Savills Vietnam reports on HCMC real estate market Q3/2018

10 October 2018

GDP growth reached 6.9%, the highest 9M/2018 growth in eight years. In 2018, the government forecast GDP growth to reach 6.7 percent. Manufacturing and processing grew 13% YoY and continued to be a key GDP contributor.

Strong export momentum continued up 15% YoY to US$179 billion, delivering a US$5.4 billion trade surplus.

The US remains the largest export market with US$35 billion, increasing 13% YoY.

Total registered FDI reached over US$25billion, while FDI disbursement increased 6% YoY to US$13.3 billion with Japan being the largest contributor.

CPI growth was well controlled at 3.6%, approximately 4% under the limit.

International visitors strongly grew 23% YoY to 11.6 million, Asian tourists continued to be the main source market.

1. RETAIL: RENOVATIONS INCREASE APPEAL

Total stock was 1.2 million m2, with over 55,000 m2 added due to the entry of three shopping centers and two supermarkets. One department store downsized, withdrawing 7,300 m2

Average gross rent decreased -1% QoQ and -3% YoY. New supply in the non-CBD offered competitive rent. Average occupancy increased 1ppt QoQ even after the entry of new supply.                                

Retail sales had strong growth at 12% YoY, in which F&B grew 13% YoY. High retail density in the CBD and NUAs are encouraging retailers to renovate and revise the tenant mix for wider appeal. In Q4/2018, over 100,000 m2 will be added in non-CBD districts, which will pressure overall performance.

2. OFFICE: STRONG PERFORMANCE

One new Grade B and one new Grade C office provided approximately 9,000 m2. Total office space reached over 1.8 million m2, increasing 1% QoQ and 6% YoY. 

Overall performance continued to improve with average rents increasing 3% QoQ and 7% YoY. The surge was due to rent increments across all grades, especially Grade A. Average occupancy was 97%, up 1ppt QoQ. Given the very low vacancy rates and lack of new supply in upcoming quarters, the office segment expected to continue its strong performance.   

By 2020, approximately 387,000 m2 will be added.

3. SERVICE APARTMENT: ROBUST UPSCALE SEGMENT

One new project and four new phases added approximately 450 units, whilst one project withdrew. Total stock was more than 5,500 units, up 6% QoQ and 16% YoY. 

Average occupancy was 84%, increasing 1ppt QoQ due to the improved performance of CBD projects. The majority of take-up was from Grade A and B. Average rent increased 1% YoY. 

From Q4/2018 to 2020, more than 1,500 units from 11 projects will enter the market. Six are located in the CBD and will provide approximately 780 units; accounting for 50% of future supply.

4. HOTEL: ROOM RATE RECOVERY

One 5-star and two 3-star hotels closed for renovation, equivalent to 393 rooms. Room supply was down -3% QoQ and -4% YoY to approximately 15,800 rooms from 127 hotels. 

The low season saw average occupancy dropping -1ppts QoQ but stable YoY. Meanwhile, overall ARR gained 3% YoY, a significant improvement in the context of increasing competition between tourism destinations. 

To 2020, 3,000 rooms from 15 projects are expected to come online.

5. APARTMENT: LIMITED NEW SUPPLY

Fourteen new projects and 10 launches of new phases provided over 7,700 units. Primary supply dropped -26% QoQ and -47% YoY to 18,800 units. 

There were over 10,000 sales, down -30% QoQ and -13% YoY. Absorption was 53%, down -3ppts QoQ but up 21ppts YoY. Grade C continued to dominate with a 54% market share. Grade A sales increased 58% QoQ. 

Until 2020, supply is expected to be approximately 124,000 units from 94 projects; District 9 is expected to have the largest share at 32 percent.

6. VILLA/TOWNHOUSE: SUPPLY SCARCE

Six new small-scale projects and one new phase added 650 dwellings. Primary stock was approximately 1,200 dwellings, dropping -26% QoQ and -39% YoY. Transactions decreased

-66% QoQ and -67% YoY due to scarce supply. Townhouses with small land sizes (< 75m2) accounted for 65% of sales. 

Primary land supply was 1,860 plots with high quarterly absorption of 64 percent. Suburban districts led due to low investment entry. 

From Q4/2018 to 2020, 20,200 dwellings/plots are expected to enter the market. District 9, Binh Tan and Binh Chanh will contribute 60% future market supply.

 
 

Key Contacts

Linh Dinh Huong

Linh Dinh Huong

National Head
Marketing Communication

Savills Hanoi

+84 24 3946 1300 Ext 112