Vietnam Real Estate Investment Situation in Recent Years

Passers-by will be granted a 10-year visa (renewable), the right to buy a car duty-free and not be taxed on foreign income.

• Cultural factors: The widespread and fluent use of English also facilitates and facilitates transparency in real estate transactions. Malaysian society is reinforced by law and religious (Islamic) law. Malaysians avoid unnecessary psychological stress, respect authority, strengthen family relationships and are always proper in social behavior. Malaysians are warm and friendly, and social life is peaceful.

•Economic factors: Malaysia's economic growth averages 7% annually, with real estate growth of about 15 to 30% per year. Economic growth has created demand for high-quality residential and commercial housing to meet the growing foreign community.

Today, high rental yields, rapid infrastructure improvements, unrestricted foreign investment and good capital appreciation, increasingly advanced aviation services, declining tax rates and other incentives, and a new wave of investment coupled with an investment attraction policy are stimulating the Malaysian economy. With its close ties to Australia, Bali and Singapore, Malaysia has easily attracted investment and tourists from these countries. This, coupled with a booming tourism industry and the emergence of luxury resorts, has created a very attractive real estate investment environment in Malaysia.

Chapter 2:‌‌

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REALITY OF VIETNAM'S REAL ESTATE INVESTMENT ENVIRONMENT

2.1 Vietnam real estate investment situation in recent years

2.1.1 Investment capital flow into the market

Vietnam remains a destination for foreign capital with a growing presence of multinational corporations expanding or establishing new operations.

Table 1: FDI capital poured into Real Estate from 2004 to 2008

(Source: Foreign Investment Agency - Ministry of Planning and Investment)

According to the chart above, it can be seen that the registered FDI and FDI in the real estate sector increase annually at a dizzying speed. In 2008, the amount of foreign direct investment (FDI) in real estate increased to a record high. According to the Foreign Investment Agency - Ministry of Planning and Investment, by the end of 2008, the committed foreign direct investment capital poured into Vietnam reached 64 billion USD, 3 times higher than in 2007, with 1,171 newly licensed projects. The implemented capital reached 11.5 billion USD. The average project scale reached 51.47 million USD/project, much higher than the previous period.

The real estate sector attracted strong FDI in 2008 with nearly 28 billion USD in committed investment, an estimated 30% of the total implemented investment capital in the real estate and hotel sectors, compared to 13% in the light industry sector and 3% in the agriculture and food sector. The additional capital of projects operating in Vietnam in 2008 alone was equivalent to the total newly registered capital in one year in the early 2000s.

Table 2: Total FDI capital in Real Estate 2008.

(Source: Vietnam Economic Report 2008 by VietRees)

The number of office and hotel tourism projects is not much but the total investment capital is large. Many billion-dollar projects have been committed by foreign investors to invest in the next few years such as: New urban area project in Phu Yen by New City Group (Brunei) 4.3 billion USD; Ho Tram project by Asian Coast Development Ltd. Group (Canada) 4.23 billion in Ba Ria - Vung Tau. Berjaya Leisure University Urban Area Project (Malaysia) 3.4 billion USD, Hotel, office and housing high-rise construction project by TA Assiociates International Group (Singapore) 1.2 billion USD in Ho Chi Minh City.9

9 10 Outstanding Real Estate Events in 2008 http://cafef.vn

According to the Foreign Investment Agency (Ministry of Planning and Investment), in the first 4 months of 2009, Vietnam attracted 6.357 billion USD, equal to 83% of the same period in 2008, of which 91% of capital was poured into the real estate sector. In the real estate sector, the registered capital for hotel construction reached 4.505 billion USD, urban areas reached 600 million USD and high-end offices was 684 million USD. Up to now, the notable projects in terms of large capital scale are still those licensed in Ba Ria-Vung Tau province since the beginning of 2009 such as: Safari wildlife park construction project and Binh Chau-Vietnam resort with a total investment of 500 million USD, Toc Tien new urban area project with 600 million USD and The Vietstar Mixed-User Complex Project with 200 million USD. Meanwhile, industry only attracted 392 million USD, while agriculture and forestry were insignificant. This proves that real estate is still an attractive investment field for investors.

2.1.2 Real estate prices

Real estate prices in Vietnam are considered too high. People with average incomes or lower still find it difficult to own a home because real estate speculators take advantage of opportunities and the gap between supply and demand to push prices up. According to a recent study by Knight Frank Real Estate Company in collaboration with Citi Private Bank, land prices in London are currently the most expensive in the world : 49,200 USD/m2 , followed by Monaco at 46,900 USD/m2 , New York at 34,200 USD/m2 . In Asia, Hong Kong is at the top with 26,300 USD/m2 , Tokyo at 23,500 USD/m2 . London's land prices increased sharply in 2007 due to many foreign investors and wealthy people from abroad flocking to London to buy houses. In London, the owners of houses worth over 4 million USD are mostly foreigners. Meanwhile in Vietnam, in July 2007, a house on Dong Khoi Street was advertised for sale at ACB Real Estate Supermarket for about 1 billion VND/m2 . In addition,

10 The Independent - USA May 2007

On Le Loi and Nguyen Hue streets, although there are few houses for sale, in good locations with street frontage, the price is not less than 40,000 USD/m2 , a number too high compared to the standard of living as well as the quality of real estate in Vietnam.

Along with the massive influx of foreign investors, a series of domestic investors also flocked to the real estate sector such as Lilama, Truong Hai, Viglacera... Therefore, from the end of 2006 to the end of 2007, real estate prices in Vietnam and especially in large cities skyrocketed, at low levels a few dozen percent, at high levels it could be up to more than 200%. The average price of high-end hotels also doubled compared to 2006, while office rental prices became increasingly expensive, ranking 13th in the world. In early 2008, the real estate market had growth.

hot, strong transactions, real estate prices pushed up. Office rental prices also pushed up class A offices in the first quarter in HCM about 70 USD/m2, an increase of about 100% compared to the previous year, in Hanoi about 51 USD/m2 , an increase of about 58% compared to the previous year. However, transactions decreased at the end of 2008 due to the difficult economic situation, many businesses cut spending.

The price of luxury apartments in Ho Chi Minh City at the end of 2008 decreased, ranging from 30 - 60% compared to the end of 2007 and the beginning of 2008. In Hanoi, apartment prices were more stable, with the price reduction in most housing projects being insignificant, about 7 - 10% compared to the end of 2007. In the first months of 2009, the selling price of luxury, high-end and mid-range projects tended to decrease from 4 - 8%, with some projects reducing prices by 20 - 30%. However, the Hanoi market in the past 2-3 years has not had a strong increase in supply, so the Vietnamese real estate market will not have significant decreases in selling prices in the near future.

Figure 3: Graph reflecting the real estate market in 2008

(Source: chart by Professor Dang Hung Vo, former Deputy Minister of Natural Resources and Environment)

Since the beginning of 2009, the real estate market has begun to become active again. The selling price of affordable apartments has increased by 5-15%. The number of customers looking to buy a house has increased, the number of people willing to put down money to buy an apartment has also increased significantly. The market has warmed up and will continue to heat up because investors understand and respond better to market demand. Foreign investment capital is still pouring into this sector in large quantities and many investors still want to invest in this market segment. The decline in rental prices as well as selling prices of real estate types is necessary to promote the market to grow, become more attractive to tenants and accelerate the expansion plans of large companies when the world economic situation begins to improve.

2.1.3 Real estate transaction methods

The current market is still mainly transacted directly, so there is an imbalance in supply and demand and is dominated by real estate investors and speculators. Therefore, those who need residential real estate do not have many opportunities to continue participating in the market. According to VietRees, up to 65% - 70% of the total number of transactions

Real estate transactions in major cities in Vietnam are due to speculative buyers. The Ministry of Construction issued Circular No. 13/2008/TT-BXD on May 21, 2008, stating that: “Real estate businesses must sell, transfer, lease, and hire-purchase real estate through real estate trading floors (except for social housing projects under the Housing Law)”, which will further promote the development of the real estate market. In early 2008, when the real estate market was hot, a series of real estate trading floors were established, with the number of real estate trading floors currently reaching more than 100. However, those with large scale can be counted on the fingers of one hand. Currently, many real estate trading floors are operating at a standstill. Customers only know a few reputable floors such as Vigralera, ACBR, Sacomreal, Tin Nghia, Phuc Duc... the rest are floors opened by investors to sell products only for themselves. Because the real estate market is in a quiet period and most organizations and individuals are still trading without going through the floor because only organizations are required to trade through the floor while transactions between individuals are popular. Therefore, the trading floors will continue to have difficulties for at least the next 3 to 4 years.

2.2 Situation of Vietnam's real estate investment environment

According to the World Bank's Doing Business Report, in 2008, Vietnam's business environment was ranked 91/178 countries and 92/181 countries in 2009. Thus, in recent years, the friendliness of Vietnam's economy to foreign investors has improved compared to 2007 when it was ranked 104/175 countries, and in 2006 it was ranked 98/155 11 .

According to the announcement of Jones Lang LaSalle International Real Estate and Financial Services Group, the Vietnamese real estate market in 2008 is considered to have improved in terms of

11 World Bank (WB) Doing Business Report, Doing business 2008

transparency, ranking 77th out of 82 countries in the ranking. In 2007, Vietnam ranked 56th out of 56 countries and was in the non-transparent group. Vietnam ranked 11th in the list of 28 markets with the biggest change in transparency in the past two years. The ranking assesses market transparency through many factors such as effective inventory, market factors, listed assets, legal environment and trading methods, proper application and understanding of legal regulations, respect for private property rights, access to and updating of market databases. In addition, other indicators such as investment performance, professional ethics and professionalism in the real estate business market are also included in the ranking. Thus, the legal environment related to real estate investment and laws has been changed in a positive direction, Vietnam is currently still one of the countries with attractive real estate investment opportunities for foreign investors.

2.2.1 Natural and demographic factors

a) Natural conditions of Vietnam

Vietnam is located in the Indochina peninsula, in Southeast Asia with an area of 331,212 km², including about 327,480 km² of land and more than

4,200 km² of inland sea. Although Vietnam is a tropical country, it has many temperate mountain resorts such as Sa Pa, Tam Dao, Bach Ma, Ba Na, Da Lat. Vietnam has a 3,260 km long coastline with dozens of famous beaches, many forests, mountains with beautiful caves, many ancient architectural works and many unique festivals. Because it is located along the coast, Vietnam's climate is partly regulated by ocean currents and has many marine climate factors. Vietnam has a long coastline, Ha Long Bay is a natural wonder recognized twice by UNESCO as a world natural heritage... creating abundant tourism potential for Vietnam. Thus, Vietnam has an advantage in terms of location.

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