Will foreign investors dominate the M&A in real estate for 2024?

- In 2023, the domestic real estate situation faced many difficulties. How do you think this will affect M&A activities in this field in 2024?

In 2023, several developers failed to sell their projects, causing a huge cash flow issue.

According to Vietnamese industry groups, in 2023, domestic real estate enterprises were looking for answers to their bond concerns. Due to the burden of this situation, many businesses were compelled to reorganize and sell assets in order to meet financial obligations.

There are many such assets on the market, but the quality of the assets is what determines if a purchase is successful. Projects listed for sale will only attract attention if they are legally compliant, particularly under the new legislation established by the National Assembly in 2023.

- So, how will M&A deals in real estate look in 2024? Is it true that foreign investors will dominate this sector?

I disagree with the assertion that foreign investors will dominate the M&A real estate market by 2024. In my opinion, people will be extremely careful about acquiring real estate at this time.

For starters, because the Vietnamese real estate market is now being filtered, even long-term international investors in Vietnam are unable to adequately analyze market risks, particularly while waiting for the legislative papers that will lead the new Laws.

Foreign investors should avoid "investing" in M&A operations right now, unless the project is legally guaranteed or has extraordinarily high potential.

M&A activity in real estate will be more robust in 2024, notwithstanding its low level. However, I observe that this "recovery" does not stem from foreign investment.

The market's momentum may be based on projects completed in 2023. Companies who have been heavily involved in the market's "rescue" process will recognize their skills in these transactions and will implement relevant rules.

Companies with adequate land finances who wish to build will most likely wait until the market rebounds, probably by 2026, when conditions will be more favorable. This market will remain calm in the first half of 2024, with more positive indicators expected in the third and fourth quarters.

The new legal corridor will assist to unlock a huge number of projects and build impetus for mergers and acquisitions.

- In your opinon, which segment will be prioritized for M&A activities in real estate?

Industrial real estate now has a very limit ed supply on the market. This market has experienced rapid expansion in recent years, as Vietnam has become an increasingly appealing location for FDI in manufacturing. This tendency continues, causing corporations with industrial real estate land funds to choose to keep them for development rather than sell.

The price of industrial real estate in Vietnam will continue to rise following the completion of key infrastructural projects such as the North-South Expressway. Unless the price is terribly low, I don't believe many M&A deals in this category will take place in the near future.

As a result, I believe that the residential real estate sector will see the most activity. However, legislative difficulties have a significant impact on residential real estate, particularly in larger cities such as Ho Chi Minh City. However, the new legislative requirements have yet to be applied precisely.

Furthermore, all of these issues will be decided based on the recently enacted draft of the Land Law (amendment). A new legislative framework will unleash a huge number of projects, generating impetus for M&A operations.

- How will M&A in real estate contribute to the market's recovery in 2024?

I think it will assist real estate market recovery. Currently, many real estate companies are experiencing financial challenges. Even once legal difficulties are overcome, it is impossible for them to pursue all current projects simultaneously. As a result, to address short- and medium-term financial issues, corporations are likely to sell some assets in order to focus cash on bringing important initiatives to market.

For example, a firm having ten legally settled projects will never sell all of them. The market has recently been highly "thirsty" for supply, and enterprises will have to prioritize finishing as soon as possible in order to sell to it. If they miss this recovery phase, when the market has more supply, it will be extremely tough for those who are hesitant to sell.

When firms are able to sell their products, they use the cash flow to fund their projects. This will result in more sustained liquidity in the real estate market.

 Thank you so much!