Foreign direct investment (FDI) capital pledged for Vietnam’s property market in the year’s first half witnessed a big surge and was higher than total pledged capital of the entire year of 2017, according to national investment data.
Data of the Ministry of Planning and Investment’s Foreign Investment Agency shows that the property sector attracted the second highest registered FDI capital in January-June with over US$5.5 billion, or over 27% of total registered capital in the period. Meanwhile, last year recorded only US$3.05 billion pledged for the sector, equivalent to some 8.5%.
Among large-scale property investments is the smart town project worth more than US$4 billion in Hanoi’s outlying district of Dong Anh. Developed by a Japanese investor, it is the most capital-intensive FDI project in the six-month period.
Another big investment is the Lotte Mall Hanoi project by a South Korean investor. This US$600-million project is a complex comprising shopping mall, hotel, office space and apartment functions.
Amata Vietnam earlier got licensed to construct an industrial city in the northern province of Quang Ninh. The 714-hectare project is an expansion to the north by the company after successfully developing Amata City Bien Hoa in the southern province of Dong Nai, which has attracted 165 investors from over 20 countries and territories.
Commenting on the property market in the year’s first half, deputy managing director of Savills Vietnam Troy Griffiths said that the stable macro-economic development has given a boost to the domestic market and FDI attraction. Foreign investors have still showed interests in Vietnam’s property market.
Besides direct investments, foreign indirect investments have increased via mergers and acquisitions (M&A) and stake purchases at domestic businesses or developed projects.
M&A activities have been quite busy in the past time. Notably, Japan’s Nomura Real Estate has acquired a 24% stake in Sunwah Tower, a 22-level office building located right in the heart of HCMC. This is the first grade-A office building in Vietnam that Nomura has invested in.
Vingroup’s Vinhomes last April signed a deal with Singaporean investment fund GIC Private Limited, under which the latter will invest US$1.3 billion via acquisition of Vinhomes shares and provision of a debt-like instrument to implement projects.
The central bank’s measures to restrict property lending, control bad debts and maintain credit growth have made domestic investors seek other capital sources, including via M&A.
Meanwhile, in the eyes of foreign investors, the domestic property sector still holds potential for growth. High profitability has kept Vietnam appealing to investors in comparison to regional rivals.
According industry experts, this year may see a new record of M&A transactions in the property sector. This investment model is getting more popular when combining strengths of parties involved, which are financial capabilities and experience of foreign investors and domestic enterprises’ understanding of investment procedures and ownership of large land sites.
Su Ngoc Khuong, head of investment at Savills Vietnam, noted that investment and M&A activities are mainly carried out by investors from Asian countries, particularly Singapore, South Korea, Malaysia, Japan, Hong Kong and China.