Vietnam real estate market charms foreign investors: experts

Residential real estate in Vietnam always attracts foreign investors’ interest, reflected through mergers and acquisitions (M&As) and direct investments, said experts.

According to data from research agencies, since 2021, real estate M&As in Southeast Asia have tended to decline in both total value and number of deals.

In Vietnam, the number of M&A deals in the first half of 2024 decreased slightly, but the transaction value increased by nearly 9% compared to the same period in 2023.

In the six-month period, registered foreign direct investment (FDI) in the real estate sector in Vietnam surged 61.4% year-on-year. This evidence of how the Vietnamese real estate market is viewed by foreign investors such as the U.S., Singapore, Japan, and South Korea through both M&As and FDI thanks to the potential for stable economic growth.

Dr. Su Ngoc Khuong, senior director of Savills Vietnam, said that foreign investors are very interested in Vietnamese real estate, especially those based in the Asian region. Recently, Savills Vietnam brokered an M&A deal for a project worth several hundreds of millions of USD.

"Vietnam has a population of nearly 100 million, and especially in large cities like Hanoi and Ho Chi Minh City, the demand for housing is huge, so residential real estate is always a segment that foreign investors are interested in," he said.

However, currently, land funds in large cities are very limited, he noted

"The limited residential land funds have prompted foreign investors to turn to other real estate segments such as office buildings and retail real estate with attractive profit margins of 7-8% per year. Foreign investors look at Vietnam with long-term plans and the office building sector promises to be vibrant as there are shortages of supply in Hanoi and HCMC," Khuong commented.

Trang Bui, general manager of Cushman & Wakefield Vietnam, said since late 2023, many notable real estate M&A deals have been recorded, mainly involving Malaysian, Taiwanese, Chinese, Japanese, Singaporean and Korean investors.

"Foreign investors aim for clean land funds, with good quality, real value, complete legal status and great development potential," she said.

According to Trang, 15 years ago, FDI flows mainly ran into high-end housing with familiar names such as Keppel Land and CapitaLand, but now, the market is welcoming many newcomers like Lotte Group, GS, Sumitomo, and Hong Kong Land.

Along with residential property, industrial real estate continues to receive great attention from foreign businesses.

In early March, one of the most famous deals was Mapletree Logistics Trust (MLT) - an investment fund from Singapore, spending more than $50 million buying two Grade A warehouses in Binh Duong and Hung Yen provinces.

CapitaLand Investment also plans to invest an additional $73-110 million in Vietnam in the next two years. The main goal is to build or acquire industrial parks.

More M&A deals in the making in H2

In H1, the real estate sector did not see many large deals. However, because the financial health of many real estate businesses was still weak, and they faced difficulties in accessing capital sources, selling projects or part of projects helped them restructure and increase resilience.

In April, VRC Real Estate and Investment JSC approved for its subsidiary, ADEC JSC, to transfer part of the ADC Residential Area in Phu My ward, District 7, HCMC with a price not lower than VND800 billion ($31.59 million) to supplement capital for ADEC's operations.

In June, low-cost housing developer Nam Long Group also completed the transfer of a 25% stake at the 45-hectare Paragon Dai Phuoc project to Japanese partner Nishi Nippon Railroad. The deal was worth VND662 billion ($26.14 million). After completion, it is estimated that Nam Long will earn an after-tax profit of about VND200 billion.

Some large real estate businesses are also collecting land to prepare for the next phase of the property market. For example, Dat Xanh Group (DXG) is looking for a land fund of 100-200 hectares across the country, firstly in Binh Phuoc and Dong Nai provinces, with good legal status to carry out projects in the 2024-2025 period.

Although Nam Long Group owns a land fund of more than 680 hectares to develop projects until 2030, it still plans to expand its clean land fund and develop new urban land funds in the long term.

An Gia Group also announced in February that it was looking for opportunities to carry out M&As and expand its clean land fund. Currently, the company is targeting two potential land plots in District 8 and Thu Duc city in HCMC.

In addition, a series of other large enterprises such as Ecopark, TNG Holdings, Vinhomes, Eurowindow, Phu My Hung and Ha Do Group are also developing projects from large land funds in many localities.

Experts said that real estate M&As promise to be bustling in H2. Deals continue to be promoted with the participation of businesses inside and outside the industry, both domestic and international. In addition to the industrial and residential real estate segments, the office and resort real estate segments are also of interest to investors.

The new laws on land, housing, and real estate business, set to take effect from August 1, 2024, will remove obstacles for M&A activities, they said.

In particular, the Land Law will add many benefits to foreign investors, such as acquiring land use rights in industrial parks, industrial clusters, high-tech zones, and land use from acquisition of real estate projects and expanding methods of receiving land use rights for foreign-invested enterprises, they elaborated.