Economic and market analysis experts assessed that in 2011, with the existence of real estate index in big cities, real estate market is expected to be stable and transparent. In addition, merger and acquisition (M&A) trend would also create new dynamics to the market.
Increasing M&A trend
In the recent time, VinaCapital Investment Fund sold 70 percent stake in five-star hotel Hilton Hanoi Opera for $8 million. Shortly after that, the fund sold its entire 50.1 percent stake in class A office building project in the centre of District 1, HCM City.
Owner of two apartment projects Prince and Princess at Thao Dien Ward, District 2, HCM City also sold the two projects to JSM Indochina investment fund for $26 million to build a consolidated complex. Hoang Anh Gia Lai Group sold the entire Hoang Anh An Tien project in Nha Be District, HCM City with nearly 1,000 apartments to BIDV Labour Union Investment Joint Stock Company. Dat Xanh Company acquired the Phu Gia Hung Apartment project in Go Vap District, HCM City in the form of buyout Ha Thuan Hung Limited Company, the owner of this project. Most recently, Paragon Corporation hired Malaysia’s Parkson to manage the Saigon Paragon Shopping Centre, etc.
According to various property experts, the recent project transfers are only the beginning stage of a new trend. In the context when credit market has not shown positive changes and investors are unable to access to different loans, M&A seems to be a reasonable solution. In another aspect, professor Dang Hung Vo, former deputy minister of Natural Resources and Environment said that in the recent two years, many foreign investors participated in real estate market of Vietnam through M&A, rather than actively looking for projects.
The reason is the difficulties in Vietnam’s legal framework and real estate market. The gap of interest between foreigners and Vietnamese people remains rather large. On the other hand, the mechanism to mortgage property to get investment loans has not been accepted at foreign credit institutions. Therefore, the important channel between domestic real estate market and foreign financial market has not been cleared. Thus, M&A of domestic enterprises and foreign real estate firms is also understandable.
Creating real estate index
According to information from Ministry of Construction, in 2011, the four largest cities of Vietnam will be the pilot areas to build real estate index, including Hanoi, HCM City, Da Nang, and Can Tho (after the pilot phase, other provinces and cities will be encouraged to apply widely). The published indices include real estate price index and index for the quantity of real estate transactions. Accordingly, real estate price indices include general price index of the local areas, and price index of each property type in each area of the province or city.
Indices for the quantity of real estate transactions will include index for the quantity of transaction in each area, each local area and index for the quantity of transactions of each property type. The property types chosen to be applied include properties to sell or transfer, which are apartments, individual houses or land; and properties for lease as offices, etc. The first publication of the indices will be from the third quarter of 2011. The starting time to build indices is the first quarter of 2011. Ministry of Construction expects that vague status of information would be cleared after the application of real estate indices.
Investors and businesses can easily look up and have a rather clear picture on the price fluctuation as well as the quantity of transactions in a specific area. To ensure the authenticity and reliability, Nguyen Manh Ha, director of Department for Housing and Real Estate Management (Ministry of Construction) said index calculation methodology would be based on the actual trading situation in each area of the cities, not the prices set by investors. In addition, price fluctuation over time of similar properties will also be calculated.
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