Last week, it was widely reported that work could start on a Trump Tower in Ho Chi Minh City as soon as next year. However, Vietnam’s real estate sector is not flush with cash, and this could make it challenging to get this project off the ground.
Work could start as early as next year on a US$1 billion Trump Tower in Ho Chi Minh City, it was reported last week.
This announcement came during a trip to Vietnam by executive vice president of the Trump Organisation and the son of the current American president, Eric Trump.
Trump had been in the country for the groundbreaking of another Trump-branded project just outside of Hanoi, a resort and golf course with a US$1.5 billion price tag to be completed in partnership with local industrial real estate developer Kinh Bac.
Afterward, he had travelled on to Ho Chi Minh City, where he reportedly toured the site for a proposed Trump Tower.
However, despite the hype this generated, there are a lot of questions that still need to be answered for this to be a realistic proposition.
In particular, given the current state of Vietnam’s real estate sector, how will it be paid for?
Notably, it’s still early days when it comes to the tower; however, the resort and golf course project, though not officially confirmed, looks to be like typical Trump developments in most other parts of the world.
That is that the Trump Organisation will license Kinh Bac its brand and maybe provide management services for a fee. Kinh Bac, on the other hand, will cover the costs and the build.
Presumably, its tower project would be something similar.
Kinh Bac’s total assets, however, were only worth around US$1.7 billion at the end of 2024, with its average annual post-tax profit for the last four years being only US$45.31 million.
For its part, it has said it will contribute just shy of VND 6 trillion (US$229 million) to the resort and golf course, however, this means the company still has a lot of capital to raise across both projects.
And this could be challenging.
Many of Vietnam’s banks, for example, are already heavily exposed to real estate.
After the bond market froze-up at the end of 2022 on the back of several high-profile frauds, Vietnam’s banks were left to move in to provide the funds the real estate sector needed to keep moving.
Moreover, the regulatory reforms made to the corporate bond market to prevent future crisis – credit ratings requirements and limiting buyers to institutions and ‘professional investors’ only – have meant a safer bond market, but less corporate bond capital flowing into housing.
Furthermore, before 2022, it was common for people to buy their homes off the plan and pay a decent part of the total costs up front.
These funds, however, were often used to buy more land and start new projects instead, relying on continuous inflows from new buyers to finance ongoing developments, in a pyramid-type structure.
As a result, when capital markets froze, projects could not be completed, with buyers left out of pocket and without their prepaid homes. This hit consumer sentiment and trust in the sector hard.
This was also subjected to regulatory reform in the aftermath, with developers limited to taking no more than a 5 percent deposit, with further payments tied to progress not exceeding 50 percent of the total cost until a project is completed and the keys are handed over.
That is to say, selling units off-the-plan no longer provides the big sums of capital that it used to.
This real estate turmoil has spilled over into international money markets, too.
One of Vietnam’s biggest real estate developers, Novaland, for example, has repeatedly defaulted on its international debt obligations.
Moreover, Vinhomes, Vietnam’s biggest real estate developer, received a ‘junk’ rating for its debt earlier this year.
Notably, this was mostly attributed to its connections to sister company VinFast, however, this speaks to the complexities of investing in Vietnam’s real estate sector – the spider webs of companies and connections some of these firms have built can make it difficult to do an accurate risk assessment.
And investor sentiment still seems to be cautious.
Vietnam’s key real estate stock index, the VNREAL, peaked at 2,088 points in January of 2022 but plummeted to less than 1,000 points by July that year, where it has mostly stayed bar for a month or two here and there.
Furthermore, not being able to access foreign funds means there are a lot of real estate firms competing for limited local investor cash.
Adding to that, Kinh Bac is an industrial real estate developer that lacks experience in either golf courses and resorts or inner-city towers. Whereas it may be able to outsource skills and experience, a US$1 billion tower is a sizable project, particularly in Vietnam, for a first attempt.
Moreover, Hanoi and Ho Chi Minh City are both pockmarked with unfinished construction projects that have run out of money. Saigon One in the heart of Ho Chi Minh City, for example.
This then poses the question, is a new Trump Tower currently the best investment that can be made right now?
But, of course, there are other factors at play.
If these Trump projects are believed to be effective at currying favour with the Trump administration, as it has been suggested they are, then there is every chance the government could step in.
There has reportedly already been high-level intervention to speed through project approvals, and if the government were to direct banks to fund the project, it would not be unusual. State intervention in the banking industry is rife, with government leaders often pressuring banks to lend more and keep interest rates low.
Moreover, Vietnamese people have historically been partial to Trump for his bombastic attacks on China.
And in this context, the Trump name on the project may also drive interest (Although sentiment, admittedly anecdotally, does seem to have shifted since the “reciprocal tariffs” were announced).
So, where does that leave it?
Vietnam’s real estate sector investment environment is very complex, and raising capital right now is challenging. That is to say, on its merits alone this project would likely struggle to grow legs.
However, while Vietnam’s property sector fundamentals may not support a US$1 billion Trump Tower right now, geopolitical incentives, as opposed to market logic, may be enough to get it done.