Page 25 - V.E.T 349

PROPERTY

Platform for to leverage more positive policies and eco-
nomic news. The next two years are antic-
ipated to be an exciting period for real
prosperity estate M&A activities in Vietnam. Region-
ally, there has been a significant decline in
real estate transactions, leaving substantial
capital available for investment. Despite
high interest rates, the growth prospects
An improved legal framework for real estate and comparatively higher yields in Vietnam
should help M&A deals in the sector grow. remain attractive to foreign capital.
Throughout 2023, Savills has continued
to receive strong enquiries from investors
Mr. Neil MacGregor
seeking to invest in Vietnamese real estate.
Managing Director of Savills Vietnam
Given the scarcity of residential supply,
any investor successfully bringing a project
to market is likely to tap into strong under-
lying demand, especially if targeting owner-
occupiers in the growing middle class. In
Ho Chi Minh City, continued robust per-
formance, despite new Grade A supply,
means opportunities persist for office
investors and developers. Those delivering
or repositioning office buildings with green
credentials will attract a rental premium.
Real estate investors in Vietnam must
overcome bureaucratic hurdles, particularly
in settling land use fees. However, the pro-
posed changes to the Land Law are likely
to expedite processes, making housing
more accessible for buyers, while generating
much-needed revenue for developers.
Investors now exercise extreme caution
regarding the legal ownership of projects,
ensuring a clear pathway for necessary
government approvals for development.
Land use fee settlement and approval of
ietnam’s real estate market was strong demographics, and a genuine need 1/500 master plans are crucial for resi-
pressured by global and local chal- for housing. Government efforts over the dential development projects. The scarcity
V lenges in 2023, including high past two years have made progress in man- of projects with clear legal ownership and
interest rates and inflation. Delays in proj- aging and addressing these issues, instilling the necessary approvals challenge investors
ect approval and a lack of new launches confidence that it will continue working looking to enter, resulting in a credit
affected sentiment, but robust demand toward a better future. crunch as banks struggle to secure collateral
persisted, driven by urbanization. The Office markets in Ho Chi Minh City for lending to real estate projects. Uncer-
market remained resilient, however, and have defied global trends, maintaining tainty around the completion of key infra-
is poised for increased real estate merger strong occupancy rates and steady rental structure projects adds complexity to deter-
and acquisition (M&A) activity over the growth. The city’s office market stands out mining the optimal timing for real estate
next two years. as one of the best performers in the Asia- project development.
Pacific region, with green credentials ben- While changes in the legal framework
RESILIENCE AMID CHALLENGES efiting premier office buildings and ensuring have yet to be fully implemented, local
Vietnam’s real estate sector has weath- high take-up rates and rental premiums. authorities remain cautious in their exe-
ered global economic pressures and Viet- According to Savills’ ESG Vietnam cution. Until there are tangible changes
nam-specific issues during 2023. The high Report 2023, 20 office buildings in Vietnam and progress in land use fee settlement
interest rate environment globally has have LEED or Green Mark certification. and the issuance of land use right certifi-
exerted significant pressure on the world Seventeen are in Ho Chi Minh City, and cates, completing M&A activities will
economy, fostering uncertainty among account for approximately 25 per cent of remain challenging. A notable example is
investors. Elevated inflation has strained existing office stock, which will rise to 31 for condotel products, where local author-
household spending, which coupled with per cent by 2026. While hospitality initially ities remain hesitant to issue titles for proj-
high inventory levels have seen manufac- faced a slow recovery, it is now gaining ects, despite recent clarifications in the
turing orders soften, directly impacting momentum, with hotel performance in legal framework.
Vietnam’s key growth sector. Hanoi and Ho Chi Minh City returning to Vietnam’s economic fundamentals are
Ongoing delays in residential project pre-Covid levels. strong, driven by attractive demographics,
approvals have resulted in fewer project infrastructure development, urbanization,
launches, impacting sentiment in residential M&A ACTIVITIES: CHALLENGES, strong FDI flows, and a rapidly-growing
market. However, underlying demand OPPORTUNITIES, GROWTH middle class. If the legal framework permits,
remains robust, particularly in the owner- Despite the challenges, the market has real estate M&A activity is expected to
occupier sentiment, driven by urbanization, displayed significant resilience and is poised boom over the next two to three years. %

40 | VIETNAM ECONOMIC TIMES | DECEMBER 2023 en.vneconomy.vn