According to RCA and Cushman & Wakefield data, real estate investment and M&A deals will still take place in 2023, but the number is small and the total value is also smaller than last year. In particular, the total transaction value in the first 9 months of the year reached 729 million USD, down 33% over the same period last year, due to the lack of large-value deals. Foreign investors still account for the majority of real estate transactions, purchases and investments, while the domestic sector accounts for less than 10% of transactions.
However, the foreign sector is facing many challenges when hunting for real estate projects in Vietnam. Cushman & Wakefield said that although the economy is slowing and there are many assets being divested, the portfolio of projects for foreign investors to withdraw money is not much. The reason is due to legal problems, especially the legal completion of the project, the difference in price expectations from the two parties and the compensation process.
On the buyer’s side, the main obstacle is finding good opportunities with a stable source of income. Investors looking for development cooperation opportunities also spend a lot of time researching appropriate strategies and expected values. Another challenge is that most of the properties offered for sale on the market are often not publicly available and official, so access to good properties is difficult.
Neil MacGregor, Managing Director of Savills Vietnam, also said that foreign investors in Vietnam are facing great challenges in administrative procedures, especially land use money. While the settlement of land use levies and planning approvals of 1/500 are the most important factors with projects. Currently, few projects are legally complete, causing credit scarcity because banks have difficulty in approving collateral before lending.
CEO of Savills Vietnam said that the completion of M&A activities will continue to face difficulties until there is a clear change in the settlement of land use levies and issuance of land use right certificates. For example, the Condotel product, although the legal framework has been clearly explained, the management agency still hesitates to issue books.
If legal barriers are removed, real estate M&A activities are expected to boom in the next 2-3 years. Trang Bui, General Director of Cushman & Wakefield Vietnam, said Vietnam remains an emerging market attracting investment in the context of global economic fluctuations. An important factor in foreign investors’ investment or M&A decisions in Vietnam is attractive profit margins.
In the period of 2018 to the first 9 months of 2023, total real estate investment and M&A in Vietnam reached about 4.2 billion USD, led by residential and industrial types, accounting for 46% and 28%, respectively, according to data from RCA and Cushman & Wakefield. This shows that the taste of foreign investors is still towards real estate to serve the needs of “peaceful living”.
