Sustained interest in real estate M&A

15:00 | 24/01/2019
Mergers and acquisitions in the real estate sector remained strong in 2018, with foreign direct investment volumes continuing to pour into the country at ever greater volumes.
sustained interest in real estate ma

The mergers and acquisitions (M&A) scene in the Vietnamese real estate market in 2018 witnessed many large-scale transactions with the total value surpassing the $1 billion mark. According to experts, Vietnam is a promising market for M&A at least for the next five years.

At the beginning of this year, the M&A market was active with a range of transactions by outstanding names such as Singapore’s CapitaLand, Frasers Property, GIC, Japan’s Nomura Real Estate, and especially many Vietnamese investors which have acquired land plots and projects from foreign investors.

According to experts, the reason why the Vietnamese real estate market continues to attract foreign investment is that the country is located in a good geographical position in Southeast Asia and the country is having high demand for real estate. The occupancy rate of all real estate segments in Vietnam are usually higher than that of regional countries.

Vietnam also has a high and stable GDP growth rate, which is consistently higher than that of most regional countries.

Dominic Scriven, executive chairman of Dragon Capital, the scale of the M&A market in Vietnam is now equal to those of Indonesia and Malaysia.

“I think that the scale of M&A in Vietnam could surpass these two markets in the coming years,” he said at the Vietnam M&A Forum in August 2018.

Real estate remains among the three sectors attracting the most foreign direct investment (FDI) to Vietnam. South Korea, Japan, Singapore, China, and Hong Kong are the five largest real estate investors in the country.

Japanese investors are now aiming to pour $9-10 billion into Vietnam over the next few years, mostly into infrastructure development and real estate.

Troy Griffiths, deputy director of Savills Vietnam, said that foreign investors remain very interested in the Vietnamese property market. Much of the capital pouring into the country came through M&A deals.

“We can see that M&A activities across the region have been pretty hectic. The listed market has been particularly active, with over $1 billion collected through listings on the Vietnamese stock exchanges in the first quarter of 2018,” Griffiths said.

Moreover, the tightening of financial policies for the real estate sector as well as the increased control of the State Bank of Vietnam over non-performing loans have also encouraged domestic investors to look for new financial sources, including M&A, Griffiths said.

“Hundreds of millions of dollars are waiting to be invested in Vietnam, mostly in the residential, office for lease, and hotel segments, as well as in industrial zones. The stable development of the economy is pulling investment from Japan, South Korea, and China to Vietnam, and real estate remains one of the key sectors,” he added.

According to figures released by the Foreign Investment Agency under the Ministry of Planning and Investment, real estate was the second-biggest area in attracting FDI in 2018, including new licences, capital increases, and stake contributions, with slightly less than $6.62 billion.

By Bich Ngoc

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