Skip Ribbon Commands
Skip to main content

News Release

Ho Chi Minh City

Story on real estate investments in emerging markets, with a focus on Vietnam

Vietnam is witnessing renewed interest from foreign and domestic investors. This can be attributed to a growing economy, a property market that is reached the bottom of the cycle and relaxation of foreign ownership legislation.

1.      Which emerging markets are currently hotspots for growth, and why? 

Vietnam is witnessing renewed interest from foreign and domestic investors. This can be attributed to a growing economy, a property market that is reached the bottom of the cycle and relaxation of foreign ownership legislation. In addition, a number of Free Trade Agreements (TPP, EU, ASEAN) will further boost the medium/long term growth prospects. Interest rates and inflation have reduced significantly and stabilized over the past 2 years, which has led to an increase in development activity in both major cities (Ho Chi Minh and Hanoi), with many domestic and foreign developers such as CapitaLand and Keppel Land increasing construction activity, encouraged by strong sales volumes in the past 12 months. 

Vietnam has been a hot spot for GDP / economic growth which are driven by 3 factors including Strong Domestic Consumption / Strong Private Investment / Net Exports. 

(1) Strong Domestic Consumption


Source: CEIC – Vietnam's retail sales growth highest in the Southeast Asian region


From the CEIC data above, retail sales growth is accelerating to a 15% growth year-on-year in Vietnam, while many other Southeast Asian countries are experiencing declining or negative growth. Being an indicator of underlying consumer sentiment, recent retail sales strength reflects a positive outlook on domestic consumption which supports GDP growth.

(2) Private Investment

One of the key drivers of private investment includes Foreign Direct Investment (FDI). FDI in January-September 2015 rose 8.4% on the year to US$9.7bn (source: Planning Ministry data), the strongest growth since inflows began in the late-1980s, despite a slowdown in China. New commitments rose even more strongly to US$11bn, focused on manufacturing, with energy and electronics yielding this year's biggest project announcements. 

Government's support for privatisation and push for business efficiency has also attracted FDI.

According to Vietnam's Ministry of Planning and Investment, FDI into Vietnam's Industrial Park ("IP") segment accounted for 67% of Vietnam's total FDI of US$11 billion and 59% of the total 1,400 projects in the nine-month period from January to September 2015. One noteworthy transaction was Amata Corporation's purchase of a development site at US$279 million in the Long Thanh District (Dong Nai) planned for a US$500 million IP and township development.

(3) Net Exports Growth

Recent reports suggest that Vietnam is becoming a strong destination for manufacturing, as export figures continue to hold up, despite the sluggishness seen in other leading export-oriented economies in Asia. Despite a sharp slowdown in its major export partners, including China and export countries, broader-based production made Vietnam export industries less vulnerable to these external headwinds. Business confidence indices, which dipped in Q1, had recovered by Q3, and exports were 9.6% up on the year in Q1-Q3.

Moreover, the Trans-Pacific Partnership (TPP) deal was finalised in October 2015, with eleven other countries including the US and Japan agreeing to reduce tariffs on a wide range of products that Vietnam now produces competitively. The TPP will facilitate Vietnam's access to other large markets which in turn will offset China's slowdown.

The TPP promises a boost to food exports (reviving agricultural growth, which slowed to 2.1% in the first nine months of the year, despite some risks for smaller producers), and another burst of textile/clothing export growth. This will in turn allow annual export growth to pick up to over 10% in 2016 after the slowdown to 9% this year.

There is no question, as and when the TPP takes effect, the benefits for Vietnam will be significant.


Indonesia (Jakarta)

Foreign capital is keen on investing in Jakarta Prime Retail and Residential, where strong rental growth in recent years have driven growth in capital values, which in turn attracted investor interest. This probably served as a pull factor for Lippo Malls Indonesia Retail Trust ("LMIRT") to acquire two retail malls in Indonesia for a combined sales value of US$79 million in 3Q15. Another noteworthy deal was Pacific Century Premium Developments' land acquisition late last year to construct the PCPD Office Tower. As growth in retail rents decelerates as it shifts into the next phase of the property cycle and upcoming office supply exerting downside pressures on office rents, on top of a relatively weak economic growth and a depreciating rupiah, JLL has downgraded its forecast in the property market outlook for Jakarta in 2015.


Philippines (Manila)

Foreign capital has also been chasing after prime office assets in Manila. There has been sustained foreign institutional investor interest in this sector in recent years, which have supported capital value growth and yield compression. For example in 2014, Asian Carmakers Corp entered into a joint venture with Century Properties to develop Asian Century Center (to be completed in 2017). This deal reflects interest of foreign capital in Manila's office market as well as Century Properties' efforts to diversify away from residential development to capture yield compression in the office segment. Moreover, with the formation of the ASEAN Economic Community, investor interest is projected to widen in Manila's office investment properties and support the rise in capital values.


Malaysia: Against the backdrop of the ongoing negative sentiment on domestic issues relating to the controversial investment fund IMDB, China economic slowdown, plunging oil prices and MYR losing more than 10% of its value against the USD, is it all gloom and doom for Malaysia's property market? Not really.

Having been tagged an "affordable" market for some time; there is always an investment appeal for quality assets in Malaysia. The weakening of the Ringgit adds to this appeal. While volatile currency drives investors away over the longer term, we think that the sharp depreciation of the Ringgit is due to sentiment, rather than economic fundamentals. Markets generally believe that the Ringgit is undervalued and it should trade below MYR 3.8 to USD1, a level it was pegged at in 1998. - See more at:


2.    Why should investors consider property in emerging markets over developed ones?
 Real estate investments in emerging markets are perceived as investments with higher risks yet higher-potential return. Investors are willing to take part in joint venture projects / club deals in these markets, where they team up with local developers who require capital support – in order to have an early foothold in these markets which will experience exponential growth in the future when their economies take off.

Moreover, these emerging markets have underlying growth drivers which include population growth and accelerating urbanisation rates which allow investors / developers to leverage on.

Whether you are looking to buy a residential apartment, invest in large scale development projects or acquire income producing investment opportunities the fundamentals remain the same when looking to invest in a developing market. Take time to understand the country and market dynamics including the legal system. Both major cities are currently experiencing considerable of investment into infrastructure at present therefore some areas will stand to benefit from increased connectivity, which in turn will increase property values. If you are a looking to buy residential property, always consider developers with a strong track record. As with any real estate investment location will always be an important factor.

​3.    What are the typical risks involved when it comes to property investment overseas?
 Currency risks – e.g. Malaysia: against the backdrop of the ongoing negative sentiment on domestic issues relating to the controversial investment fund IMDB, China economic slowdown, plunging oil prices and FED phasing in rising interest rates in the near future, MYR losing more than 10% of its value against the USD. An investor who is invested in the Malaysian real estate has to bear currency risks when income / capital returns are converted back to their home currencies.

In the case of Vietnam, potential hurdles an investor will face include:

  • Restricted access to credit for real estate development
  • Bureaucratic systems, especially regarding land disputes, continue to affect the business environment, blocking the fast completion of real estate construction projects. This can be time consuming and costly.
  • Red tape around land ownership, although new laws have recently been introduced to allow for foreign ownership of property.

     JLL Vietnam sees great potential in the long-term economic development of Vietnam´s real estate sector, as the market becomes more mature and evolves from a frontier market into an emerging market the legal and bureaucratic framework will improve which will lead to considerable upside in real estate.

4.    Is now a good time to start investing in emerging markets real estate, given the uncertainty over the global economy?

Despite global uncertainty, Vietnam has performed well in the past 12 months. The stock market is up 12% in 2015, inflation is stable at +/-3% and interest rates are steady at 8-9%. 

The property market in Vietnam experienced a downturn for the past 4/5 years as the market however, in the last 12 months the market has rebounded and we are witnessing an increase in positive sentiment and overall confidence. Property prices in Vietnam remain affordable with a typical 2 bedroom, 70SQM residential apartment within 10-15 mins drive of Ho Chi Minh City CBD selling for $1600-2000 per SQM, equating to $112-140,000.00. When compared to other major cities within the region we believe there is considerable upside. 

5.    What is the real estate market like in Vietnam?  

Domestic Investors

Local developers have shown greater activity in Vietnam's real estate market. The largest Vietnamese real estate developers are Vingroup Joint Stock Company (Vingroup JSC) and Novaland Group.

Vingroup JSC is Vietnam's largest listed real estate developer and manager, with a market cap of around US$3.4b.  Vingroup's portfolio of 45 real estate projects spans across many sectors in the real estate market, including: (1) Vinhomes luxury apartments and villas (2) Vincom and Vincom Mega Mall shopping centers (3) Vincom Office space for lease (4) Hospitality e.g. 5-star Vinpearl Resort, upscale Vinpearl Luxury resorts, Vinpearl Land amusement parks and family entertainment centers, Vinpearl Premium resorts and villas, and Vinpearl Golf Club (5) VinMart supermarkets, VinMart+ convenience stores, VinFashion, VinDS chain of specialty retail stores, VinPro electronics and appliance stores, and Adayroi comprehensive E-commerce platform.

Novaland Group began its venture into real estate in 2007 with its first project, the US$500m Sunrise City on Nguyen Huu Tho Street in District 7. Its real estate business focuses on mid to high-end segments of residential apartment complexes and landed property.


Foreign Investors

Vietnam is becoming a more attractive location for foreign capital in the medium term compared to several of the other Southeast Asian countries. Transaction data from Real Capital Analytics (RCA) also captured this increase of foreign interest as several private equity funds have allocated capital to Vietnam in a bid to increase their presence. For instance in 2Q15, a consortium led by Warburg Pincus, the US private equity firm, had injected an additional $100 million in Vincom Retail, the country's largest shopping mall owner and operator in 2Q15. In the same quarter, Gaw Capital Partners acquired four assets across multiple asset classes from Indochina Land by at the price of US$106 million, together with their local joint venture partner, NP Capital. Gamuda Land has also acquired a 40% stake (US$64.1 million) in Celadon City, a modern township project initiated by the Sacomreal, Thanh Thanh Cong (TTC) and An Phu Gia joint venture. 

There are indirect approaches into Vietnam's real estate as well. Real estate investment funds (REIFs) have been officially permitted in Vietnam since September 15, 2012, when Decree No. 58/2012/ND-CP of the government providing for the implementation of the Amended Law on Securities came into force. These REIFS allow foreign individuals / institutions to participate in the Vietnam's real estate market. A REIF must maintain 65 percent or more of its total asset value in real estate. The remaining portion of the asset value can be invested into valuable papers, securities and government bonds. In addition, REIFs are not allowed to directly develop any real estate development projects, provide any financing or guarantee for any loan.

 Sectors Grade A Office.jpg

Sectors: Grade A Office

HCMC and Hanoi cities' rental values are bottoming out and future growth is expected.

Upcoming completions include Vietcombank Tower which will add 37,000 sqm to office stock in 2H15, while Saigon Centre phase 2 is expected to contribute an additional 32,000 sqm in 1H16.

The office market is enjoying stable demand and JLL believes that strong economic growth will result in greater demand over the next five years, as the expansion of the tertiary services sector across much of the country increases office space requirements. Growth of the tertiary services demand outstrips supply, so that we expect rental rates to rise. With a limited pipeline of new projects at present, we expect to see rental rates increase in the early part of 2016, as demand will continue to outstrip available supply.

6.       How easy is it to invest in Vietnam property and what are the rules like for foreign buyers? What are the potential returns like? Any specific areas or notable projects that investors can look at?

Operational Requirements for Foreign Corporations

Under the Law on Investment 2014, all foreign investors conducting business activities in Vietnam must undertake their investment in accordance with the Law on Investment. A foreign investor investing in Vietnam for the first time in the form of establishment of economic organisation must have an investment project specifying, inter alia, the location of the project and the need for land use proposal. The licensing authority evaluates the feasibility of the investment project for the issuance of an Investment Registration Certificate (IRC) to the foreign investor itself, rather than an Investment Certificate to the foreign invested enterprise (FIE), as provided under the Law on Investment 2005. If a project falls into the criteria of important projects, then it needs to seek in-principle approval before issuance of an IRC. 

The Law on Investment 2014 classifies three types of projects subject to in-principle approval, comprising projects of the National Assembly (NA); projects of the Prime Minister (PM); and projects of the Local PC.

After the foreign investor has been issued with an IRC, a newly established FIE must register for issuance of its

Enterprise Registration Certificate (ERC), a tax code and seal with the relevant departments of the Local PC for its full and lawful operations. The FIE can then enter into the land lease agreement with the provincial people's committees or infrastructure developers.

There are three methods in which a foreign corporation can participate in real estate business activities and/or acquire land use rights in Vietnam:

  • Establishing a wholly foreign-owned entity in Vietnam, whereby the project entity may:
    • Enter into a lease agreement directly with the state authority for the duration of the investment project, with rent being paid annually or on a lump sum basis
    • Enter into a land allocation agreement directly with the state authority in the case of implementation of investment projects for the construction of houses for sale or for a combination of sale and lease
  • Establishing a joint venture with a Vietnamese entity that leases land from the state and subsequently contributes the value of the land use right to the joint venture
  • Acquiring shares or capital contribution in a Vietnam domiciled company that has been engaging in real estate business activities and leased/allocated land from the state authorities


Recent Changes to the Law on Housing and Law on Real Estate Business (November 2014)

The amendments made to the Law on Housing and the Law on Real Estate Business in November 2014, which came into effect in July 2015, had a quick and positive effect on Vietnam's real estate market. The changes made to the Law on Housing significantly relaxed the residential ownership rules for foreigners, although some limitations remain.

Meanwhile, the amendments made to the Law on Real Estate Business have introduced stronger safeguards for the industry as a whole. Overall, confidence is noticeably returning to the market, and both buyers and sellers have stepped up their activity in recent months.

Investors can currently enjoy returns of 6-7% on residential property and 9-11% on commercial, depending on location, age and quality of building and covenant strength of tenants. JLL are currently marketing a number of opportunities ranging from development land, income producing assets, Hotels, Healthcare parks

7.    How easy is it to get money out? When should investors make an exit?

​​There are no restrictions for foreigner investors taking money out of the country provided that the correct procedures are followed when an investment is made and all necessary tax requirements are fulfilled upon selling the property.

Exit strategy for any investment is crucial and will depend on individual specific requirements.  If the investment is part of a diversified portfolio and will form part of a pension plan then usually a medium to long term hold strategy should be considered.  If the investor, has some spare cash and wants to explore investing in an emerging market then maybe a short/medium hold is more suitable. One important consideration to remember when investing in emerging markets is the property cycle tends to be shorter than more mature markets. For example we have witnessed soft market conditions in the past 4-5 years, so it is reasonable to assume 4-5 years of growth.