnam’s real estate market including its fast-growing economy, rapid urbanization and expanding middle-class, which is growing at the fastest pace in Southeast Asia according to HSBC.
The bank projected Vietnam’s middle class will jump from 12 million people in 2012 to a 33 million by 2020.
A loosening of restrictions in the country’s regulatory environment has also helped boost sales.
Last year, Vietnam eased restrictions on foreign property ownership to improve market liquidity.
The amended law went into effect in July of last year and allowed foreign investment funds, foreigners with valid visas, international firms with operations in Vietnam and overseas Vietnamese to buy residential properties.
The Vietnam Real Estate Association (VNREA) forecast a promising prospect for the local real estate market as demand from foreign buyers drove market growth.
The number of foreigners living in the country hit 320,000, according to the property association.
Investors with business interests in Vietnam are the most likely to buy local properties because they are attracted by potential returns of between seven and eight percent here, according to the VNREA.
