UKVFTA brings more investment to Việt Nam real estate market

September 23, 2022 - 09:51
With a dynamic industrial scene, Việt Nam may see players in industrial data centres or logistics. However, the focus may to largely be on services and financial services.
An apartment complex in HCM City. UK investors put about $1 billion investment in 23 property projects in Việt Nam. — VNA/VNS Photo Hồng Đạt

Hoàng Hà

HÀ NỘI — Việt Nam's real estate market is seeing more investment from the UK thanks to the UK-Việt Nam Free Trade Agreement (UKVFTA).

The UK is known for consulting services, especially in the real estate industry. Real estate is not only the choice of many investors but also a safe and very effective investment channel, according to Savills Việt Nam, a UK real estate consulting provider in Việt Nam.

"This agreement is likely to promote the expansion of UK businesses in Việt Nam, and we expect interest from companies in data centres, high-tech manufacturing, financial services, high-tech services and possibly pharmaceuticals too," Matthew Powell, director of Savills Hanoi, told Việt Nam News.

"These businesses will demand real estate across the country, which could range from manufacturing plants or office space. There has been an increased interest and demand from UK companies. Việt Nam has been very much on the agenda and the two countries continue to have investment conferences."

"We could see institutional investors on the commercial market with interesting Grade A office properties like Techcombank Tower 6 Quang Trung."

With a dynamic industrial scene, Việt Nam might also see players in industrial data centres or logistics. However, we expect the focus to largely be on services and financial services, he said.

In addition, "we expect that investment from the UK will be related to services, pharmaceuticals, engineering specialists, high-tech manufacturing, aviation, financial services, and other export industries from the UK."

Although Asian countries like Singapore and South Korea lead investment, there are several active multinationals from the UK in Việt Nam, especially in the financial services sector. For example, Standard Chartered launched its new head office in Hà Nội at Capital Place in June.

"Currently, interest is largely Asian based, but we could see a rise in UK curiosity," Powell said.

On December 29, 2020, the UK and Việt Nam signed the free trade agreement (UKVFTA) with an aim to pave the way for continued and increasing trade between the two countries. The agreement came into effect on May 1, 2021.

As can be seen from previously signed agreements, participation in trade agreements can bring great benefits to the investment market in Việt Nam, according to Cushman & Wakefield Vietnam. A good example is the US$1 billion capital flow from Denmark for the Lego factory project in Việt Nam, after the EU-Việt Nam Free Trade Agreement (EVFTA) came into effect.

A view of the Vietnam - Singapore Industrial Park II (VSIP II) in Bình Dương Province. This province expects to attract more foreign investment after many FTAs came into effect, including UKVFTA. VNA/VNS Photo Vũ Sinh

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Hiếu Lê, Senior Director, CBRE Vietnam, said: "CBRE has seen increased foreign direct investment from Europe manufacturers to Vietnam, following the EVFTA (between Việt Nam and EU) comes into effect."

Countries participating include German and Demark. The two most notable and recent projects from LEGO and Pandora (both from Denmark) are good examples of this trend.

New investors from Europe are looking to diversify their production away from China, especially as Việt Nam's Government has committed to sustainability and green energy. Both committed to VSIP3 in Bình Dương following government commitment to provide solar power to these two facilities, Hiếu said.

German investors, meanwhile, are very active in the automotive and precision mechanics industries. They are actively sourcing land for their expansion in Vietnam to accommodate a rising local and regional demand.

"This investment from the EU continues to maintain its momentum in 2023," Hiếu said.

"Thus, we have high confidence that the UKVFTA will also help attract more investors from the UK to Việt Nam," Trang Bùi, Country Head of Cushman & Wakefield Vietnam, told Việt Nam News.

"The UK's property market is mature and established, their investors are thus more willing to deploy capital on assets that are already in operation, and have generated profit, with high stability and low risks," Trang said.

"This strategy can seem different from investors from other regions in the world. In general, cross-border investors always need some time to adjust capital flows and seek out the right opportunities in developing countries like Việt Nam."

"To maximise the potential benefits of the UKVFTA, Việt Nam needs to constantly change and improve policies and business environment according to strict requirements posed by foreign investors. Through this process of continuous improvement and adaptation, the country's competitiveness will rise to new heights on the global investment map," she said.

As of May 2022, the UK has a total of 462 investment projects in Việt Nam, with a total registered investment capital of $4.15 billion.

UK investors invested the most in Việt Nam's manufacturing and processing industry with 120 projects registered investment capital of nearly $1.6 billion, accounting for nearly 40 per cent of total investment capital.

The second was the real estate industry with 23 projects having an investment capital of $1.04 billion, accounting for 26 per cent of the total investment capital.

The UKVFTA will pave the way for a new wave of foreign direct and indirect investments from the UK in Việt Nam in the former’s areas of strength, such as renewable energy and environmental technology. As of today, there are no specific details revealed on investment protection in the trade deal. However, it is expected that clauses for investors may be similar to those of the EVFTA, a bilateral trade agreement that Việt Nam recently concluded with the EU. — VNS