Vietnam's real estate market is showing signs of flourishing with international investors trying to secure a foothold in the market either through mergers and acquisitions or by forming joint ventures.
Foreign buyers, mainly from Japan, South Korea and Singapore, have their eyes on the country’s two major cities: Hanoi in the north and Ho Chi Minh City in the south. Notably, investors have expressed an interest in luxury properties, according to a Ho Chi Minh City-based property consulting firm.
Vietnam’s property market has captured the attention of international buyers, especially Japanese, as a potential investment destination which may generate an annual return of between 20 and 25 percent.
Japanese real estate companies are planning to invest up to $2 billion in the Southeast Asian country, said Than Thanh Vu, president of a merger and acquisition consulting company.
One of Japan's largest builders, Kajima Corporation, has formed a joint venture with Indochina Capital to channel funds worth of $1 billion into property developments in Vietnam over the next 10 years. The 50:50 partnership has plans to kick off four large-scale high-end property projects in Hanoi, Ho Chi Minh City and Da Nang in the next 12-15 months.
Vietnam is currently viewed as one of the markets with the most potential in Asia for foreign direct investment, said Keisuke Koshijima, Market Development Executive.
Kajima has identified the country as the next key driver for its growing business in the region, he added.
The company’s strategy is to create high-value properties to cater for the growing middle class in Vietnam, he continued.
Foreign investors are also entering Vietnam’s property market through mergers and acquisitions.
Singapore-based investment fund Frasers Centrepoint Limited has acquired a 70 percent stake in a luxury residential apartment project from a local real estate developer. The $100-million project, G Home, covers one hectare in downtown Ho Chi Minh City.
Securities firm Mirae Asset, part of independent financial services group Mirae from South Korea, spent $350 million to become the owner of Vietnam’s tallest building, the Keangnam Landmark.
Marc Townsend, general manager of CBRE Vietnam, a commercial real estate services and investment firm, said at a workshop last month that foreign buyers prefer stable operating properties like apartments so that they can make a quick return on their investments.
According to CBRE, newly-registered foreign-direct investments in Vietnam hit $16.4 billion in the first nine months of the year, and about 6 percent of that went into the real estate sector.
The number of newly-established companies in the real estate sector almost doubled on-year to 2,160 from January to September, said the Ministry of Investment and Planning in a report, adding that registered capital also increased 2.5 times from the same period last year. That means on average eight property firms have been launched daily in the past nine months.
Investor interest has been fueled by Vietnam’s fast-growing economy, accelerating urbanization and expanding middle-class population with higher incomes
In the newly released biannual Global Real Estate Transparency Index 2016 by property consultancy firm Jones Lang LaSalle (JLL), Vietnam ranks 68th out of 109 markets, far below other countries in the region such as Singapore 11th and Thailand at 38th.
According to JLL, transparency across Vietnam’s real estate markets has steadily improved over the last few years with better access to market information, increased availability of market data and improved enforcement of planning and land use regulations.