Property market looking attractive to foreigners

Many foreign investors are seeking investment opportunities while others are already buying projects in the local property market as local developers are finding themselves mired in financial difficulties.

Marc Townsend, Chief Executive Officer of CB Richard Ellis (Vietnam), said many foreign investors are looking for investment opportunities in Asia in which Vietnam is becoming an attractive destination.

South Korean investors for instance have returned since their departure in 2008. Some investors from Russia and China have also consulted his company about opportunities to invest in building office and apartment buildings here.

A representative of Sai Gon Thuong Tin Real Estate Joint Stock Co. (Sacomreal) said in the first six months of this year, some foreign investment funds had worked with the company on cooperation opportunities.

Among them, Mapletree Investments, a subsidiary of Temasek Holdings Group of Singapore, mulled over office and apartment tower projects; Sung Chang Co. from South Korea was interested in retail projects; and the real estate investment fund EngelInvest from Israel studied the Vietnamese market.

According to Marc Townsend, high population density and profitability from property projects in Vietnam are attractions for foreign investors though there are still challenges.
For instance, tightened property loans and insufficient money supply have become big pressures for many developers.

Besides extending projects, many companies have had to sell some, withdraw capital from other projects or sell products at cost prices or even lower to maintain their business.
Many companies cannot acquire credit loans, so they have to get access to capital sources by seeking opportunities to form a venture with local and foreign investors.

Su Ngoc Khuong, Research Department Director of Savills Vietnam, said many local property developers are consulting his company about access to foreign investors.

Compared to 2010, project transfer consultancy orders for Savills Vietnam this year have increased by more than 20 percent.

The majority of investors from Asia such as Japan, South Korea and Singapore are determined to invest in this market because of cultural similarities and their understanding of local business practices.

Foreign investors are interested in office and apartment building as well as villa projects.
According to Khuong, except for companies listed on the stock exchange, investors seldom announce information on project transfers.

A deal often lasts from six months to one or two years. For instance, Jones Lang LaSalle Vietnam needed more than one year to settle the deal for transferring the Centre Point office building on Nguyen Van Troi Street, Phu Nhuan District, HCMC, between Refico—the project developer, and Japan Asia Vietnam, a Japanese real estate investment fund.

Khuong said Savills is carrying out many deals, in one of which, it brokers the transfer of a commercial-office-residential complex worth US$120 million in HCMC.

The deal is expected to be completed by the end of this year. Earlier, the company had succeeded in brokering the transfer of an office building project worth about US$100 million in Hanoi.

Cooperation by necessity

While newcomers explore the market prudently, old foreign investors who have been familiar with the Vietnamese market are expanding their portfolios by buying up projects.

In May, Singaporean real estate group CapitaLand bought a 70% stake in the apartment project in Binh Trung Dong Ward, District 2, HCMC, from Khang Dien Saigon, an affiliate of Khang Dien Investment and Housing Co.

The project, which has 974 apartments and is capitalized at US$70 million, covers more than 2.9 ha.

Two weeks later, this group continued to buy a 65 percent stake in Quoc Cuong Sai Gon Co.’s apartment project in Binh Chanh District, HCMC, for more than VND121 billion (US$5.8 million).

The project to build 800 apartments requires an investment capital of nearly VND906 billion and covers about 9,000 square meters.

Yip Hoong Mun, Chief Representative of CapitaLand Vietnam, said current difficulties are opportunities for investors and his company continues to seek cooperation opportunities with owners of feasible apartment projects.

Le Hoang Chau, Chairman of the HCMC Real Estate Association, said mergers and acquisitions of projects will continue.

According to Chau, this trend is good for the market because investors must work with each other to strengthen their financial ability to implement projects, or else they can hardly survive.

Market observers said apart from capital, cooperation with foreign investors is beneficial because of the trademarks, project management experiences and customers that foreign partners will bring along.

They said not all property projects cause a loss when being transferred.

For instance, Sacomreal made a profit of hundreds of billions of dong when selling 60 percent of its shares in the Celadon City residential project with 7,000 apartments in Tan Phu District, HCMC, to Gamuda Land, a company of Malaysia.

TBKTSG/Tuoi Tre

Tags: Vietnam Property market, Vietnam property sector, vietnam real estate market