Real Estate M&As in Vietnam Reach $1.5 Billion in 2017, to Hit Records in 2018: JLL

Tuan Minh

08:42 10/02/2018

BizLIVE - Foreign investors have been involved in the majority of M&A deals in the real estate sector in Vietnam.

Real Estate M&As in Vietnam Reach $1.5 Billion in 2017, to Hit Records in 2018: JLL

Foreign investors have been involved in the majority of M&A deals in the real estate market in Vietnam.

Merger and acquisition (M&A) deals in the Vietnamese real estate market had a total value of some $1.5 billion in 2017, compared to $921 million a year earlier, Jones Lang LaSalle (JLL) Vietnam has said in a report, predicting M&A activities to reach record levels in 2018 thanks to regional investors’ strong appetites.
Foreign Investors Play Main Role in M&As
The Vietnamese real estate market continues showing irresistible appeal to foreign investors, mostly through merger and acquisition. Joint ventures have become popular among foreign developers who have strong financial capacity and track record, joining forces with local developers who own land and have strong connection with the local community.
JLL observes there are hundreds of million dollars waiting to be poured into the market in most segments including residential, office, retail, hospitality and industrial. Investors are from many different countries such as Japan, South Korea, and Singapore, with an increasing number of groups from mainland China.
The real estate firm said that 2017 proved to be an active year for M&A activities in Vietnam real estate sector, with overseas players involved in major transactions such as Hongkong Land, CapitaLand, and VinaCapital.  
In 2017, Vietnam real estate market welcomes a record number of foreign capital investors, mainly private equity funds, looking to deploy their capital quickly and efficiently.
“There is currently strong interest in Vietnam real estate from foreigner investors, and we expect this theme to continue for the foreseeable future. There will continue to be a strong preference for income producing assets, however given the shortage of this type, there will be a continued focus on development activity.
We are seeing more partnerships and joint ventures forming between local companies and foreign investors, we expect this trend to continue,” said Phuong Le, investment analyst at JLL Vietnam’s Capital Markets.

According to statistics of the Vietnamese investment ministry, foreign investors won approval to invest $3.05 billion in real estate in the Southeast Asian country last year, making it the third most attractive industry to overseas players.

The government's loosened regulations on foreign limit on home ownership, strong FDI inflows, and growing middle-income class are the main factors that draw overseas investors' interest.
Investor Appetite in Vietnam
Traditionally, residential is still one of the most attractive sectors. Investors are now turning their target to commercial market especially Grade A office in a prime location with expected potential growth of capital value and yield compression (7%-8%).
According to JLL, office rental rate in Vietnam are higher compare to other neighboring countries which reflecting an overall shortage of supply. In addition, investors continue to show good appetite for hotel assets.
Hospitality has been interesting over the past year with new funds with foreign capital now specifically targeting this sector. “We expect that this trend will continue in hospitality, and in other growing sectors such as industrial and alternatives like education,” Phuong added.
The affordable housing market is another key growing sector, now drawing specialist capital sources who identify value in these underlying fundamentals including growing middle class.
Challenge in Real Estate Investment in Vietnam
For residential and commercial projects, foreign investors often search for "clean" land (i.e. compensation completion, site clearance, land use fees have been paid, land use right is in place, and good planning). However, those assets are rare as the Vietnamese realty market is still immature.
In addition, the Vietnamese real estate market is tightly held and open market offerings in this high-growth, high-potential sector are rare. The accessibility to the good assets is quite limited; most foreign investors are working with investment consultancy to enter this market, JLL said.