The Savills Blog

Promising Investment Spotlight: Why Vietnam Now?

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Vietnam is now one of the fastest growing countries in the world. All current investment trends are pointing up as the government continues to make things easier for business and foreign investment. Linked with macro-economic performance and encouraged by supporting policies, the real estate sector is expected to continue to surge and sustain its growth.

GDP

After the low point in 2012, the economy has consistently seen positive GDP growth with 6% pa growth rates over 3 consecutive years, making the country one of the top performing economies regionally and worldwide. GDP is expected to grow 6.7% in 2017.

As an emerging market, the economy has quadrupled in size over the last 10 years. Viet Nam has gone from being one of the world’s poorest countries to middle income level with mid-term prospects that will outperform almost all Asian peers. Solid growth is expected given the increased potential from established and upcoming free trade agreements, increasing FDI and continued governmental efforts to support the economy.

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CPI

For many years, inflation was higher than other regional countries. However, with the government taking decisive action to better control it, has seen this become no longer such an economic threat. There is now a strict official commitment to inflationary targets of less than 5 percent. As a result CPI has increased only by 3.84% during the first eight months of 2017, still within the year’s 4% target. Stable inflation like this promotes and supports positive conditions for domestic and foreign investment.

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FDI

Transformation and development has seen FDI levels continuously grow since 2000 and increase dramatically when Viet Nam became a formal WTO member. FDI remains an important driver of the economy and in 2016 it reached a new high of nearly US$16 billion of disbursed capital, up 9% YoY and registered FDI grew 7.2% YoY to US$24.4 billion. In the first eight months of 2017, FDI disbursement reached US$ 10.3 billion, up 5.1% YoY while registered FDI was US$23.36 billion, increasing 45.1% over the same period last year.

The largest proportion goes to the manufacturing sector and the next to real estate development. Strong FDI inflows underline Viet Nam’s investment performance potential and confirms it as a key business destination for corporations and investors around the world.

 

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Vietnam has foreign trade agreements (FTAs) in place and is negotiating others to an expected 15 in total – no doubt more are planned and already include economic giants like the US, Japan and China.There have been ten regional and bilateral free trade agreements including six as an ASEAN member country and four as an independent. Vietnam recently successfully completed trade negotiations with the EU and is actively negotiating the TPP, the ASEAN-Hong Kong FTA, EFTA (European Free Trade Association), and the RCEP (Regional Comprehensive Economic Partnership). All these treaties confirm continued commitment to free trade and worldwide economic integration while showcasing Vietnam’s will, energy and outstanding economic growth.

Infrastructure development across the country is also a major focus in supporting continued growth. Major infrastructure improvements continue: HCMC, perhaps the most important economic hub in the country, has initiated multiple bridges from the under construction Thu Thiem New Urban Area to improve connection with various city districts. The first is expected to be completed in 2018.

Another major development is the ongoing Metro Line 1 connecting Ben Thanh Market in district 1 and Suoi Tien Theme Park in district 9, with further extension to Dong Nai province to the east. This urban railway line with three underground and 11 elevated stations will considerably enhance city connectivity and speed of movement. Metro Line 1 is expected to be operational in 2020, while the first of six metro lines in Hanoi is scheduled for operations in 2018. The gradual completion of infrastructure and road connectivity of major metropolitan areas and satellite cities will significantly and positively impact commuting and shape development of real estate projects for years to come.

The legal framework has developed and improved property prospects with the 2014 Revised Law on Real Estate Business and Revised Law on Residential Housing. This allows foreign enterprises to freely invest, develop, operate and sell properties across all real estate sectors. This regulation amendment has opened up major new opportunities for foreign investors in real estate. The more clear and consistent legal framework has since encouraged an influx of new investors looking to establish a position in the market.

Demographic profiles also favour Vietnam. With a large and growing population, middle class growth is faster than any other Southeast Asian nation meaning property prices in all major cities will continue to be driven up by urbanization. Unlike China where the population is aging rapidly, there is a far younger average population with a very large workforce in Vietnam. These all combine to create a ripe target for retailers and residential developers.

The tourism sector continues to grow and had another positive result in the first eight months of 2017. There were approximately 8.5 million international arrivals, a 29.7% YoY increase, following the record breaking 10 million plus in 2016. According to the Vietnam National Administration of Tourism, 11.5 million international tourists are expected by year end 2017. As tourism development is a key priority for the government there have been further visa easements and exemptions with more planned, making tourism potential in the coming years significant.

The strong and increasing numbers of inbounds have been proven to attract local and foreign investors to burgeoning hospitality sector opportunities. New resort developments continue in renowned beachfront destinations like Da Nang, Hoi An and Phu Quoc and major city centres are seeing new hotels built to match the growing demand from increasing numbers of business travelers.

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The outlook for Viet Nam is very positive. There is continued and growing investment interest showing in growing FDI levels, increasing numbers of M&As and a surge of new business registrations. The real estate market, which is linked directly to the performance of the macro-economy, will continue to sustainably grow across all sectors. Now is the time to take a closer look at Viet Nam and what this incredible country has to offer.

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