1.1 Research Background and Motivation
The last decade has witnessed a strong growth in investment activities in general and in particular in real estate investment in Vietnam. It is the fact that the real estate sector has been one of the major drivers of the long lasting economic growth enjoyed in Vietnam in the recent past. Moreover, one of the components of the demand for housing in Vietnam has been the acquisitions of real estate by foreign investors. However, there are few studies intending to examine the determinants of Foreign Real Estate Investment (FREI), which in the Vietnamese case is more surprising.
In fact, in recent years, there has been fast growth in direct real estate investments and portfolio investments in the real estate securities. According to UNCTAD (2004), worldwide cross-border merger and acquisition sales in real estate increased from USD 4,984 million within 1988–90 to USD 40,640 million within 2001–03. Similarly, other FDI statistics reflect the recent dominance of real estate sector flows among other services FDI.
Existing economic literature suggests that FREI (like FDI in other services) will assist a host country’s economic development by injecting financial resources as well as provision of services in terms of lower cost and higher level of quality. In effect, it introduces additional competition, generates employment and brings technology (Arnold et al., 2006; UNCTAD, 2004; Golub, 2009). Moreover, FREI contributes significantly to the rapid globalization of metropolises and facilitates changes in the scene of urban development qualitatively (Wei et al., 2006; Wu, 2001). In addition, it is believed that the FDI inflows make the real estate industry in host countries perform well (Jiang et al., 1998). For example, He et al. (2009) argued that participation of
industry such as technology transfer, introducing recent practices and standards and injection of financial capital to the market. It is also believed that the increased FREI raises the tourism in the host country, as tourism is the step that follows acquiring a property in a foreign country (Rodriguez and Bustillo, 2010).
1.2 Problem Statements
Given the importance of FREI for host economies and consequently, a growing international competition in attraction of FREI, many scholars and policymakers have attempted to understand the factors that influence FREI. Various determinants have been identified that influence the location of investments for foreign real estate investors.
Theoretical and empirical studies have identified market size and growth, physical infrastructure, FDI in other sectors as some of the important determinants of FREI.
Bilateral trades, labor costs, exchange rate risks, property prices, tourism agglomeration, populations have been identified as additional influences that can explain FREI.
1.3 Objectives
The main purpose of the thesis to examine the relationships between 6 “Location”
factors (Tourists, Location, Land cost, Infrastructure, GDP, Population density ) and foreign real estate investments (FREI) in Vietnam. Moreover, the study also research about the shift in investment flows between four main categories: office, retail, residential and tourism. In addition, geographical factor are considered as a cause affecting FDI in real estate.
The information was collected from various sources about the real estate market in Hanoi and Ho Chi Minh City also provides an overview of the market in this period.
The rise and fall of prices for rent, for sale and the relationship between every single market are significant and will be analyzed in the next chapter. It can also be seen as a qualitative, predictions, creating a foundation for establishing hypotheses and analyze
the results of the regression model
1.4 Research Scope and Limitations
Rather than analyzing a broad range of determinants of FREI, this study focuses on the some factors of real estate market (for example, land cost, location, tourism, market size, population density and infrastructure). These aspects are then used to help identify those components which are the most important to foreign real estate investors. In fact, as far as we know, there has not been a systematic study to examine the effects of real estate market factors on FREI across Vietnam. I begin to fill these gaps by analyzing the relationships between real estate market factors and FREI for 34/63 provinces. My research will analyze the combined data from multiple sources, such as from the General Statistics Office and foreign and domestic reports.
This study based on the OLI paradigm and previous researches on the effects of Location factors on the investment decisions of MNEs in Vietnam real estate market.
There are 6 Location variables selected, which will be discussed in more detail in the next chapter, data were collected from 34 provinces across Vietnam. Regression models have been used to quantify the FDI real estate flow in Vietnam. From the result, we will have a clearer picture of the impact of these hypothesized variables as well as analysis of the shift of FDI inflow in the real estate sector in Vietnam.
1.5 Thesis Structure
Figure 1.1 Procedure of the research
Figure 1.1 shows procedure of this research. Base on the above steps, the thesis structure is as follows:
Chapter 1: Introduce the background, motivations, objectives, scope, limitations and thesis structure.
Chapter 2: In the second section a conceptual discussion is carried out, and the most significant hypothesis about the determinants for FREI are exposed after a review of the literature.
Chapter 3: In the third section, we describe the temporal trends of the figures, making apparent the macroeconomic relevance of FREI inflows in Vietnam. In addition, I specify two econometric models for the time period 2005–2012 taking into account the different points of view considered and report the empirical findings.
Chapter 4: In the fourth section, some concluding remarks are summarized.
Chapter 5: Finally, the fifth section contains conclusions and recommendations.
Conclusion and Suggestion Data Analysis
Data Collection and Arrangement Study of Methodologies
Literature Review Setting the Objectives
Topic Selection