The complicated development of the COVID-19 fourth outbreak, the tightened bank credit, and the reduced FDI in real estate created difficulties for the real estate market. M&A in the real estate market goes on strong, especially in the industrial real estate segment.
The Monetary Forecasting and Statistics Department under the State Bank of Vietnam (SBV) surveyed credit trends with the participation of 95% of credit unions and international banks’ branches operating in Vietnam. The survey showed that banks plan to tighten their lending activities to buy houses in the second half of this year.
According to the research agency of SBV, in the first half of 2021, banks assess credit risk to increase but slower than the last six months of 2020 in all fields, except loans in the financial business, banking and insurance sectors. Stocks and tourism are rated as riskier.
The Foreign Investment Agency reported that the amount of FDI in real estate in the first seven months of 2021 only reached 1.17 billion USD, down more than 1.6 billion USD, equivalent to 58% over the same period last year. Potential partners mostly come from Korea, Japan, Singapore, Indonesia.
The Agency also informed that in 2020, despite the pandemic, Vietnam had real estate projects that got an increased foreign investment, such as the West of Westlake urban area. However, there has been no project with increased capital in the first half of 2021. There are only new projects in line waiting for construction plans.
The lack of large projects that drive the growth of FDI-focused economies like Vietnam can affect the growth and development of these economies in the short or medium term, especially in the current state of stagnant public investment projects, where private investment still faces many difficulties.
The attraction of foreign investment capital into real estate, especially housing projects, is being negatively impacted in the short term because of social isolation. But real estate developers are still preparing new projects to meet the needs of domestic and foreign customers when demand recovers, with the expectation that Vietnam will still be one of the markets with high rental yields and lowest property prices in the region.
The real estate market is facing difficulties caused by the pandemic. However, new forces are driving the market to recover, real estate market is expected to move forward soon.
The Government promoting disbursement of public investment capital has had a great impact on the economy, including the real estate market.
Real estate companies also recognized and gradually adapted to the epidemic situation. Companies have to make calculations and forecasts in accordance with the new changing environment when planning for the short-term and long-term orientation of their businesses.
The demand for housing is still abundant. Housing demand is up to hundreds of millions of square meters of housing when Vietnamese people still want to own houses and residential land.
The Government also encourages upgrading the infrastructure of industrial zones and the possibility of piloting several industry clusters to form production networks, supply chains and participate more deeply in global value chains in some localities, creating more positive momentum for the market.
Flexibly adjusted macroeconomic, microeconomic and financial policies will contribute to promoting the real estate market. Besides, there have been many M&A deals of great value in the first six months of this year. The deal of Boustead Projects Co., Ltd. reached an agreement to buy back 49% of shares in KTG & Boustead Industrial Logistics Fund Joint Stock Company. This cooperation will bring about 13 real estate properties (10 of which belong to KTG and three belong to Boustead Projects) with a total asset value of up to 141 million USD, covering approximately 840,000 m2 of land and about 550,000 m2 of total rental area.
ESR Cayman Limited - the largest logistics real estate company in the Asia Pacific and BW Industrial Development JSC (BW) - a developer and operator of industrial and logistics real estate that have a large market share in Vietnam also joint ventured to develop 240,000 m2 of industrial real estate in My Phuoc 4 Industrial Park.
Viet Industry Group Joint Stock Company has acquired a land bank of 250 hectares with an investment of 300 million USD. This company aims to develop factories and warehouses for lease in the high-end, sustainable segment with an investment portfolio stretching from Bac Giang, Hai Phong, Hai Duong to Dong Nai and Long An.
Along with M&A deals, FDI in production and industrial zones in the first half of this year also took place actively.
The Northern region received the majority of newly registered investments in the manufacturing sector up to 1.97 billion USD, accounting for 64% of the market share. Followed by the Southern region with 728 million USD (23%), while the Central region attracted 395 million USD (13%).
Source: The Industry of Ministry and Trade