Savills : Vietnam reports on HCMC real estate market Q4/2017

GDP exceeded the 2017 target and at 6.8% achieved the highest growth in five years. GDP per capita was US$2,385 and increased 10% year on year (YoY).

Credit growth is estimated to reach 18% to 19 percent. Estimated outstanding consumer borrowing increased 65% YoY. Loans for home buying and house repairs had a 53% share and increased 77% YoY.

Inbound tourism continues to grow with 12.9 million international visitors for 2017, up 29 percent. Accommodation and F&B revenues were approximately US$22 million, up 12% YoY.

Total registered FDI growth was 44% and disbursement grew 11% over 2016. Japan, with an over 36% share led new FDI registered capital.

RETAIL: Non-CBD Supply

Total stock was approximately 1.2 million m with 24,200 m added from three new supermarkets and one shopping centre opening. Three closures withdrew 11,100 m.

Average gross rent was down -3% quarter-on-quarter (QoQ). Average occupancy had a slight -1ppt decrease. Non-CBD rents decreased in the face of surplus supply to safeguard occupancy rates.

Many retailers offered flexible promotions to boost year-end sales. Larger projects focused on increasing footfall through consumer-centric events and new appeals such as ice skating and a mini theme park.

OFFICE: Strong

One 2,400 m Grade C project in District 1 entered. Stock was more than 1.7 million m, fairly stable QoQ, but up 6% YoY.

Performance remained positive. Average gross rents increased 7% YoY. The increase was attributed to limited CBD vacancies and new Grade A and B projects launched over the year.

Average occupancy was high at 96 percent.

By 2020 new supply is expected of up to 585,000 m.

SERVICED APARTMENT: Improved

Three projects withdrawn and two new projects saw stock decreased overall by -2% QoQ. Total stock was more than 4,800 units, up 7% YoY.

There was an average occupancy increase of 2ppts QoQ and rents remained stable. Only Grade C had occupancy increases. To generate new business, many projects expanded their short-term offers.

The over 800 new units planned to launch in 2018 are expected to affect segment performance. The CBD accounts for 70% of new supply.

HOTEL: Recovery

Stock was up 8% YoY to over 16,500 rooms. One project was upgraded to 4-star this quarter.

Average occupancy peaked at 76%, the highest for 5 years. As the high season for international arrivals, all segments saw significant improvements with occupancy rates increased up to 12 ppts QoQ.

The average room rate (ARR) was stable YoY.

According to HCMC Tourism Department, HCMC welcomed 6.3 million international visitors this year, up 23% YoY. Korea, Japan and China were the leading source markets.

APARTMENT: Grade C Sales Up

Thirteen new projects and the next phases of 6 active projects launched, providing approximately 8,500 units, a decrease of -20% QoQ. There were more than 32,000 units available across all grades, decreasing -8% QoQ and -27% YoY.

Sales were over 15,100 units, increasing 32% QoQ and 44% YoY. New project sales accounted for nearly 30% of city transactions. Grade C had good performance, up 55% QoQ while Grade A decreased -46 percent. Absorption at 46% was up 14ppts QoQ and 23ppts YoY.

From 2018 to 2019, supply is expected to be more than 68,000 units from 65 projects. District 2 is expected to provide the largest share with 46 percent.

VILLA & TOWNHOUSE: Vibrant

Five new projects and one new phase supplied over 1,100 dwellings. Primary stock was approximately 2,000 dwellings, up 2% QoQ but down -32% YoY. Ninety three percent of new supply are townhouses.

Sales were up 25% QoQ and YoY. Absorption was 67%, up 12 ppts QoQ and 34 ppts YoY. Binh Chanh for the first time led the market with a 48% share.

Ten new land plot projects added 2,000 plots to the primary market. Primary stock was approximately 3,000 plots. The segment achieved 65% absorption. In the next two years, new supply will be approximately 13,000 dwellings/plots.