Vietnam Real Estate Market: Will M&A Activities Boom in 2024?

2023 was a challenging year for Vietnamese real estate businesses. Most companies faced cash flow shortages, while access to credit for the real estate sector significantly tightened.

The central area of ​​Nha Trang city ( Khanh Hoa province ). Photo: Hong Dat - VNA.

However, mergers and acquisitions (M&A) in the real estate sector remain quite active. Experts expect M&A activity in this market to be vibrant in 2024.

The demand for home ownership remains strong.

Speaking to reporters at a recent press conference, Neil MacGregor, Managing Director of Savills Vietnam, noted that in 2023, the Vietnamese real estate market faced global economic pressures and challenges, both global and domestic. High interest rates contributing to the global economic downturn affected investor sentiment. Rising inflation also put pressure on household spending; the manufacturing sector recorded high inventory levels and reduced production orders, directly impacting Vietnam's key growth sectors.

Furthermore, according to Mr. MacGregor, delays in approving housing projects are hindering investment deployment and affecting market sentiment.

Nevertheless, Mr. MacGregor said: “Demand for home ownership remains strong thanks to urbanization across the country, a large population, and the urgent need for housing in major cities. The Government ’s efforts over the past two years have made progress in managing and addressing this issue, building confidence in a better future.”

In the context of a scarce housing supply, any capable investor launching a project can capitalize on the current high market demand, especially from the growing middle-class customer segment. In the office segment, in Ho Chi Minh City, although the supply of new Grade A projects is quite abundant, positive leasing performance indicates that there are still opportunities for investors and office developers in the future. Those providing or relocating office buildings that achieve green building certifications will attract higher rental rates.

Will M&A activity pick up again?

Assessing the market outlook for the coming period, Savills Vietnam believes that despite facing many difficulties, the real estate market has maintained its resilience and is ready to take advantage of positive economic policies and developments. The next two years are predicted to be a vibrant period for M&A activity in Vietnam.

[caption id="attachment_612576" align="aligncenter" width="1068"] The real estate market remains resilient. [Image caption: TTXVN]

Savills Vietnam predicts: “With a strong economy driven by a large population, infrastructure development, urbanization, abundant foreign direct investment (FDI), and a rapidly growing middle class, real estate M&A activity is expected to boom in the next two to three years, provided the legal framework allows.”

Mr. MacGregor noted that most investments are coming from Asian countries such as Singapore, South Korea, Thailand, Malaysia, and Japan. These countries have been active investors in Vietnam and are expected to increase their investments in the next two to three years, alongside potential from Middle Eastern investors. In particular, Vietnam's industrial sector will benefit from numerous free trade agreements, creating a diversified investment base and increasing investment in manufacturing and industrial real estate.

Foreign investors also appreciate the extensive experience and knowledge of the Vietnamese market that domestic businesses bring to the partnership. On the other hand, domestic businesses have provided greater investment opportunities for foreign investors. This allows foreign investors to expand rapidly after entering the market, while leveraging the experience and networks provided by their local partners.

Sharing the same view, Mr. Truong An Duong, Managing Director of the Northern Region and Residential Real Estate Division of Frasers Property Vietnam, predicted that the demand for industrial real estate will increase due to the growing inflow of FDI into the Vietnamese market. Speaking at the Vietnam M&A Forum 2023, Mr. Truong An Duong said: "In the coming period, we believe that industrial real estate will continue to develop well, and M&A transactions in the real estate sector will also increase."

Thu Tra