Vietnam

In Q3/2021, the mobility measures adopted by the government to contain the pandemic hit the economy domestically. According to the General Statistics Office GDP grew by only 1.42% year-on-year (YoY) in the first nine months of 2021 due to long lockdowns, supply chain disruption and factory shutdowns.

However, the Ministry of Planning and Investment reported that FDI increased by 4.4% YoY to approximately US$22.15 billion.

Some major M&A transactions included:

• Aseana Properties Ltd. sold its stake in City International Hospital to its joint venture partner with a total value approximately US$95 million.
• The Ascott Ltd. (Capitaland) acquired the 364-unit Somerset Metropolitan West Hanoi for around US$93 million
• Nishi Nippon Railroad acquired Nam Long Group’s capital contribution at Paragon Dai Phuoc One Member LLC. They joined Nam Long Group in the development of the 45 ha Nam Long Dai Phuoc township.

In terms of industrial property, ready-built factories (RBF) were the first choice for investors given healthy occupier demand for high-quality factory and warehouse space. High rents and the shortage of industrial land in prime locations also helped drive RBF demand. Bac Giang and Hung Yen provinces approved industrial zones of 800 ha in Bac Giang and 193 ha in Hung Yen. According to the Ministry of Natural Resources nd Environment, by 2030 the amount of industrial land will increase by 115,000 ha compared to 2020.

Some new public infrastructure projects were in the implementation stage and some existing projects were completing. On 23 September 2021, the Prime Minister approved the investment plan for the first phase of the Bien Hoa-Vung Tau Express with a total investment of approximately US$822.89 million, to be built under a public-private partnership model. Thu Thiem 2 Bridge saw the installation of the last steel beam. Expected to be completed by Q2/2022, the bridge will connect District 1, the Thu Thiem area and Thu Duc City. According to the Hanoi Department of Planning and Investment, Hanoi plans to invest more than US$3.65 billion in the transport sector to implement a total of 255 projects.

Neil MacGregor, Managing Director, Savills Vietnam commented “The fundamentals of the Vietnamese economy have been and continue to remain attractive to real estate investors. The growing wealthy and middle class will continue to drive demand for housing throughout Vietnam, which is further supported by urbanization and the steady reduction in the number of traditional multi-generational households.  Residential supply has been constrained in recent years, resulting in steady price increases, which have continued throughout the pandemic.  As demand is once again unleashed, the government and developers will have to act quickly to release supply to avoid rapid price escalations.  Investment in infrastructure will also be important to open up new markets to satisfy the insatiable appetite for property investment from the growing middle class, who have few options to invest their rising wealth.”

“In HCMC office supply has remained remarkably constrained, supporting occupancy rates and rents.  This sector remains a key focus for foreign investors, however opportunities remain scarce.  This will likely result in continued yield compression, with prime office yields now falling below 6%.”

“Hospitality is the sector hardest hit by the pandemic and this is where savvy investors are most likely to find rare opportunities to enter the Vietnamese real estate sector.  Whilst true recovery may take several years, this is a good time to be seeking to acquire quality assets that would never normally come to market. Opportunities exist both in key cities, as well as resort destinations.”

Regional Markets

Hong Kong’s economic outlook remains upbeat for 2021, with signs of sustained growth and recovery over the past three quarters. Promising economic figures have in turn improved the outlook for the property markets. Traditional asset classes such as office and retail, which were neglected in 2020, have clearly seen a pick in momentum, attracting plenty of investor interest in 2021. Investment in alternative asset classes in Hong Kong has boomed during the pandemic. The biggest deal in the quarter was the disposition of PCCW’s data centre portfolio to DigitalBridge Group in July, for a consideration of US$ 750 million (HK$ 5.85 billion).

Building on the recovering momentum of Q2/2021, investment sales in Singapore in the third quarter rose 36.1% QoQ to S$7.21 billion. On a YoY basis, the increase was 160.1% from a low base of S$2.77 billion. Last year’s low base was due to the strict measures imposed on movement even as Singapore emerged from the lockdown which spanned most of Q2/2020. Despite uncertainties surrounding the global economic recovery amid a resurgence of infections it is projected that Singapore's economic growth will be a respectable 6-7% in 2021. Notwithstanding the sharp rise in daily infections, many foreigners still view Singapore as a stable and attractive place to invest or start up a regional business.

Thailand’s economic figures have shown some improvement after the number of COVID-19 infections began to trend down, while the vaccination rate improved substantially from Q2. These positive signs have led to the easing of lockdown restrictions in the dark-red provinces1 and the reopening of restaurants and shops, offering hope for the Thai economy, and especially hard-hit retailers. Complete national vaccination will be a key driver of recovery and is expected to be achieved within 2022 (the vaccination rate stood at 22.8% at the end of Q3). Late in the third quarter, the cabinet approved a plan to attract more than one million qualified people to Thailand over the next five years, targeting wealthy global citizens and highly skilled professionals. Benefits of the scheme include 10-year visas for approved persons, automatic work permits, income taxes at local rates and tax exemptions on income earned abroad.

In Japan, corporate profits have rapidly improved with listed companies recording historically high net profit margins in Q2/2021. Furthermore, there are signs that the economy may start expanding in earnest early next year, as the rapid vaccine rollout continues culture. The logistics sector is thriving despite concerns over large upcoming supply, and it is likely to carry on attracting institutional capital with increased allocations as it becomes a mainstream asset class. This development may have also further fuelled the booming popularity of the data centre sector. Investor appetite for multifamily properties and offices has persisted despite rental softening. Meanwhile, retail continues to lag, although high street retail remains sought- after as seen from the multiple flagship store openings in Tokyo. Hospitality has continued to garner interest, but sellers have not been flexible on pricing, resulting in a limited number of deals. Overall, with the fierce competition currently present in the acquisition market, international capital is exploring well beyond Tokyo and traditional asset classes for investments.