M&A real estate will cool down in the second half of 2019

Lacking "clean" projects and ready projects to receive investment, M&A activities are expected to grow at a slower pace in the remaining two quarters of 2019, according to Real Estate Consulting Company Jones Lang Lasalle (JLL).

Source: Internet

In the overview report of M&A activities in Vietnam in the first half of 2019, JLL Vietnam said that Vietnam's real estate market in 2019 started with the M&A deal of Keppel Land Group at Dong Nai Waterfront project. Accordingly, Keppel Land would sell a 70% stake in the Dong Nai Waterfront City project to Nam Long for a total amount of VND 2,313 billion. The two sides will jointly develop a 170-hectare residential project in Long Hung, Bien Hoa and Dong Nai communes.

Recently, Keppel Land, through its subsidiary, signed a conditional sales contract with Phu Long Real Estate Group for a 60% stake in the whole land, with a total investment of VND 1,304 billion.

Lotte FLC Joint Stock Company, a joint venture between FLC Group and Lotte Land Company (a subsidiary of Lotte Group), was established with a charter capital of VND 556.5 billion to operate in the real estate sector. Lotte Land will own 60% of Lotte FLC and the rest will be held by FLC Group and its subsidiaries. According to media sources, the joint venture was established to develop a 6.4-hectare plot of land in Dai Mo ward, Nam Tu Liem district, Hanoi.

Recently, real estate projects that have not been developed effectively or projects that are traded at prices lower than market prices or without formal bidding are under strict control of the authorities.

The action taken by authorities to prevent corruption may have some impact on business profits in the short term, as some real estate projects are slowing down to serve the process. Investigation, this could lead to temporary delays of investors who are willing to pour capital into the market.

The consulting firm added that the "clean" land bank and compensation for housing and commercial projects in the central area or the developed area are increasingly scarce, making the looking for quality real estate investment opportunities is also increasingly difficult. Therefore, some investors and developers are shifting their footprints to the neighboring provinces of Ho Chi Minh City.

Many prominent investors such as Novaland Group are developing Aqua City urban area in Long Hung commune, Bien Hoa, Dong Nai. Nam Long Group with the Dong Nai Waterfront project and the 45-hectare Dai Phuoc Paragon urban area on Dai Phuoc Island, Nhon Trach, Dong Nai. Although many new investors are considering emerging areas, the majority of projects are still led by long-established local or international developers in Vietnam.

As U.S.-China trade tensions continue to escalate, the trend of shifting manufacturing from China to Southeast Asian countries will continue to benefit the region as a whole, including all of Vietnam. Investors are constantly looking for industrial and logistics assets, either through joint ventures with local industrial developers or acquiring existing land and real estate funds. The shortage of high-tech assets, modern warehouse space and strong demand from businesses in the region are boosting the potential of the industrial real estate market.

JLL expects that foreign investors will continue to show their interest and commitments to Vietnam's real estate market, thereby showing strong development potentials of the market. Although M&A activities will likely grow at a slower pace in the remaining two quarters, due to the lack of “clean” projects and ready projects to receive investment. However, the consultancy predicts that the current measures of the government will impact on improving the transparency of the market, while ensuring the competitiveness of Vietnam and attracting many real estate investors in the area.

According to Thanh Thinh