VietNamNet Bridge – The Vietnamese tycoons in the real estate sector believe that it is now the right time to buy real estate products, as the market’s difficulties have made the products cheaper.
Buy now, make fat profit later
The lawyers, who give advices in merger and acquisition (M&A) deals, have said that the economic recession in many developed economies has not only led to the sharp fall of the foreign direct investment into Vietnam, but also to the leave of a lot of foreign investors.
In the real estate sector, foreign investors have run out of their patience after witnessing the real estate market bogging down in difficulties, and many of them plan to quit the market. However, the misfortune of some investors could be the opportunity of others.
Vietnamese big tycoons can see the big opportunities in the leave of the foreign investors. The hotels and tourism sites they buy from foreign investors not only have high assets values, but also the well known brands as well. The brands at international stature prove to be the things Vietnamese investors will not be able to acquire after a short investment period, if they do not “take a shortcut” by buying them from foreign real estate developers.
In fact, Vietnamese real estate investors understand well that it is not easy to find the land plots on advantageous positions to develop their projects, because the “golden land areas” have been nearly fully occupied. It also takes much time and efforts to follow administrative procedures and implement the construction.
The Tan Hoang Minh project, where the compensation rate for the site clearance reached 40 billion dong per square meter in Hanoi, which last several years, is a typical example.
The Vietnamese tycoons believe that it would be better to spend big sums of money to buy the completed real estate projects, because this allows them to skip the initial investment period which might last 3-4 years and continue making profits.
However, despite a lot of real estate assignment deals taking place recently, M&A experts keep emotionless when asked about the deals. They said that the hand changing of foreign invested real estate projects are just the specific cases, while it’s still early to conclude that it is a growing tendency. They have also denied the opinion that there is a wave of foreign investors quitting the Vietnamese market.
Nguyen Ngoc Bach, President of Asian Investment, confirmed that many domestic enterprises have pushed up the M&A activities where they act as the buyers. However, Bach said that acquiring other businesses or projects is just a normal think that occurs on the market.
According to Phan Xuan Can, President of Soho Vietnam, a real estate consultancy firm--hundreds of projects have been offered to sell via Soho. However, only 10 percent of the projects deserve attention. The 10 percent projects are located on advantageous positions, while the site clearance work-- the most complicated procedure in the project implementation--is completed, and the projects have “clean profiles.”
Can thinks that there are several reasons that warm up the real estate assignment market. Some foreign investors are lacking capital and meeting difficulties, therefore, they need to restructure their investment portfolios by selling some assets.
Meanwhile, other foreign investors, who have been living in Vietnam for 5-10 years and keep medium term vision, believe that they should buy something at this moment, when the demand for sale is high and the prices are negotiable.