Foreign direct investment (FDI) in the Vietnamese real estate market this year is expected to be the lowest in five years.

Investment has been slowing down since the beginning of the year, contributing to the market's serious shortage of capital.

Real estate has been the most attractive field in terms of FDI capital in the past few years, but such inflow is declining this year, according to the Foreign Investment Agency (FIA) under the Ministry of Planning and Investment.

Newly registered and increased capital in real estate totalled just over 464 million USD this year, ranking it fourth on the FDI-attraction list behind the processing and manufacturing industry, electricity production and distribution, and construction.

Real estate amounted to 3.7 percent of total FDI inflow to Vietnam in the last 11 months. At the end of the second quarter, it ranked second after the processing and manufacturing industry in FDI attraction.

FDI inflow to the property market peaked in 2008, reaching over 23 billion USD. Last year, despite the strong negative impact of the global economic crisis, FDI in the real-estate market was valued at more than 6.8 billion USD.

Singapore is the third-largest investor in Vietnam , but it has been focusing only on ongoing projects. Investors from the Republic of Korea are also concentrating on big and long-term projects that have already begun.

Experts said international companies have changed investment strategies because of the global financial crisis, which has contributed to the decline in FDI growth in the Vietnamese real-estate market.

In addition, the domestic market is facing many difficulties, namely low liquidity, a stall in transactions and tightened credit, all of which have made foreign investors cautious. This has also contributed to low FDI inflow, according to experts.

Moreover, the demand for apartments, offices and resorts, which foreign investors have traditionally favoured, has become saturated, and now has low liquidity.

The local property market is facing a serious shortage of capital, according to Savills Vietnam , a global real-estate service provider.

For this reason, project developers have been searching for new financial sources by either selling entire projects or entering into partnership with others.

Many project developers in Vietnam , who own large land areas, now want to sell parts of these areas to have capital to invest in other projects.

The vice president of the Asian Real Estate Association of America, David Tran, said investors should look for sources from outside banks, such as remittances, to save their property projects when the market lost liquidity.

Tran said if the legal environment and the law on tax for foreign investors are further improved; a large amount of remittances will flow into Vietnam from more than 4.5 million overseas Vietnamese./.