Savills Vietnam reports on HCMC real estate market Q3/2017

HO CHI MINH, Viet Nam - Oct. 25, 2017 - PRLog -- GDP increased 6.4% year on year (YoY). There is a positive expectation the 6.7% annual growth target will be achieved.
Credit growth is boosting economic performance. Now at 11% and on line to achieve 21% by year end.
A registered FDI high of US$25.5 billion, up 34% YoY. Korea is back to the biggest source status with US$6.3 billion. HCMC projects registered US$3.7 billion FDI and lead major cities. US$12.5 billion was disbursed, 13% up YoY.
International arrivals increased 28% YoY to 9.4 million.

1. RETAIL: CBD Powers On
Total stock was approximately 1.2 million m2 with 14,600 m2 added from four new supermarkets and one podium opening. One closure and one downsize withdrew 6,500 m2. Average gross rents were stable quarter-on-quarter (QoQ). There was a slight -1ppt decrease in occupancy. CBD rents rose with new international brand launches escalating. Non-CBD occupancy weakened with unappealing concepts and surplus supply.
Shopper focus is moving to affordable products and personal services. Technology is increasingly shaping consumer behavior, so innovation is required in marketing and retail experience.

2. OFFICE: Robust
There were five new entries across all grades that saw stock increase 4% QoQ and 8% YoY to over 1.7 million m2. Four Grade C projects closed, withdrawing 15,000 m2.
Demand remained healthy despite new supply. Average occupancy was high at 95%, average rents were slightly up 2% QoQ and 7% year on year (YoY).
Grade A and B were responsible for all take-up this quarter, new launches absorbed well. Grade B was the best performing with rents steadily trending up since Q3/2016.

3. SERVICED APARTMENT: Supply Effect
Balance the fresh stock of one new Grade B, one reopened Grade C and two Grade C withdrawals, saw another 223 units available.
Total stock was approximately 4,900 units, up 5% QoQ and 9% YoY.
Average occupancy decreased -1ppt QoQ but was stable YoY. New Grade B supply had slow take-up whilst Grade C performance softened a little. Average rents were unchanged QoQ and up 3% YoY.
To year end approximately 200 units will enter. From Q4/2017 to 2019, about 1,500 units are expected from 11 projects of which six are in the CBD.

4. HOTEL: International Visitor Growth
A slight change to the 3-star universe, with one new 64-room entry and one hotel closed for renovation. The city has 133 three- to five-star projects with over 16,400 rooms.
Improved four- and five- star performance saw average occupancy of approximately 66%, up 1ppts QoQ and YoY. ARR was stable QoQ but down -5% YoY to US$76/room/night. Rates were down across all grades in response to increased competition. By 2020, another 17 projects will supply over 3,600 rooms.
There were even more international visitors to HCMC, 4.2 million for the first 9 months, up 16% YoY being 44% of international arrivals.

5. APARTMENT: Grade A Sales Boost
Thirteen new projects and the next phases of 16 active projects provided nearly 11,000 units. Primary supply is 35,000, decreasing -2% QoQ and -11% YoY.
Over 11,500 units were sold, slightly down -2% QoQ. New project sales accounted for 32% of city transactions. Grade A and B had good quarterly performance, Grade A strongest with 550 sales, up 149% QoQ. Absorption at 32%, stable QoQ and up 13ppts YoY.
From Q4/2017 to 2018 approximately 70,000 units from 60 projects are expected to be launched in HCMC.

6. VILLA & TOWNHOUSE: Townhouses Doing Well
Five new projects and one new phase supplied over 750 dwellings. Primary stock was approximately 2,000 dwellings, up 3% QoQ and -48% YoY.
Transactions were up 34% QoQ but down -9% YoY. Absorption was 55%, up 13 ppts QoQ and 23 ppts YoY. District 9 continues to lead with 43% market share.
Primary land plots supplied approximately 1,300 units with popular land areas from 50-80m2. Cu Chi with affordable prices led transactions for the first time.
From Q4/2017 to 2019, new supply will be approximately 12,600 dwellings/plots. Eastern districts dominate with 50% market share.
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