This year has seen something of a wave of Vietnamese real estate developers and brokers listing or planning to list. “After three years of recovery and unprecedented growth, Vietnam’s real estate sector has experienced major breakthroughs in fundraising, with the recent $1.35-billion IPO and listing of Vinhomes,” said Ms. Dang Phuong Hang, Managing Director of CBRE Vietnam. “This is a landmark event that will influence the decision on listing of many other local developers.”
Rising stars
More local developers looking to list comes as the local property market has seen a host of changes over the last year and the profile of local real estate developers and brokers has risen to a new level in the eyes of investors. Real estate pulled in the second-highest amount of FDI in the first half of the year, with investors seeing much potential for growth.
The Van Phu Investment JSC (Stock code: VPI) reached a turning point in June when it moved from the Hanoi Stock Exchange (HNX) to HSX at a price of VND43,500 ($1.89) per share, after joining the northern bourse at the end of last year. Focusing on both Hanoi and Ho Chi Minh City, VPI posted handy business results in 2017, with after-tax profit of more than $18 million. Foreign investors such as Dragon Capital, Vietnam Holdings, and APS now hold more than 10 per cent, just half a year after it joined the market. “Listing is inevitable for major real estate developers,” said Mr. Pham Hong Chau, Deputy General Director of Van Phu Investment. “Our listing has had a positive impact on our business performance.”
With 15 years of experience in implementing large real estate projects, including residential, commercial buildings, and urban areas, as well as highway construction and acting as a technical infrastructure contractor, VPI had sold more than 4,000 apartments as at the end of 2017 and is currently involved in nearly 20 projects in Hanoi and Ho Chi Minh City. “We will continue to accumulate a land bank in major cities and tourism hubs, and at the same time gradually move our existing land reserve into the city center,” Mr. Chau said.
Foreign funds have been dynamic in stake acquisitions in a number of other local developers. VinaCapital’s flagship fund the Vietnam Opportunity Fund (VOF) and Dragon Capital announced a few months ago they had outlaid $21 million on a 25 per cent stake in the Century Land JSC (CenLand), one of Vietnam’s leading real estate brokerages and the leader in the northern region. CenLand last month held roadshows introducing investment opportunities in the company as part of its efforts to inform investors about its plan to list on HSX this year, though it is yet to confirm exactly when.
The market has also taken in increasing FDI inflows from Japanese investors either with plans to go it alone or team up with local property developers. After debuting on HNX in early April, NetLand (Stock code: NRC) signed a strategic investment agreement with Japan’s Sanei Architecture Planning, while another Japanese company, G-7 Holdings Inc., became a major investor in the company in May. “We are also on the way to negotiating with three other Japanese investors this year to acquire more project capital,” said Mr. Nguyen Huu Quang, Deputy General Director of NetLand.
Another Vietnamese real estate developer, First Real JSC, which focuses on the mid- and high-end hospitality segments and land products and has a large land reserve in the central region, has already submitted documents to HSX and plans to list 30 million shares during the third quarter. “We will implement more than 20 projects in central and southern cities and provinces in the time to come and we’ve also been receiving investment requests from both local and foreign investors,” Mr. Nguyen Hao Hiep, Chairman of First Real, told VET.
Supply, Hanoi & HCMC
Source: VARS, Q1/2018
Transactions, Hanoi & HCMC
Source: VARS, Q1/2018
Future prospects
Residential remains a major asset class of appeal thanks to strong fundamentals driven by a low ratio of modern home ownership, young demographics, and rising incomes, which continue to lay the foundation for further IPOs and private placements to come, according to Ms. Hang from CBRE. “Investment interest in commercial, industrial and hospitality real estate is also on the rise,” she said. “Expansion of sectors across the board is fueled by GDP growth, which continues to impress, reaching more than 7 per cent for the first half of the year, the highest since 2011, and by sustained strong FDI flows.”
She also noted that foreign investors have never been more welcome, and while on an institutional level they have capital and know-how they have increasingly found themselves faced with competition from local developers with increased capabilities and financial prowess. “The listing of prestigious real estate firms will bring new quality products to the stock market, raising the overall market price of real estate shares and attracting more interest from domestic and foreign institutional and individual investors, leading to rising liquidity, transaction value, and market value of real estate stocks,” Mr. Chau from VPI said.
Large land reserves in prime locations are among the primary advantages held by all major Vietnamese property developers. First Real, for example, plans to build 20 projects this year with 5,000 apartments, raise its number of branch offices around the country to 16, and reach market capitalization of $44 million. Meanwhile, NetLand’s growth vision to 2020 includes it becoming a Top 3 company in Vietnam with a good distribution network and products that provide customers with real value. “We aim to raise investment and partner with foreign investors to acquire stable capital resources and their management experience,” Mr. Quang said.
He added that the local market will continue to consume good products in prime locations and at reasonable prices during the second half of the year, in particular apartments at less than $65,000. “Foreign investment funds are still keen to work with domestic companies to create products that are attractive to buyers,” he said. “Generally, the market in the second half will grow at about 5 per cent.”
Market limitations
Vietnam is still a developing market and investors see much growth potential after watching how the real estate market has progressed in other regional countries. One thing Vietnam could do to boost investor confidence further would be to speed up the construction of infrastructure projects, according to Ms. Hang.
In the context of tightening credit flows into real estate, it is becoming more difficult for developers to rely on funding from bank loans and it’s imperative they look at other channels. Besides the commonly-adopted strategy of forming a joint venture, strong local developers are now more open to the option of issuing shares on the local stock exchange. “Vietnam’s stock market witnessed tremendous growth in the beginning of 2018, but right now is going through a correction period,” Ms. Hang said. “Developers planning to list will have to plan carefully.”
Meanwhile, Mr. Nguyen Tho Tuyen, CEO of CenLand, believes that the state of the real estate market in the time to come will depend greatly on the finance market. Some investors have already cooled on Hanoi and Ho Chi Minh City. “Our survey found that investors continue to be interested in localities with convenient transport and a central location,” he said. “The market size has not changed much, which leads investors to properties with good locations.”
Mr. Quang from NetLand said that Vietnam’s real estate market has experienced a land fever since the beginning of the year, which is causing a lot of difficulties, especially in the provinces. “The situation is now under control,” he believes, “But banks are cautious about real estate lending and property transactions in May and June slowed, as did prices.”
Stakeholders are paying greater attention to sustainability, according to CBRE Vietnam. Many have pointed to overheated growth in sub-sectors like land at proposed special economic zones. “Due to the government’s timely intervention, however, we don’t think there is any chance of a real estate bubble,” Ms. Hang said. “We have also observed improvements in product mix and product diversification, even though there is still room for further improvement. Most importantly, many developers are still cautiously optimistic about the market in the near future.”
VN Economic Times
