Ho Chi Minh City real estate market in Q4 2018

Serviced apartments: Rental prices increase.

Favored by a wide range of clients, from tourists to businesspeople and professionals, serviced apartments in major cities are experiencing a strong surge in demand with good occupancy rates. In the fourth quarter of 2018, serviced apartment rental prices increased compared to the previous quarter.

The supply of Class B apartments increased by 195 units from several new projects. The total supply is over 5,700 units, up 3% quarter-on-quarter and 20% year-on-year; the highest in the past 5 years. The average rental price is $25/m².²Rental rates increased by 1% quarter-on-quarter and year-on-year, driven by a 4% year-on-year increase in Class A and B rental rates. Occupancy rates decreased by -1 percentage point quarter-on-quarter and -3 percentage points year-on-year due to increased supply. Over the next three years, 1,700 units from 12 projects will enter the market; international developers are estimated to account for approximately 77% of the future supply.

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Apartment: Impressive

A large number of apartments and luxury apartments will be launched in the near future. However, in the past period, 23 new projects along with 13 projects launching subsequent phases have provided more than 9,500 units. There were over 18,300 primary units this quarter, down -3% quarter-on-quarter and -44% year-on-year. Transaction volume reached 11,000 units, up 10% quarter-on-quarter but down -27% year-on-year. The absorption rate peaked at 60%, up 7 percentage points quarter-on-quarter and 14 percentage points year-on-year. Class C apartments accounted for 58% of total sales and had an absorption rate of 64%. By 2021, the market is estimated to have more than 154,000 apartments from 100 projects launched, with over 66,000 units launched in 2019. This is certainly positive and impressive news for this segment.

Hotels: A resurgence

Supply remained stable quarterly and decreased by -4% year-on-year, mainly due to the temporary closure of a 5-star hotel with over 300 rooms. Occupancy rates in 2018 reached 70%, the highest in the past 5 years. During the peak season for international tourists, all categories saw improvements in occupancy rates of 6 to 10 percentage points quarterly. Average room rates increased sharply by 10% quarterly and 6% year-on-year thanks to improvements across all categories. According to the Ho Chi Minh City People's Committee, 7.5 million international tourists visited the city in 2018, a 17% increase year-on-year. In 2019, this number is expected to increase by a further 14% year-on-year.

Villas and townhouses: Limited supply

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Five new small-scale projects supplied the market with 390 units. Primary supply reached over 1,280 units, up 5% quarter-on-quarter but down 37% year-on-year. Transaction volume increased 64% quarter-on-quarter but decreased 57% year-on-year due to limited supply. Go Vap led the market with 33% of total transactions. Primary land plot supply reached over 1,970 plots in the quarter. This market segment achieved a high absorption rate of 77 percent. From 2019 to 2021, 22,650 units/plots will be supplied to the market. Suburban districts such as District 9, Binh Tan, and Binh Chanh will contribute 56% to the future supply.