The US-China trade war has accelerated industrial growth thanks to tariff related relocation and Vietnam also heads Savills recent World Nearshoring Index as global supply chains are being reappraised.

The investment environment appeal is underpinned by one of the most attractive tax regimes in Asia. The next Communist Party Congress is in early 2021 which will see national development goals to 2050 refined and reinforced. The Government is determined to see Vietnam lead the post-pandemic recovery; GDP growth of 3.3% in the first three quarters suggests it is well underway.

Vietnam already has 13 free trade agreements and the most recent, with the EU, is expected to be the most influential growth and export driver. More than 60% of the population is of working age and while the large rural population provides competitively priced labour for industrial zones, a national skills development plan is underway to support a transition to higher value manufacturing.

At 6.3% of GDP, Vietnam has the highest proportional infrastructure investment in South East Asia. Major projects, such as the new Ho Chi Minh City airport at Long Tan, are increasingly funded through Public Private Partnerships (PPP). The Asian Development Bank estimates that to 2025, $16.7 billion per annum is needed to finance infrastructure development, while the World Bank forecasts up to $25 billion per annum. Clarifying legal frameworks to allow increased private investment is expected to attract more funding to such projects.

Industrial property growth is being driven by increasing foreign direct investment and wage growth is driving interest in affordable property, although high land prices are limiting supply. Estimated housing demand from 2020 to 2023 is more than 500,000 units with pipeline developments only satisfying up to 40% of this demand. This substantial shortfall and rising GDP per capita implies demand will increase significantly ahead of supply. Urbanisation is now around 35% and, increasing by an average 1.8% each year, is expected to be 43% by 2025.

Tourism remains deeply affected by the pandemic but has been a growing contributor to the economy. China, South Korea and Japan account for 60% of arrivals so – as these nations are recovering swiftly from the pandemic, Vietnam tourism should recover sharply too.

The combination of more offshoring, rising personal wealth and recovering tourism, all backed by a business-friendly government and strong infrastructure spending, bodes well for the Vietnam real estate market in 2021 and beyond.

Further reading:
Savills Vietnam