M&A to pick up in property market

"The property market has been seeing one of the worst slumps in many years," said Đinh Thị Nhật Hạnh, CEO of Khai Hoan Land.

High inventory and mounting debt have sent developers scrambling for funds, creating good opportunities for new players, including businesses and investment funds, to join the market by acquiring suitable lands for their future projects.

A property project by Novaland in HCM City — VNA/VNS Photo

The market recently has seen major deals such as the Novaland Group's share exchange worth over VNĐ1 trillion with Dallas Vietnam Gamma Ltd.

Phat Dat Company sold 89 per cent of its shares in the 197 Điện Biên Phủ Building Project in Bình Thạnh Dist. HCM City. The company said the sales were part of an effort to bolster cash flow, restructure the investment portfolio, optimise investment, improve debt liquidity and settle bonds before maturity.

Nguyễn Quốc Anh, deputy director of batdongsan.com.vn, said these were only the first of many deals and that merger and acquisition activity would likely pick up pace in the coming months.

Anh said there had been talks of major M&A deals worth hundreds of millions, even billions of dollars in the making, with foreign investors showing particularly high interest.

David Jackson, managing director of Colliers Vietnam, said foreign investors had shown a lot of confidence in the market's potential and foreign funds could provide a much-needed boost to the market to speed up its recovery.

"We have been contacted by numerous investors, both from inside and outside of the country, about investment opportunities in Việt Nam's property market," he said.

Dương Thùy Dung, CEO of CBRE Vietnam, said foreign investors had been closely watching the market for some time now and many of them had started making their moves. In addition to traditional investors from Hong Kong and Singapore, recently there had been many more investors from South Africa and the Middle East showing interest.

Successful deals, however, remained few and far between.

Dung said one major obstacle was the high return foreign investors demand. They often asked for 18-20 per cent return while domestic developers could only go as high as 13-15 per cent annually.

Foreign investors were also extremely cautious with developers with poor reputations or those who have placed their projects as collateral for the banks.

Nguyễn Công Ái, deputy director-general of KPMG Vietnam, said foreign investors routinely conducted extensive market research and surveys into the market before making their offers. They also tended to value projects slightly lower than domestic developers.

"Vietnamese developers often had to spend a huge sum of money to first acquire the land, finish the legal prerequisites and develop infrastructure. It isn't always an easy decision to sell," Ái said.

On the other hand, investors were the ones with cash to spend and they, of course, were looking out for the best deals possible.

He said M&A activities within the market would likely pick up around the end of 2023 or in early 2024 once both sides have enough time to consider their positions.