Surging interest from Japanese investors in Vietnam’s real estate market

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Surging interest from Japanese investors in Vietnam’s real estate market

With an annual return on investment of up to 20-25%, Vietnam’s real estate industry is booming as an ideal investment destination for Japanese property firms ready to take on the market with a combined investment of up to USD 2 billion.

Vietnam’s economic growth, which has on average been above 5% since 1999, is the main driver for investor interest in the county. The country’s growing population will also lead to a rapidly expanding demand for real estate. As Vietnam’s domestic market continues to shrink and its population aging rapidly, Japanese companies are seeing Vietnam as a promising market for real estate.

Moreover, given Japan’s extremely low interest rates and limited economic growth, these investors have little option and are compelled to invest overseas.

Hanoi and Ho Chi Minh City are prime locations for Japanese conglomerates such as Sumitomo, Sanyo Homes, Daiwa House, Aeon and Toshin that are in search for large-scale mixed-use developments comprising of apartments, serviced apartments, retail and office space.

Earlier this year, Sumitomo funded a USD 100 million office-building project in Vietnam, showing pent-up demand in the sector. Meanwhile one of Japan’s largest builders, Kajima Corporation, formed a joint venture with Indochina Capital to invest USD 1 billion into property developments in Vietnam over the next 10 years. The partnership has plans to acquire several local projects in the pipeline.

In terms of investment, Japanese real estate firms are entering the local market through mergers and acquisitions (M&A), as they prefer acquiring stakes in local property developers gradually overtime as to gain a better understanding of the local market.

M&As also allow foreign investors to quickly gain a foothold without going through the massive amount of complicated paperwork involved in the real estate sector.

“Many of these Japanese real estate companies are financially strong to begin with and have immense experience in property developments, so I believe finding the right property in the most sought-after locations will be easy for them,” according to Michael Sieburg, Associate Partner of Solidiance Vietnam, an Asia-focused management consulting firm.

Vietnam is currently viewed among the top markets in Asia for foreign direct investment – but also adding to the attractiveness is the much-anticipated Trans-Pacific Partnership (TPP) agreement that will bolster the manufacturing landscape in the country.

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