Property Market: More Capital Likely to Make M&As More Vibrant

10:41:16 AM | 9/9/2014

Real estate experts said that the adjustment in planning in the near future will have a significant impact on the supply of real estate in Hanoi, especially the downtown area. This may continue to make waves of mergers and acquisitions (M&As) and capital increases in real estate projects more vibrant in the time to come.
Cash flow keeps going to M&As
According to Mr Dang Xuan Minh, General Director of AVM Vietnam, evolutions of the market in recent times has recovered the estate market, especially in acquisitions and mergers (M&A). This will continue in the upcoming time.
Thus, the trend of foreign investment in the real estate sector in Vietnam still does not drop. While Vietnamese real estate companies still face many difficulties, especially in the financial sector, foreign investors, with strong financial capacity, have quickly implemented M&A activities for potential projects, even for "golden land" projects with reasonable price.
Mr Minh also stated that, in the coming years, the real estate market will continue to witness many M&A deals, in which foreign investors are still more active. The foreign investors further involved in real estate operations in Vietnam will be the basis for Vietnamese property market coming towards transparency, enhanced and customer-oriented services.
Dr Alan Phan, an expert in real estate, said that the real estate market in Vietnam is still receiving cash flows from foreign as well as domestic investors in projects that encountered capital flow difficulties. "These new investors begin to buy with the price which is lower than the one investors spending for the execution of projects", commented Dr Alan Phan.
Although M&A market is actively operating, in the segment of new projects, during the first 6 months of 2014, Hanoi had not licensed any new projects. In the context of land and workshops available to meet the attraction of industrial production in Hanoi and the former industrial areas has been filled, it is also considered a segment with great potentials.
According to the Foreign Investment Agency (Ministry of Planning and Investment), the majority of new projects will focus on areas of trade, services such as purchasing goods, construction; information technology with the inconsiderable registered investment capital scale of no more than US$800,000/ project.
However, regarding projects registering to increase capital, the amount of increased capital is quite huge (up 83 percent compared to the same period in 2013) with 50 projects increasing capital with the value added investment of US$467.1 million, in which focusing in the property area (accounting 50.1 percent), followed by manufacturing and processing (13.9 percent) and commodity trading activities (11.8 percent).
No new investment
According to the study of CBRE Vietnam- a property consultant in Vietnam, the real estate, tourism and hospitality industry is one of the most attractive industries to foreign investors, after the retail sector, food and beverages.
In Hanoi market, due to the influence of a number of planning related to the real estate sector, there will have a short-term scarcity in supply in both high and low-end segments.
According to representatives of the major real estate transactions, the supply of affordable apartments segment is not available within the past one year because they do not deploy low-price apartment projects.
The projects under construction currently are being restarted projects after a long time of delay due to lack of investment capital.
For the high-end segment, the market received good signals although the short-term supply will be limited by the decision to suspend construction of new urban projects in urban areas that the government issued in July 2014.
Mr Richard Leech, CEOof CBRE Vietnam, said, in the second half of 2014, foreign-invested capital flow will remain focused on real estate projects in the southern region, especially Ho Chi Minh City. He also analyzed that Hanoi, in the long time, will continue to attract less FDI capital in real estate projects than Ho Chi Minh City.
Statistics of Savills Vietnam also showed that in the second half of 2014, the real estate market in Ho Chi Minh City will receive 11 new projects, offering more than 100,000 m2. It is expected that by 2016, there will be more than 390,000 m2 of 27 projects involving in the project market.
However, Mr Richard also revealed that a number of projects in Hanoi are still of great interest of investors, especially investors from South Korea. Because the Korean investors have opened a lot of large-scale factories in the northern region, so the level of interest in real estate in Hanoi or surrounding areas is expected to increase in the future.
Therefore, the development of the latest high-end projects in Hanoi is expected to cope with many difficulties in the future.
Luong Tuan