M&A deals in Vietnam's real estate sector forecast to take off in 2017

Mergers and acquisitions in Vietnams real estate market are expected to jump in 2017 as foreign investors look for local partners rather than starting their investments from scratch.

 

President Donald Trump has pulled the U.S. ouf of the Trans-Pacific Partnership, a deal from which Vietnam, was expected to gain the most. Even so, Vietnam will be viewed no less attractive as an investment destination than it could have been with the TPP, said Stephen Wyatt, general manager of property consultancy firm Jones Lang LaSalle.

 

He forecast Vietnam’s strengthening real estate market will lift the number of mergers and acquisitions (M&As) to a new record in 2017.

 

Vietnam has emerged as a potential investment destination that can generate an annual return of between 20 and 25 percent, said Than Thanh Vu, chief executive of an M&A consulting company in Ho Chi Minh City.

Investors’ interest is fuelled by the Southeast Asian country’s annual economic growth, which has been above 5 percent on average since 1999, Vu said.

 

There are many factors driving the inflows of foreign investments into Vietnam’s real estate market, including its fast-growing economy, accelerated urbanization and expanding middle-class population with higher incomes.

 

Foreign property developers want to tap into Vietnam’s growing population because it will lead to a rapidly expanding demand for housing.

 

Global investors are increasingly entering the local market through M&As, Vu said , explaining that they prefer gradually acquiring stakes in local property developers so that they can gain a better understanding of local demands.

Besides, M&A deals also allow foreign investors to quickly gain a foothold in the market as they can skip the massive amount of paperwork required to enter the real estate sector.

 

The number of announced M&As in 2015 increased by 40 percent from 2014 with total value of $4.3 billion, according to data released by the Institute of Mergers, Acquisitions and Alliances.

A third of Vietnam’s top 10 largest mergers and acquisitions over the past two years have involved real estate companies.

The market has been spurred on by foreign buyers from Japan, South Korea and Singapore who are interested in large-scale mixed-use developments comprising apartments, serviced apartments, and retail and office space in Hanoi and Ho Chi Minh City.

 

For instance, a large number of Japanese property developers including Sumitomo, Sanyo Homes, Daiwa House, Aeon and Toshin have pledged to invest up to $2 billion in the country.

 

In its biannual Global Real Estate Transparency Index 2016, Jones Lang LaSalle Vietnam ranks 68th out of 109 markets, but far below other countries in the region such as Singapore in 11th and Thailand at 38th.

According to the index, transparency across Vietnam’s real estate markets has steadily improved in recent years with better access to market information, increased availability of market data, and improved enforcement of planning and land use regulations.