Savills announces Vietnam and Asia investment

In this series of press release, Savills proudly introduces some selected topics featured in Prospects: Asia Pacific Real Estate Intelligence, a new online magazine produced by Savills APAC

The debut unveils the investment sector across APAC in last 12 months and first quarter of 2018, as well as the development of mergers and acquisitions (M&A) Q2.2018 in Vietnam – one of the most favoured destination for foreign investors

Asia Pacific real estate capital is more mobile than ever

Cross-border activity in Asia Pacific is at a 10 year high, according to Real Capital Analytics.

Investors have not been so busy internationally since 2007, RCA found, however the sources of cross-border capital have changed since the last peak.

“Then, the flows were driven by Australian and Singaporean sources. Now, next to the Singaporeans, Chinese and Hong Kong investors dominate,” says Petra Blazkova, senior director, analytics for APAC at RCA.

Chinese buyers were the largest group over the last 12 months despite Beijing’s capital restrictions. Hong Kong, in turn, has been targeting China but also placing capital in Singapore and Japan. Singapore investors are more established cross-border players in Asia Pacific and their performance is more consistent over time. Over the last 12 months, they have increased their spending most significantly in Australia, Japan and India.

Major cities, led by Tokyo, were the most active metros in the first quarter, while Hong Kong showed some of the most startling growth. Link REIT’s completion of a deal to sell $2.95bn of shopping malls swelled the city’s retail transactions.

Meanwhile, Shanghai recorded the third-highest commercial real estate investment volume in Asia Pacific, after Hong Kong and Tokyo. This was mainly driven by office and hotel transactions.

Vietnam - Hectic M&A

In the first six months of 2018, Vietnam’s economy expanded 7.08% year-on-year, marking the highest first-half growth since 2011. The real estate sector continued receiving robust interest from foreign investors by ranking first in the contribution to FDI registration with US$4.971 billion, in which the Smart city project in Hanoi accounted for the majority. This mega project covering 271.82 ha, is jointly invested by 4 local investors and Japan’s Sumitomo Corporation. The first phase is planned to commence in the third quarter of this year and is to be developed by a Sumitomo – BRG Group joint venture. Once completed, the Smart city is expected to be one of the most advanced smart cities in Southeast Asia with a modern transport system.

The property market in Ho Chi Minh City also witnessed the strong interest of major players in this quarter. Frasers Property entered into a conditional share purchase agreement to acquire 75% of the issued share capital of Phu An Khang Real Estate, which owns a mixed-use development plot in District 2, for circa US$18 million in April. In early June, Malaysia’s Berjaya Land Berhad announced their proposed disposal of the Vietnam Financial Center project to Vinhomes and its affiliates for approximately US$39 million, following Vinhomes’ capital contribution of nearly US$88 million to the project back in March. Upon completion of the transaction, Vinhomes and its affiliate will fully own the 6.6-ha project in District 10 for mix-used development. In addition, Vinhomes and its affiliates also injected approximately US$522 million as capital contribution and accordingly owned 99.2% interest in the 925-ha Vietnam International University Town project, and was in the process of acquiring the remaining 0.8% stake from Berjaya.

The residential sector was still the focus of local players. Xuan Mai Corporation successfully acquired Eco-Green Saigon, a 14-ha project in District 7, Ho Chi Minh City. Nam Long Group continued their cooperation with Japanese investors, Hankyu Hanshin Properties Corporation and Nishi Nippon Railroad to develop Akari City, a 8.8-ha residential project in Binh Tan District, Ho Chi Minh City. Besides, Nam Long also kicked off their key project, Waterpoint township in Long An province in June. Covering 355 ha, Waterpoint consists of townhouses, villas, high-rise apartments, mixed-use complex, hospital, education and sports facilities.

The second quarter of 2018 also recorded the notable IPO of Vinhomes JSC, the residential property development unit of Vingroup, drawing strong interest from domestic and foreign investors, including GIC who acquired a 5.74% stake as Vinhomes’ cornerstone investor.

Aside from the positive outlook for the residential sector, Savills expects outstanding M&A performance from both the industrial real estate and office sector. The industrial sector is fuelled by growing FDI being poured into manufacturing, improved infrastructure and a competitive outlook when compared with other countries in the region.