Japanese sun rises in Saigon housing market

Behind only Singapore and Taiwan now, the growing attention Japanese firms have been paying to the residential sector in Ho Chi Minh City is reflected both in the number and scale of projects.

Investors from the land of rising sun also seem to be setting a faster pace than those from other countries, market observers say.

Japan used to occupy a very small market share until a few years ago, but now they are paying great attention to Vietnam’s real estate market, especially in Ho Chi Minh City, said Le Thi Huyen Trang, Head of Market Research and Consultancy Services at real estate services firm JLL.

While JLL does not have sufficient data on the capital that Japanese investors have poured into the real estate housing market, in terms of number of projects, Singapore is leading with 10 projects, while Japan and Taiwan next with 9, she noted.

“Singapore and Taiwan have been investing in real estate in HCMC for a long time, so their aggregate numbers of projects are higher. But in terms of speed of growth, investors from Japan have been very active over the past four years,” Trang said.

According to HCMC’s Department of Planning and Investment, the city attracted nearly $487 million in registered foreign direct investment (FDI) in H1 2018, 10 percent of which came from Japan.

Real estate business is the second largest source of FDI, accounting for more than a quarter of total registered in the city.

Pham Lam, CEO of realty developer DKBA Vietnam, said he’s had many meetings with Japanese investment funds, developers and real estate service providers eyeing HCMC’s housing segment.

“The presence of Japanese investors is a positive signal, and can be a catalyst for real estate investment from other countries, especially Asia, over the long-term,” said Lam.

Different approach

Unlike investors from Singapore or Taiwan, who typically develop projects on their own, Japanese investors tend to partner with a local firm and their projects have so far been focused mainly in the southern part of the city, Lam said.

A typical case is the partnership between Vietnam’s An Gia Group and Japan’s Creed Group. In 2015, Creed injected $200 million into three An Gia projects in District 7 – Riverside, Skyline and River Panorama.

The joint venture is about to launch their fourth project, Sky89, at the intersection of Dao Tri and Hoang Quoc Viet streets adjacent to the Phu My Hung New Urban Area. The 42,500 square meters project includes a 35 storied block with 430 apartments.

An Gia has also attracted another major investment fund from Japan called Hoosiers, a 15-year-old group which manages 100 buildings including 10,844 apartments across Japan.

Then, a big realty developer in the city’s southern part, Phu My Hung, for the first time in two decades, has partnered with three Japanese giants, Daiwa House, Nomura and Sumitomo, in a joint venture to develop Midtown, a 2,500-unit project.

Without disclosing the value of their cooperation, Phu My Hung said this is its most costly project in 2017.

Mizuki Park in Binh Chanh District is another Japanese-invested project in the city’s southern part. The VND8 trillion ($349 million) project is a joint venture between Vietnam’s Nam Long Group, which holds a 50 per cent stake, and Japan’s Nishitetshu and Hankyu.

The Tien Phat - Sanyo Homes joint venture which is developing the $30 million Ascent Lakeside project on Nguyen Van Linh Street is yet another example.

In the south of HCMC alone, the number of future apartments that has the “Japan standard” runs into tens of thousands of units.

Green experience

Vo Tri Thanh, former Deputy Director of the Central Institute of Economic Management (CIEM), said that apart from financial muscles, Japanese realty investors are also strong in advanced technology and green buildings.

Su Ngoc Khuong, Director of Investment at Savills Vietnam, said that after a period of time when Japanese interest seemed to focus only on office and hotel segments only, capital has been shifting to the residential segment.

Their aim is to serve the big housing demand among Vietnamese people as well as the Japanese community in HCMC, he said.

Several market observers have noted that a distinctive feature of Japanese investment is that whenever a Japanese investment fund ventures into a certain market, they are followed by satellite firms like contractors, developers and suppliers of building materials.

Therefore, Japanese-backed projects usually carry recognized Japanese standards, they said.