Merger and acquisition (M&A) activities might potentially occur at slower pace and lower frequencies in the remaining two quarters of 2019 as a result of the scarcity in clean and clear projects readily available to invest.
According to real estate and investment management services provider JLL, as there have been investigations carried out by Vietnamese authorities targeting property projects that were allocated inefficiently in the past, either not through formal bidding process or sold at cheaper price than market price, profits for property developers and investors in the short term would be affected.
With some real estate projects are put on hold for investigation, it might potentially lead to temporary shortfall of projects readily available to invest.
“We expect that ultimately it would help the sector overall as transparency would improve, ensuring fair practices in the market and boosting both foreign and investors’ confidence to invest in Vietnam’s real estate sector,” noted Khanh Nguyen, senior director of Capital Markets at JLL Vietnam.
Meanwhile, as clean and clear land bank for residential and commercial projects is harder to find in the CBD or in well-known areas in the city, JLL observes a number of investors and developers looking to expand their footprint towards other neighbouring provinces.
Notable developers include Novaland with their Aqua City township project in Long Hung, Dong Nai province, as well as Nam Long with Dong Nai Waterfront City (DNWC) and its acquisition of Dai Phuoc Paragon, a 45-hectare township located in Dai Phuoc Island, Nhon Trach, Dong Nai province last year.
“Although there are a number of new developers and investors who are looking at these emerging areas, we note that the majority is still dominated by local or foreign groups who have been long-established in Vietnam,’ said JLL.
As US-China trade tensions have escalated recently, the trend of manufacturing shifting away from China to the Southeast Asia region will continue to benefit the whole region, including Vietnam.
There is a continued strong interest in industrial and logistics assets with both incumbent and new investors are actively looking through joint ventures with local industrial developers and/or acquisition of land bank and operating assets.
The lack of high specification, modern logistics warehouse space, and strong demand from regional occupiers are supporting the potential growth of this industry.
Quality of the assets, rental growth, deal size and remaining land tenure are the key crucial factors for investors to determine their investment decisions.
“We expect foreign investors to continue showing their keen interest and strong commitment in Vietnamese real estate market, and that the market still has the potential for growth. Although the M&A activities might potentially occur at slower pace and lower frequencies in remaining two quarters due to lack of ‘clean’ and ‘clear’ projects readily available to invest, we forecast that the current investigation would ultimately improve transparency in the market. This would ensure Vietnam’s competitiveness and attract even more investors from the region,” commented Nguyen of JLL.
Over the course of the first two quarters, Vietnam witnessed a total registered FDI streamlining into real estate of $1.32 billion, a decrease by 76 per cent on-year. In the first half 2018, there were $5.54 billion flowing into the nation, with large investments initiated by two major projects of Smart City in Hanoi with total investment capital of $4.1 billion by Sumitomo Corporation and Laguna project in Hue with an additional investment of $1.1 billion made by a Singaporean investor.
Registered FDI into real estate for the period is still higher than those recorded in the same period of 2016 and 2017, at approximately $0.6 billion and $0.7 billion respectively.
Notable property projects in the first half of 2019 consist of Keppel Land’s divestment of the DNWC project. Keppel Land, accordingly, is divesting 70 per cent interest in DNWC to Nam Long Investment Corporation with for VND2.313 trillion (approximately $100 million). Both Keppel Land and Nam Long will jointly develop a 170-hectare residential township located in Long Hung, Dong Nai Province.
Keppel Land has also lately announced its acquisitions of three land parcels in Ho Chi Minh City. Through its wholly-owned subsidiary, Keppel Land has entered into a conditional sale and purchase agreement with Phu Long Real Estate Corporation to acquire 60 per cent interest in the three sites with aggregate consideration of VND1.304 trillion (approximately $56 million).
The partners plan to develop some 2,400 premium apartments with ancillary shophouses, which will offer around 14,650 square metres of commercial space, on the sites spanning over 6.2 hectares in Nha Be District. The total development cost for the project, including the land cost, is expected to be over VND7.4 trillion (approximately $320 million).
In addition, Lotte FLC JSC, a joint venture between FLC Group and Lotte Land (a subsidiary of Lotte Group), has been formed with a chartered capital of VND556.5 billion ($24.1 million) to operate in the field of real estate, according to National Agency for Business Registration. Lotte Land will own 60 per cent of Lotte FLC and the remaining stake is held by FLC and its affiliates.
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