|Some real estate businesses hope to reach a certain size so that they can look at listing on stock exchanges, Le Toan |
The Ho Chi Minh City Stock Exchange (HSX) last week confirmed the receipt of a listing application by Khai Hoan Land JSC – one of the major real estate brokerages in the country. Accordingly, the group registered to list 175 million shares, equivalent to a charter capital of approximately VND1.75 trillion ($76.1 million).
In the same vein, Dat Xanh Services (DXS) – the brokerage arm of property developer Dat Xanh Group – aims to list more than 358 million shares on HSX this month.
Property tech corporation PropertyGuru, backed by private equity firms KKR and TPG Capital, is also considering a listing in the US.
Vietnam is hailed as one of the best countries in Southeast Asia for property investment thanks to a vibrant domestic real estate market and its robust growth.
PropertyGuru – the parent company of Vietnamese property portal batdongsan.com.vn – believes in the vast potential of Vietnam’s property market and is ramping up its presence in the country. The positive indicators of the economy in 2020 and the first quarter of 2021, along with the state policy reforms, all indicate that 2021 will be a favourable year in all aspects of Vietnam’s economy and real estate market, it says.
Despite the sweeping pandemic and a global recession, Vietnam has maintained a stable economy and achieved positive growth last year. In the Asia-Pacific region, only China, New Zealand, and Vietnam achieved this.
Last year, foreign direct investment continued to pour into Vietnam with a figure amounting to $28.53 billion, while the real estate industry alone accounted for about $3.8 billion. Moreover, radical tax revamps for real estate-focused businesses, coupled with favourable disbursement policies, have enjoyed noticeable changes.
Real estate searches in the first quarter of 2021 had the highest growth rate in many years, reaching 37 per cent over the same period in 2020. Real estate prices in many localities also increased sharply, as batdongsan.com.vn highlighted.
“This year is one of the most generous credit years for the real estate market. From a supply perspective, the pandemic is a risk but also an opportunity for the real estate market,” PropertyGuru noted. “Each year, Hanoi and Ho Chi Minh City need approximately 140,000 houses, yet supply has been very limited since 2019. Many businesses have changed their product development strategies. Units with good fundamentals, diverse product portfolios, and targeting the real needs of buyers have many opportunities to prevail. Investment in real estate is a priority for most Vietnamese. Owning a house seems to be a must for an adult here.”
Eric Nguyen The Trung, member of the board of directors cum deputy CEO at Khai Hoan Land, shared his view that Vietnam’s real estate industry is just at its dawn.
“The demand for housing is huge and given that good supplies are limited recently, we do think the housing price will reach another level. In large cities, a high urbanisation rate significantly pushes demand for more products. However, the underdeveloped infrastructure and conservative legal framework make it difficult for projects to be executed expeditiously,” Trung told VIR.
In his view, the townships and bigger projects developed by reputable developers will gain an upper hand, and the appetite for those products will be on an upward trajectory in the long run.
Tapping into the fund pool
In contrast to the long-standing momentum of property developers in the Vietnamese stock market, some major real estate brokerages are just in the preparation stage for an initial public offering (IPO). Listings of real estate brokerages are lagging property developers, such as Vinhomes, Novaland, and Phat Dat Real Estate.
Trung of Khai Hoan Land explained, “For real estate brokers, it is not easy to reach a certain size for listing. For example, it does not make sense for a company with $8-13 million market cap to file for an IPO. Moreover, brokers might find it hard to reach an outstanding position and gain customers’ trust. If a company does not possess such key advantages, it is not eligible to raise funds for an IPO.”
In addition, real estate developers in Vietnam have tangible products and are often of a larger scale. Brokerage firms, on the other hand, do not have tangible products and are usually smaller in size. The brokerage profession in Vietnam often has a short lifespan, depending on the products from developers.
“Brokerages were only recognised and regulated by the law in 2004 when the Law on Real Estate Business was born,” PropertyGuru said.
Before that, the development of the real estate brokerage profession was still fragmented, taking place within small groups in each local area, and not yet representing an industry of Vietnam. Therefore, brokerages also take time to establish a position in the market.
Individuals working as real estate brokers must be trained, certified and socially recognised as real estate consultants.
“The listing of large brokerage companies until now is only reasonable in terms of time and preparation of the companies. After a period of development, brokerage companies in Vietnam often tend to become developers,” the Singapore-backed firm emphasised.
PropertyGuru was reportedly considering a listing in the US through a special purpose acquisition company (SPAC) route. The corporation previously nixed plans for an IPO in 2019 on the Australian Stock Exchange, citing valuation concerns. There might be a deal as soon as this year as well, and a merger with a SPAC could see the company valued at $1 billion, according to Bloomberg.
However, the US Securities and Exchange Commission is now stepping up scrutiny of SPAC, and this rout’s frenzy has been met with greater investor scepticism which could delay PropertyGuru’s overseas listing.
A representative of PropertyGuru told VIR, “Our focus remains to fuel investments in our proptech ecosystem that benefits home seekers, real estate agents, and property developers across Southeast Asia. We are looking at any beneficial scenario to fund that growth – an IPO and other financing and corporate transactions will always be an option. We have nothing to share on that, though, at this moment.”
In April, DXS carried out its IPO and is now expecting its deal to be a blockbuster on the stock market in 2021. Up to now, DXS has a nationwide distribution network with an overall market share of up to 29 per cent.
A strong foundation in the primary market is considered an important steppingstone for DXS to transform into a full-service model in the future. Since 2019, DXS has been developing a secondary brokerage segment (resale brokerage), financial services, and real estate management.
“We want to develop DXS to follow a service ecosystem where customers can transact any real estate distributed by DXS,” the company’s leaders shared at its IPO ceremony. “Whether working directly with investors or just buying and selling, all will be served by DXS. We will also offer many other related services such as financial services or insurance.”
Nguyen Thi Cam Tu, analyst at VNDIRECT, pointed out some risks revolving around the DXS listing, “The prolonged COVID-19 crisis and the lengthy and complex legal process of selling residential projects would leave a detrimental impact on brokerage activities and sales of real estate projects. Furthermore, the secondary real estate brokerage market would face increasingly intense competition from small brokerage companies across the country.”
Khai Hoan Land, on the other hand, has mostly finished the listing procedure and is now expecting to be listed on HSX at the end of this month. The firm is slated to earn a valuation of roughly $200 million after the listing.
“Our company has more than 3,000 consultants and nearly 30 branches under its umbrella. We hold around 20 per cent share of the primary market in Ho Chi Minh City for mid- and high-end products and target profit before tax of approximately VND400 billion ($17.4 million) for 2021,” Trung added.