Foreign investors no longer passionate
The real estate sector has always been leading in terms of attracting FDI in comparison with other business fields. However, things have become quite different.
In the first 11 months of the year, the total registered capital in the sector was only 464 million dollars, according to the Foreign Investment Agency under the Ministry of Planning and Investment.
It is clear that the FDI flow into the real estate sector has “got stuck”. In 2008 which was considered the “golden age” in attracting FDI into the real estate sector, 23 billion dollars worth of real estate projects were registered in Vietnam. The FDI capital still reached 6.8 billion dollars in 2010, when Vietnam was severely influenced by the global economic crisis.
Michael Kokalari from Kim Eng Securities Company said at a workshop recently that foreign investors in Vietnam are now most interested in the consumption behavior of the young middle-class. Recently, the investors from Japan and the US have bought the stakes of the consumer industrial goods companies (Masan, Huong Thuy), because they can see the potentials in the field. Meanwhile, they are no more interested in the real estate sector.
Neil MacGregor, Deputy Managing Director of Savills Vietnam said that the year 2011 witnesses the Japanese investment wave in Vietnam with a lot of registered investment projects in different sectors, such as finance, telecommunication, consumer goods and real estate. However, the attractiveness of the real estate sector proves to be dim
Singapore has been well known as the third biggest foreign direct investor in Vietnam. However, Singaporean investors now only focus on speeding up registered projects, while they do not register new projects. South Korean real estate developers now do not seek more opportunities any more, because they injected money in big-scaled projects in the previous years already.
Meanwhile, Vietnamese real estate developers should not expect to call for capital from investment funds, because VinaCapital, Indochina Land, Dragon Capital and Prudential now need to focus on implementing projects.
Experts believe that the global finance crisis has made foreign investors change their investment strategies. Meanwhile, the Vietnamese real estate market is facing a lot of challenges, including the low liquidity, low demand, and the credit tightening policy, which has forced foreign investors to keep hesitant with their investment decisions.
In general, the biggest advantage of foreign real estate developers lies in the high grade offices, apartments and resorts. Meanwhile, the market segments seem to turn saturated with decreasing demand. Therefore, it is understandable why investors keep hesitant to develop new projects.
High expectations
According to Savills Vietnam, Vietnamese real estate market is seriously lacking capital, which has forced project developers to seek new financial sources in different ways, either selling the whole projects, seeking partners for join ventures.
A lot of project investors, who have big land funds, now want to sell parts of the land to get money to implement projects. The financial pressure on project developers may lead to the appearance of “bad assets” in Vietnam, but this would open a new period with many new opportunities to foreign investors.
Neil MacGregor said that despite the big challenges, the number of investment affairs is believed to increase rapidly in the time to come.
David Tran, Deputy President and Director of the Asian Real Estate Association of America AREAA, thinks that when the market has weak liquidity, investors need to seek non-bank capital sources, and in this case, kieu hoi (overseas remittance) would be the way-out for real estate projects.
He said that if Vietnam can upgrade the legal environment, Vietnam will be able to receive big sums of kieu hoi from the 4.5 million Vietnamese people to invest in the real estate market.
Source: TBKTVN
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