The Ho Chi Minh City housing market has thrived since Vietnam joined the World Trade Organization in early 2007 while there has been a wave of foreign investment in property, a study has found.
|A residential complex being built in District 7, HCMC. A study has found that Viet Nam’s WTO entry had a major positive effect on the city property market (Photo: SGGP)|
The study, on the impact of WTO entry on the city’s realty market done by the HCMC Institute of Development Studies, said 50 percent of all foreign investment in the city in the last two years has flowed into realty.
Foreign firms invested US$1.5 billion in 24 real estate projects in 2007, accounting for 50 percent of all projects and investment in the sector, and double their cumulative investment between 2000 and 2006.
They rose to US$3 billion in 45 projects last year.
In fact, most major projects and five-star hotels are fully or partly invested by foreign firms.
Though domestic investment is limited, the sharp increase in foreign direct investment in the sector would make an important contribution to the city’s urbanization and infrastructure improvement.
The country’s WTO entry has helped mobilize funds for developing housing projects. In 2007 23 housing projects were completed -- including Cantavil, Garden Plaza, Hoang Anh Gia Lai 1, Botanic, and Tanda Court -- with 6,400 apartments.
Work began on a further 26 buildings with 12,000 apartments that year.
Last year 31 buildings, including Saigon Pearl, Panorama, Hung Vuong Plaza, Phu My, Garden Plaza 2, and Hoang Anh Gia Lai 2, were completed.
Forty more are expected to be finished in 2010.
The study warned, however, that the flow of such a large volume of FDI into the property market causes certain problems -- for instance, it could create a trade gap since investors have to import materials for construction.
Moreover, such projects do not contribute to exports while repatriation of profits by the investors would have an impact on the foreign exchange situation.
Large foreign and local investment in the property sector caused prices to skyrocket and exacerbated speculative activities, sending bank lending soaring.
While many new buildings have up, infrastructure remains poor, causing traffic jams and other problems.
This year is expected to be a bad one for the realty market, with commercial buildings and foreign-invested projects stalling due to the global crisis.