In the first three months of 2022, Vietnam's GDP grew by 5.031 TP3T. Registered foreign direct investment (FDI) capital in the Vietnamese market reached 3.2 billion USD. Disbursed FDI capital reached 4.42 billion USD, the highest increase in the past half decade and an increase of 7.81 TP3T over the same period last year.
After the manufacturing and processing industry, real estate is currently the sector receiving the second largest FDI capital in the past 10 years. Contrary to the predictions of some experts about the risk of a real estate "bubble", the real estate M&A market in 2021 and Q1 2022 is still bustling with a series of large deals, real estate businesses continuously acquiring more large land funds.
In early 2021, Vinhomes Joint Stock Company announced the acquisition of Dai An Urban Area in Hung Yen province, the eastern satellite area of Hanoi, a deal worth an estimated VND 3,100 billion (equivalent to USD 134 million). In Dong Nai, Nam Long Investment Joint Stock Company also completed the acquisition of 100% at the company owning the 170-hectare project in Dong Nai from Keppel Land. After joining Nam Long, the project has a new name, Izumi, developed by Nam Long and Japanese partner Hankyu Hanshin Properties with a total investment of VND 18,600 billion. Of which, Nam Long owns 65.1% shares and Hankyu Hanshin owns 34.9% shares.
In Q1 2022, the market also witnessed a number of outstanding deals in Ho Chi Minh City such as the "handshake" between Novaland and Tai Nguyen Construction Production Trading Company Limited to restart the Grand Sentosa project (formerly Kenton Node), an area of 11 hectares in Nha Be area. Similarly, in District 1, the Saigon One Tower building was renamed IFC One Tower managed by VinaLand Investment and Development Joint Stock Company. In Dong Nai area, the Swan Bay project with an area of about 200 hectares will continue to be developed by Phu Long Real Estate Joint Stock Company.
The total value of M&A transactions in Q1 2022 is higher than the total value of each year 2019-2021. The office segment accounts for 58% of total transaction value, while the industrial and residential segments account for 28% and 13%, respectively. Notably, Hanoi has the largest total transaction volume in the country, thanks to the transfer of the Grade A office building Capital Place (Ba Dinh, Hanoi) from CapitaLand Development to Viva Land with a total value of 550 million USD.
Ms. Trang Bui, General Director of Cushman & Wakefield Vietnam, commented: “The total office supply in Ho Chi Minh City and Hanoi is only approximately equal to that of Bangkok, mainly consisting of Grade B and C buildings; Grade A assets, which are sought after by FDI enterprises, are very scarce. Therefore, as soon as workers returned to the office after a long period of travel restrictions, it pushed office M&A transactions to the top position.”
During the period 2017-Q1 2022, investors' appetite is still mainly aimed at traditional asset classes including the housing market, development land, industrial, office and retail. Of which, 76% of housing transactions are concentrated in Ho Chi Minh City; while Bac Ninh, Dong Nai and Binh Duong account for more than 50% of industrial real estate investment; Hanoi owns 65% of hotel transactions.
According to Ms. Trang, “during the process of working with domestic and foreign investors, we have seen significant interest in developing real estate projects from apartment projects to industrial, commercial and applied real estate. The market will also witness a strong recovery story in the resort tourism and retail sectors, which have been restrained in the past time thanks to the reopening of international flights. The residential real estate market is also expected to be positive thanks to the 114 trillion USD infrastructure investment package approved by the National Assembly.”
As the market is dominated by domestic investors, many international investors still prefer to participate in the form of joint ventures with domestic partners. Most investors participate in joint ventures and M&A deals rather than pure real estate transactions. There is no shortage of investment capital, but the difficulty lies in the opportunity. The biggest obstacle is the scarcity of suitable land in big cities such as Ho Chi Minh City and Hanoi for project development.
One of the most important things for international investors is transparency. The more transparent the market is, the more foreign investors are interested. If the market is not transparent enough, there is not enough information and data, slow transactions and unclear land ownership – all pose challenges for foreign investors. Foreign investors have a lot of capital, waiting to invest in real estate. They want to cooperate with local investors, but they need transactions to happen quickly, Ms. Trang shared.
Recently, the Government has agreed to develop the amended Housing Law and the amended Real Estate Business Law, which will be submitted to the National Assembly at the 4th Session in October 2022. At the same time, there is a proposal to submit to the National Assembly for comments and approval of the Land Law (amended) to create a legal basis for land use rights trading activities. When passed, these laws will have a major impact on the real estate market: A series of existing problems related to the real estate market such as investment activities and legal procedures because the relevant legal system has gradually been completed, so there are no longer any conflicts between regulations in the legal system on investment. This will remove many existing barriers for real estate M&A activities this year.
With a positive macroeconomic situation and international flights reopening, the M&A market in 2022 will certainly be even more vibrant. Because “in danger there is opportunity”, many businesses with strong financial potential have conducted assessments and made long-term development plans after the pandemic. Typical examples are Novaland with its strategy of building the Nova Group ecosystem; or Dat Xanh spending 1,040 billion VND to establish 4 subsidiaries in the fields of technology, finance and real estate.
The market is growing and maturing at a faster pace than before. Market participants from project developers, investors, banks and state management agencies are more cautious in their actions and roles. Cushman & Wakefield is very confident in the development of the real estate market in the coming time, and specifically 2022 will continue to be a shining year despite many difficulties.
