2023 is a challenging year for Vietnamese real estate businesses. Most businesses are facing a shortage of cash flow, while credit sources for the real estate sector have significantly narrowed.
Central area of Nha Trang city (Khanh Hoa). Photo: Hong Dat - VNAHowever, mergers and acquisitions (M&A) activities in the real estate sector are still quite active. Experts expect M&A activities in this market to be vibrant in 2024.
Demand for home ownership remains strong
Speaking to reporters at a recent press conference, Mr. Neil MacGregor, CEO of Savills Vietnam, commented that in 2023, the Vietnamese real estate market had to endure global economic pressures and global and domestic challenges. High interest rates that caused a global economic recession affected investor sentiment. Rising inflation also put pressure on household spending; the manufacturing sector recorded high inventory levels and reduced production orders, directly affecting Vietnam's key growth sectors.
Along with that, according to Mr. MacGregor, delays in approving housing projects delay investment implementation, affecting market sentiment.
“Demand for home ownership remains strong, driven by urbanisation across the country, a large population base and urgent housing needs in major cities. The Government’s efforts over the past two years have made progress in managing and addressing this issue, building confidence in a better future,” said Mr MacGregor.
In the context of scarce housing supply, any investor with the capacity to launch a project can exploit the high demand of the market at the moment, especially the growing middle-class customer segment. In the office segment, in Ho Chi Minh City, although the supply of new Grade A projects is quite abundant, the positive rental performance shows that there are still opportunities for investors and office developers in the future. Those who provide or reposition office buildings with green certification will attract high rental prices.
Will M&A be exciting again?
Assessing the market situation in the coming time, Savills Vietnam believes that despite facing many difficulties, the real estate market has maintained its resilience and is ready to take advantage of positive economic policies and changes. The next two years are forecasted to be an exciting period for the M&A sector in Vietnam.
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The real estate market remains resilient. Illustrative photo: VNA[/caption]Savills Vietnam commented: “With a strong economy driven by a large population, infrastructure development, urbanization, abundant foreign direct investment (FDI) and a rapidly growing middle class, if the legal framework allows, real estate M&A activities are expected to boom in the next two to three years.”
Mr. MacGregor said that most of the investment is coming from Asian countries such as Singapore, South Korea, Thailand, Malaysia and Japan. These countries have been active investors in Vietnam and are expected to increase investment in the next two to three years, in addition to the potential from Middle Eastern investors. In particular, Vietnam's industrial sector will benefit from many free trade agreements, creating a diversified investment base and increasing investment in manufacturing and industrial real estate.
Foreign investors also appreciate the extensive experience and knowledge of the Vietnamese market that domestic companies bring to their partnerships. On the other hand, domestic companies have provided greater investment opportunities for foreign investors. This allows foreign investors to expand quickly after entering the market, while also leveraging the experience and network that local partners provide.
Sharing the same view, Mr. Truong An Duong, Managing Director of the Northern Region and Residential Real Estate Division of Frasers Property Vietnam Company, forecasts that the demand for industrial real estate will increase due to the increasing FDI inflows into the Vietnamese market. Speaking at the Vietnam M&A Forum 2023, Mr. Truong An Duong said: "In the coming time, we believe that industrial real estate will continue to develop well, and M&A deals in the real estate sector will also increase"./.
Thu Tra
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