Although the participation of foreign investors has
contributed to unfreeze the property market, there is concern on hidden risks
if foreigners dominate the market, the Vietnam Business Forum (Dien Dan Doanh
Nghiep) reported.
The Ascott Co Ltd (CapitaLand)
has spent $9.45 million buying back 90% stake of Thuy Duong Investment Joint
Stock Co’s Somerset Central TD Hai Phong City condominium project located in Le
Hong Phong Street, Hai Phong city.
According to data of Vietnam
Department of Competition Management, there were 73 merger and acquisition
deals worth total $2.67 billion till the end of September 2011 in the whole
country, higher 1.5 times in value than the previous year. In which, 81.3% of
M&A value was made by foreign investment groups in Vietnam and 22 deals
were in real estate sector with the value of around $250 million.
Unfreezing market
The above statistics partially
showed that foreign investment capital is the way-out for some domestic realty
projects which are facing serious financial problems, helping the market avoid
any expected collapse. Given assessment on property project transfers, Dr Su
Ngoc Khuong—Investment Director of Savills Vietnam sad that disclosed transfer
deals as mentioned above was only the surface but the underground part really
is busy. Since the year early, the number of property deals Savills joined as a
consultant has grown by 20-30% year on year. Especially, among the deals,
buyers were mostly foreign investors. Usually, a deal lasts several months to
whole year so if the negotiations are successful, according to Khuong, there
will be a series of realty projects officially being changed the owners.
Most recently, the government’s
decision to approve the national housing development strategy till 2020 said
that the country’s average housing area is targeted at around 22 square meters
of floor per person by 2015. Vietnam plans to attract new construction
investment of 100 million sqm of floor. While the average housing area now is
only 17 s.qm per person, showing the serious supply shortage in Vietnam.
Foreign factor helps stimulate the idle market and create more supply to serve
the social demand.
The market needs foreign
capital, technology and management capacity, said Dong Thanh Tung—an
experienced property investor. We might have to import technology and employees
from foreign countries but local enterprises will have to learn much management
experience and modern technology, and the market entry method from foreign
partners. The direction seems to be better than the trend of changing design,
inner decoration or re-projection in view to cut investment costs as some
project investors are doing.
Reasonable fears
Dr Vu Dinh Anh, Former Deputy
Head of the Market and Price Research Institute said that there had not been
accurate figures on foreign investors as well as their real investment value in
Vietnam’s realty market. But what we should pay attention is the disbursement
matter rather than the capital level they committed. Because, once the
foundation is completed, investors are able to mobilize capital and when seeing
upheavals in the property market, they will withdraw capital immediately. The government
should keep an eye on gaps in the laws regarding foreign factors in the real
estate market, he recommended.
Economists feared that when FDI
inflow means the risk of increased trade deficit for the future because
investors have to import technology, materials, and workers to implement
projects. Moreover, the realty projects are not involved in export operations
so this will cause difficulties for Vietnam’s foreign currency balance as
foreigners earn Vietnamese dong and then repatriate foreign currencies.
VietBiz24
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