Independent Variables

GDP(market size) GDP in the location. The data is collected into 2 period 2005-2008 and 2009-2012.

Vietnam General Statistics Office (In million USD) (+)

Pop density Population density in the location.

The data is collected into 2 period 2005-2008 and 2009-2012.

Vietnam General Statistics Office (people/km2) (+)

3.3.1 Dependent Variable

Foreign Real Estate Investments (FREI): FREI is the direct investment by foreign individuals or firms in the host country’s real estate sector by provinces across Vietnam.

The data on FREI is average figures obtained from Vietnam General Statistics Office in two periods 2005-2008 and 2009-2012.

3.3.2 Independent Variables

Infrastructure: It cannot be denied the fact that infrastructure plays an important role in the investment decisions of FDI inflows not only in the field of real estate. There have been many previous studies indicate that for developing countries like Vietnam, the difference in infrastructure between the provinces is significant. Infrastructure investment always requires large capital and is often public investment. With foreign investors in the real estate field, it is always a hot field and requires high profit;

therefore, to minimize capital investment and risk, they tend to select the area with

complete infrastructure in level high. Ramasamy and Yeung (2010) showed that countries which have well-developed infrastructure attract higher levels of FDI in service sectors (including real estate). Renaud (2010) argued that infrastructure development was one of the important factors that attract foreign investors into Dubai’s real estate sector. Jones Lang LaSalle’s (2009) report also noted that established infrastructure was one of the main factors for long-term investors when they assess any potential real estate transaction in the MENA region. Similarly, Chin et al. (2006) found that level of public infrastructure was one of the important factors for property investors in Southeast Asian cities’ real estate markets. Lall et al. (2003) found that the physical infrastructure is a significant determinant of FDI in the Caribbean and Latin America regions. Harry and Xiaolun (1995) in the research in FDI inflows in China have recognized the provinces with complete infrastructure systems often receive great favor of foreign investment flows. He et al., (2009); Jiang et al., (1998); Zhu et al., (2006) also stated the Location factors have great influence on Frei, in which infrastructure is always the first priority. Therefore, it is expected that infrastructure is a positive and significant determinant of FREI. In order to reflect the level of infrastructure, this study collected data regarding total investment in infrastructure in the province from 2005-2012, the data were averaged at 2 periods in 2005-2008 and 2009 - 2012.

Market Size - Gross Domestic Product (GDP):

Another important factor, which investors always consider, is the market size. Harry and Xiaolun (1995) agree that GDP may point out fairly accurately the level of market development. GDP generally reflect the economic development of the country – or in my case in province. It reflects the province’s potential demand and thus gives a good estimate of the province’s market size. In this regard, GDP is usually an especially important factor for foreign investors seeking to sell as well as to produce in a local

market. Harry and Xiaolun (1995) conclude that GDP contributes the most essential factor for international investor’s decisions when he research China‘s FDI inflows. Kok and Ersoy (2009); Luiz and Charalambous (2009) agreed that location factors play an important role in selecting the area of real estate investment, including market size. Lai and Fischer (2007) collected data from foreign investors that invested in Taiwan’s property sector during 1997–2003. They found that the ranking of priorities for foreign real estate investment firms is led by economics, policies, market sizes, and society and product factors respectively. He et al. (2009) argued that a higher GDP would make a higher demand for properties, hence attracting more FREI (because more local demands and larger market size would create higher incomes for foreign real estate investors).

Rodríguez and Bustillo (2010) also showed that GDP has the strongest effect on FREI in Spain. Falkenbach (2009) documented that market size is a significant factor in attracting foreign investors to the host country’s real estate market (because market size reflects availability of investment possibilities). Similarly, in their study on OECD countries, Gholipour and Masron (2011) found that larger market size attract greater amount of FREI in these countries. The data collected regarding GDP were average figures at 2 periods in 2005-2008 and 2009 - 2012.

Population Density:

Population density is also a variable has been studied quite common in the previous researches. Especially in the real estate sector, it plays the more important role. No one is unaware real estate production primarily to serve to residents around it, from office, residential, and commercial center to the resort. Obviously, higher population density, higher demand for real estate. Practice has proved over the world, the city has the high population density of is often high price in real estate. It could be mentioned names like Tokyo, New York, Shanghai, etc. Zhu et al. (2006) investigate Shanghai market,

conclude that even in the cities, investors tend to choose the area with high population density. The data were averaged at 2 periods in 2005-2008 and 2009 – 2012 in 34 provinces across Vietnam.

Landcost:

As some countries have political model similar, for example China, land in Vietnam is state-owned. Therefore, to calculate the land cost is a very complex issue. In my research, I have collected data of land cost of the provinces yearly. These are the data used as a basis for compensation and ground clearance. It is well known in Vietnam compensation and clearance work is time-consuming and most controversial, those works take long time even than construction work. In Vietnam, land prices in the central areas are much higher than the suburbs. In addition, land prices in major cities have high demand for real estate is often higher than in the surrounding provinces.

Raymond and Peter (2000), researching about residential property values in Hong Kong, has recognized that land cost account for a relatively large proportion of the sale price of this type of real estate. The data were averaged at 2 periods in 2005-2008 and 2009 – 2012 in 34 provinces across Vietnam.

Geographical Location:

As many countries, geographical location is likely to be important determinant effects on investment decisions. The inland provinces have the advantage of long-standing urban development; people have higher demand for housing and convenient transportation. Meanwhile, the coastal provinces have the advantage because the port is convenient for transport to a foreign country, and this province usually possesses beautiful beaches, an important factor for tourism business. In practice, in the coastal provinces, due to lower land prices and population density are often not high; therefore, the clearance work is easier and more convenient. Harry and Xiaolun (1995) in study of

FDI inflows in China have found that coastal provinces have a large advantage in attracting foreign investment. Therefore, geographical location is an important variable used to evaluate the initial assumptions about the shift of real estate investment in Vietnam. I use dummy variable to reflect coastal location with the value 1, while others is 0.

Tourist:

As mentioned in the hypothesis of a shift of FDI inflows and asset structure of foreign investors, the last and foremost factor needs to be mentioned is tourism. To assess the impact of tourism on FREI, my research will use data on the total number of foreigners traveling each province, the data was collected in 2005-2012, and taking the average of 4 year periods. Rodriguez and Bustillo (2010) believed that the increased FREI raises the tourism in the host countries, as tourism is the step that follows acquiring a property in a foreign country. This can influence tourism when the previous investment in real estate is introduced. In other words, tourism and real estate have close correlations. He and Zhu (2010) showed that FDI in real estate is common in large cities, which has larger number of population, foreign investments and tourists. Gholipour and Masron (2011) examined the effect of tourism agglomeration (learning about the host location) on FREI in OECD countries. Rodriguez and Bustillo (2010) also concluded that the attractiveness of the host country as holiday destiny related to FREI.