Foreign investment in realty M&As surges
Foreign investment in Vietnam through mergers and acquisitions (M&As) in the real estate sector between January and October 2019 rocketed 235% from a year earlier to a record high value of US$1.75 billion, data showed.
An aerial view of the Phu My Hung residential area in District 7, HCMC
Increasing competition among domestic and international investors for real estate projects, obstacles within the legal framework and the restructuring demand from local firms may be the main factors leading to a surge in M&A deals, reported news website VnEconomy.
Data from the Ministry of Planning and Investment revealed that the total amount of newly registered and increased capital, capital contribution and share purchases by foreign investors in the property sector reached nearly US$3 billion in the 10 months, down 47.8% against the year-ago period.
However, capital through M&A deals accounted for a staggering 58.6% of the total investment.
During the 2017-2018 period, the registered foreign funds through this M&A channel failed to exceed the US$723-million level, which was recorded in 2016. However, this kind of capital has risen sharply since the second quarter of this year.
In the first 10 months, the number of M&A deals totaled 299, compared with 121 in the same period last year. It was even higher than the figure for the entire year of 2018 at 147, 2017 at 107 and 2016 at 80.
Meanwhile, foreign investors injected nearly US$1.3 billion into new property projects, the lowest in the past four years.
Duong Thuy Dung, senior director of real estate consulting firm CBRE Vietnam, stated at a recent workshop in HCMC, that the domestic property sector will still see sustainable growth next year, thanks to high housing demand on the back of the relatively stable economic situation and mortgage loans.
The number of new property projects has been modest in recent years, while the financial capacity and project development abilities of local investors have been high, making it easier for them to compete with their foreign peers in major projects, according to experts.
Also, sharp land prices and hindrances within the regulatory framework could be obstacles to foreign direct investment, so they resort to M&A deals with local counterparts who have easier access to cleared land for the development of projects.
Local firms, particularly those that need capital restructuring, are compelled to cooperate with their foreign peers due to the tightened control over real estate loans by the State Bank of Vietnam. SGT
Foreign investment pledged to Vietnam in the January-September period this year through capital contributions and stake acquisitions rocketed by 82.3% year-on-year, raising concerns over an economic crisis ten years ago making a comeback.
European and American investors were concerned by the lack of rigid policies on corporate transparency and intellectual protection.