Apartment market for sale
In the fourth quarter of 2017, the market welcomed 8,559 more apartments, an increase of 12% quarter-on-quarter, bringing the total annual supply and cumulative supply to 31,106 units and 228,903 units, respectively. The total supply in 2017 decreased by 18% compared to the previous year, creating conditions for the market to absorb inventory from 2015 and 2016. This is the period when products are invested more in design, utilities, and finishing materials to meet the increasing needs of customers. Sales and marketing strategies are also prepared more carefully.
Consumption in the fourth quarter and the whole year of 2017 was quite positive in all segments. In the fourth quarter of 2017, 8,934 apartments were sold, up 23% compared to the previous quarter and down 29% compared to the previous year. The total number of apartments sold in 2017 reached 32,905, down 5% compared to the previous year, but this was the first year in the past 5 years that the number of apartments sold exceeded the total number of newly offered apartments in the year.
It is predicted that in 2018, mid-range products will continue to account for a high proportion with a moderate amount of high-end and luxury segments being introduced, creating a foundation for a more sustainable development. In terms of regions, the East and South will continue to be the hot spots of the market next year, with many new projects in District 2, District 7, District 8, Binh Thanh such as One Verandah, GEM Riverside, Midtown, High Intela, Green Field. Selling prices in 2018 are expected to increase by an average of 3%, in which the high-end and luxury segments will increase by 5%, while the affordable and mid-range segments will have a lower increase of 1.5%.
Retail market
The fourth quarter of 2017 welcomed 21,300 m2 NLA from two retail projects: The Garden Mall (formerly Thuan Kieu Plaza) and the retail podium of Viettel Complex (District 10). In total for 2017, the market had 7 projects with 74,183 m2, increasing the existing retail supply in Ho Chi Minh City to 820,840 m2 NLA. All new supplies were concentrated in the non-Central area and there was no new area in the Central area.
Although new supply this year only accounts for about 38% of last year's new supply, the retail market is still vibrant with foreign brands (mainly mid-range fashion and food and beverage) choosing Ho Chi Minh City to open their first stores in Vietnam.
The fashion industry has not cooled down due to the 'fever' of H&M and Zara in the past time, but this quarter welcomed more major foreign fashion brands such as Desigual (Spain), Trendiano (Korea) and COACH (France). These 3 brands are all tenants at Saigon Centre. The Garden Mall officially opened with main tenants in the food and beverage industry on the ground floor and 'Tropical Book Forest' of Phuong Nam Book City with a leased area of nearly 3,000 m2. Meanwhile, the food and beverage sector continues to welcome brands mostly from Asia such as PastaMania (Singapore), Chamimi (Thailand), Hokkaido Baked Cheese Tart (Japan), etc. The retail trend towards young people is expected to continue to grow in the coming time due to the increasing income and consumption needs of this class.
It is forecasted that in the next 3 years, competition in the retail market will increase due to a large amount of retail space under the apartment podium that will be offered for lease. E-commerce is receiving more attention from investors and consumers. By 2020, e-commerce revenue in Vietnam will increase by 60% compared to 2017 and will account for nearly 1.5% of total retail revenue.
In terms of future supply, 13 out of 15 projects expected to be completed in 2018-2020 with a total NLA of 638,082 m2 are located in the outer/fringe areas of the CBD. Half of these 15 projects will be completed in 2019 with notable new projects such as Sala Shopping Centre (District 2 – 60,054 m2), Vinhomes Central Park commercial area (Binh Thanh – 59,000 m2) and Elite Mall (District 8 – 42,000 m2). Union Square will also reopen after a period of upgrading.
Office Market
In 2017, Ho Chi Minh City welcomed 4 new projects: 1 Grade A building and 3 Grade B buildings. Q4/2017 especially welcomed the Etown Central project, a building with 36,450 m2 NLA located in District 4 with 27 floors above ground and 4 basements joining the Grade B supply. This building has announced only 40% vacancy after the first quarter of operation and is expected to be quickly filled.
Asking rents for both Grades showed steady momentum, with Grade A and Grade B reaching US$37.0 and US$20.6, respectively. Grade A recorded a 1.3% increase year-on-year while Grade B was virtually unchanged year-on-year. Grade A increased slightly quarter-on-quarter by 0.9% while Grade B decreased slightly by 0.5%.
Overall, 2017 saw an increase in new supply in the Office market along with an increase in absorption rates. In 2018, the market will have more new supply with better quality, however, the growth rate will be slower than in 2017 due to the only Grade A project in the central area - Deutsches Haus as well as the Grade B supply will continue to expand to the peripheral districts such as District 2 and District 10, typically with a project from Dai Quang Minh New Urban Area and Viettel Complex Phase 2. Rental growth will slow down as existing projects will continue to adjust their rental prices appropriately with the market movement in parallel with the vacancy rate increasing and decreasing rapidly when the market is still in a good absorption momentum of new premises.
Tea - HU
