Japanese investors flock to real estate

Japanese investors are increasingly attracted to the Vietnamese real estate market

For the past year, many Japanese investors have co-ordinated with Vietnamese counterparts to develop ­property projects in the country.

The largest project to come from Japanese investment so far, Sumitomo and BRG Group are expected to start construction of a $4.2 billion smart city in Hanoi this year.

Elsewhere, Mitsubishi has also co-operated with ­Vietnamese property developer Bitexco to create 240 low-rise housing units and two high-rise condominiums out of a proposed total of more than 1,000 low-rises and 17 high-rises at The Manor Central Park project, also located in the capital.

Mitsubishi has recently decided to pour a total of around $500 million to develop a range of projects developed by ­domestic Phuc Khang Group.

“Major cities like Hanoi and Ho Chi Minh City have high population density and large-scale economies, while the housing supply still limited. The improving infrastructure system within the real estate market offers high potential for future investment,” a representative from Mitsubishi said.

“Japanese and Vietnamese investors are of similar ­mindsets and hold similar ­development strategies. Therefore targets from both sides will bring about new residential areas to Vietnam,” he said.

Meanwhile, Hankyu Hanshin Properties Corporation and Nishi Nippon Railroad have also been in co-operation with Nam Long Group to develop a range of property ventures in ­Vietnam.

Kajima Corporation, a Japanese group which has been actively investing across Southeast Asia, has a current partnership with ­Indochina Capital to invest more than $1billion spread over several years to develop a chain of 20 hotels in Vietnam, ­Cambodia, and Laos under the brand name of Wink Hotels.

Keisuke Koshijima, executive vice president and general manager of the Overseas ­Operations Division of Kajima Corporation, told VIR that ­besides investing in the hotel segment, the company is still looking for opportunities in ­offices, residential areas, and other real estate development.

“Against the backdrop of continuing economic growth, Vietnam keeps its position as one of the hottest markets in the world for Japanese investors. I foresee that this trend will ­continue in the years to come,” Koshijima said.

Alongside this, the Vietnam real estate market has attained interest from other groups such as Nikko, Tokyu, AEON, Nidec and Hitachi.

Danang emerging as hot ­destination

The central city of Danang has recently become a fresh destination for Japanese ­investors, to rank alongside Hanoi and Ho Chi Minh City.

During a recent annual meeting between Danang authorities and ­foreign investors, two ­Japanese-backed real estate projects received investment certificates and another billion-dollar plan got the green-light to carry out due diligence.

Kai Marcus Schröter, ­general director at Hospitality Tourism Management based in Danang, commented that the city as an investment destination in manufacturing, trading, infrastructure, construction, and real estate has been on the radar of Japanese investors for quite some time, with a noticeable ­increase since 2017.

“This is most likely due to improved foreign investment legislation, effective infrastructure development, and the ­relatively lower labour costs compared to Hanoi and Ho Chi Minh City,” said Schröter.

Especially, he saw a noticeable increased interest from Japanese investors in real estate and hospitality, albeit at a lower rate than in other ­sectors.

“This interest is mainly due to the positive tourism market developments, with a new number of direct flights between Danang and Japanese cities, and an increase in visitor arrivals. There is also a noticeable trend in the acquisition of second homes and retirement properties from Japanese buyers. This is due to various stimulating factors such as an aging population in Japan, cheaper living costs in Vietnam, an attractive living environment, improved healthcare, and foreign ownership rights,” he added.

In Danang, Mikazuki Group has recently invested $100 million into the Xuan Thieu complex, which includes a five-star hotel, waterpark, and food court. Before that, Sun Frontier Fudousan also started construction on the Garden Tower apartment project in Son Tra district of the city.

Another Japanese-financed company, Sun Frontier Investment, has also received an investment certificate to develop a twin-tower project in Hai Chau district at a cost of $56.4 million.

Until now, Danang has attracted 170 Japanese-invested projects with the total registered capital of $650 million.

High interest and potential

With the high prestige in ­financial capacity and ­visible actions after making any investment decision, projects backed by Japanese investors receive a very strong response from the market.

Le Hoang Chau, chairman of the Ho Chi Minh City Real Estate Association, said that there is still enormous opportunity for co-operation between Ho Chi Minh City and Japanese property developers and construction companies, as the city now has some 1,200 projects underway, including infrastructure upgrades and beautifying works.

“Japan is known for creating efficient and successful small metropolitan towns, making them confident to build properties in Vietnam. Not only is building these satellite towns a wise business choice for Japan, but it has also expressed interest in Vietnam. The building of smart cities is attractive for investors, the government, and potential residents,” Chau said.

Japanese investment is also helpful for Vietnamese real estate companies giving Vietnamese companies experience in financial and technology transfer.

Takimoto Koji, chief representative from the Japan External Trade Organization (JETRO), confirmed that direct and indirect investment flow via mergers and acquisitions (M&A) from Japan is on the rise.

“Many Japanese investors are pouring funds into the real estate market here. Besides developers such as Mitsubishi, Maeda, and Kajima, we also have seen increased interest from Japan such as Creed Group. All of those are reflecting the keen eye of Japan’s business community to the Vietnamese market,” Koji said in a meeting last week between Vietnamese and Japanese businesses, held in Ho Chi Minh City. “We expect that the M&A flow from Japan to Vietnam, especially in real estate, will continue to increase in 2019 and in the years after that.”

Schröter from Hospitality Tourism Management however stated that to increase awareness and direct investment from Japan, local authorities should consider opening an investment promotion bureau and conduct road shows in Japan, with professional and Japanese-speaking staff.

“Japanese funders are particularly diligent in choosing investment destinations, not only in terms of finances and risks, but also in terms of intangible values, attractiveness of the destination, and quality of living. This is somewhat harder to achieve and takes time. Vietnam needs to take a long-term approach, rather than focussing on a sudden increase of investment activities,” he said.