Vietnam’s coronavirus success story excites real estate developers

Vietnam’s containment of Covid-19 has pinned hope among foreign real estate investors who see a safe shelter to allocate their money.

Vietnam's real estate sector remains attractive to foreign developers. Photo: Phung Huynh Vu Qui/Getty Images

The sentiment among the real estate developers has become strong following the encouragement by the governments in their own countries after a large number of multinational attempted to relocate manufacturing bases out of China.

Foreign experts attribute the sentiment to the safety that the government of Vietnam has fight for in the battle against the pandemic.

South China Morning Post believes that Vietnam is set to get a second round of tonic from global companies diversifying their production bases in the region as the coronavirus outbreak exposes the concentration risk in China.

The situation in Vietnam burnishes its appeal as an alternative to China since giant companies like Apple, Samsung and their suppliers switched out to limit the damage caused by higher tariffs in the US-China trade war.

Meanwhile, global real estate and investment management firm JLL believed that Vietnam, with relatively developed infrastructure and proximity to China, has attracted the majority of those who wanted to diversify their manufacturing portfolio outside China.

Although the Covid-19 pandemic is currently causing difficulties for investment decisions or relocation activities, industrial park developers remain confident of increasing land prices as they were well aware of long-term potential in Vietnam’s industrial segment, sending land prices soaring in the northern industrial market, JLL explained.

Demand for industrial land remained strong in the first quarter this year thanks to Vietnam’s good industrial fundamentals, the consultancy company noted.

Analysts say industrial and residential property in Hanoi and Ho Chi Minh City are likely to get another tailwind after the pandemic lockdown disrupted supply chains and escalated trade and political tension between China and other economic powerhouses.

Sunny Hoang Ha, sales director at SPG Land Vietnam, part of a group that controls Greenland Hong Kong Holdings, affirmed that this Covid-19 outbreak is forcing many companies to re-evaluate their supply chain strategy and Vietnam is primed to benefit.

Jeremy Williams, chief business officer at PropertyGuru, explained that demand for accommodation for both foreign and local staff is set to grow thanks to the influx of foreign industrialists. He noted that the residential segment will see an increase in demand, providing an uplift to prices.

In reality, putting the virus under control has enabled Vietnam to become one of the first countries to restart its economy.

For that reason, property developers, private equity funds and analysts are still betting on the prospects of Vietnam’s real estate market in which foreigners and foreign organizations are eligible to own houses in the country in a tenure of 50 years.

A latest move from Japan will instigate a rush to Vietnam and elsewhere to shift their manufacturing facilities out of China.

Officials from the US and the EU have also indicated their willingness to reduce their dependencies on other countries and Vietnam is expected to be a good choice.

Indeed, foreign direct investment (FDI) rose for seventh straight year as suppliers to Apple, Nintendo, Samsung build new bases.

In the first three quarter this year, FDI to real estate projects ranked third among sectors in Vietnam (behind manufacturing drawing US$9.9 billion and electricity US$4.4 billion) with US$3.2 billion out of total US$21.2 billion in the period, according to the Ministry of Planning and Investment (MPI).

Another reason is that Vietnam’s young population provides a ready pool of talented professionals, adding to its investment appeal.