HCMC real estate market spirals downward

HCMC real estate market spirals downward

The number of real estate transactions in HCMC has fallen 49 percent year-on-year in the first three months of 2019.

One of the problems facing the Ho Chi Minh City market stems from legal difficulties in selling projects. Photo by Shutterstock/Tommy Teo.

Transaction volumes in all segments – affordable, mid-range and high-end housing – have fallen. Absorption rate in this market also fell 8 percent compared to last quarter, Savills said.

The HCMC real estate market had decelerated in the last quarter of 2018, with 11,000 units sold for a 27 percent year-on-year drop.

According to Savills, the downwards trend in consumption seen in HCMC has followed a decline in supply. Total supply, which includes unsold units and newly built units in the last quarter of 2018, fell 44 percent year-on-year.

This number fell by a further 34 percent in Q1 2019 to just over 12,000 apartments, which represents a 57 percent drop compared to Q1 2018.

According to real estate analysts CBRE Vietnam, HCMC saw its one of its worst periods in the second quarter of 2018. Just 7,000 plus units were consumed, mainly due to negative sentiments after a fire at Carina Plaza, a 700-room apartment complex, killed 13 people and injured 28 in March.

Since then, the market had consistently underperformed based on year-on-year comparisons, according to CBRE. New supply in the third quarter of 2018 was just 6,711 units, down 14 percent year-on-year.

Despite seeing a surge in demand in the last quarter, consumption was still 16 percent lower than the same period in 2017, CBRE said.

Average prices of newly built apartments in the first 3 months of the year rose 3.1 percent compared to the previous quarter, and increased by 14.9 percent over the same period last year, CBRE said.

One of the problems facing the Ho Chi Minh City market stems from legal difficulties in selling projects, Le Hoang Chau, chairman of HCMC Real Estate Association, told local press. In fact, there is a lot of supply, but many fail to meet regulatory standards required to begin selling, he said.

Many projects get stuck at various levels from applying for approval from local authorities to getting permission to begin construction and to getting permission to begin selling.

These are major bottlenecks for investors, who just want to sell their inventory as soon as possible to recover capital, said Chau.

(source: vnexpress)

June 24, 2019 / by / in
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Domestic property price to be stable in H2

The domestic real estate market in the second half of this year is not expected to witness significant changes in price due to stability in supply, according to experts.

Customers look at a real estate project in Ha Noi. The domestic real estate market in the second half of this year will not see large changes in price. – Photo kinhtedothi.vn

During the last six months of this year, the medium- and high-end apartment market would not see any price fluctuations, said Nguyen Minh Ngoc, the Viet Nam Real Estate Association (VNREA)’s market researcher.

However, some products in those segments would experience a slight decrease in price because of more preferential selling policies for customers, he said.

The second half of the year would also be the period in which investors would have to boost liquidity to recover capital and prepare financial resources for investment next year, Ngoc said. Therefore, customers with low capital would find it easier to choose a suitable product.

According to the VNREA, the local property market will have a stable supply by the end of the year because the market has a large apartment inventory from the three previous years, though the supply of new apartments has dropped from the beginning of this year.

“The new supply has dropped but there is high inventory of apartments so sellers must have more policies for their customers to increase liquidity for collecting capital. Thus, the possibility of price increases will be very unlikely and the price could drop slightly compared with the same period in 2018 due to better selling policies,” Ngoc was quoted by the Kinh te do thi newspaper as saying.

“By the end of this year, the change of credit policy for the real estate sector in promoting control and reducing credit scale will have a significant impact,” said Nguyen Manh Khoi, Deputy Director of Housing and Real Estate Market Management Department under the Ministry of Construction.

Nguyen Tran Nam, VNREA chairman, said there was a concern about the real estate bubble, so the Government has taken steps to limit credit sources to real estate and the Government will be likely to tighten further in the future.

Thus, credit growth in real estate began to decline from the end of 2018. On the other hand, the volume of land for housing plans and compensation has been tightened while people’s purchasing power is still very strong.

From the beginning of this year until now, foreign direct investment (FDI) capital into Viet Nam’s real estate market has increased sharply against the same period in 2018 and reached the highest level in the last three years, reported vov.vn.

In fact, the new higher investment has not helped the release of more new products because the existing high inventory has made investors limit the increase of supply.

In addition, the land fund in big cities, such as Ha Noi, HCM City, Da Nang and Nha Trang, is in short supply.

Meanwhile, new projects are slow in developing due to difficulties in compensation and site clearance, leading to the scarcity of land fund and high land prices.

According to VNREA’s researcher Ngoc policies on real estate finance are having a great impact on promoting investment of businesses. Now, the Government has permitted the use of 40 per cent of short-term capital to be medium and long-term loans for property projects instead of 60 per cent as before and the percentage will be reduced to 30 per cent in the future.

The tightening of financial credit policy will force investors to build new mechanisms for their own development roadmap, and secondary investors will have to determine reasonable investment levels for their ability.

The Viet Nam Real Estate Brokerage Association said from the beginning of this year until now, new real estate supply tended to decrease, especially in two big cities, Ha Noi and HCM City.

Total housing supply in Ha Noi decreased by 25 per cent year on year while in HCM City, the reduction rate is even higher at 50 per cent of total supply.

Experts said that the decrease in new supply was due to high inventory of apartments over the last three years with total value of inventory at VND23 trillion.

Condotels were the product with the largest inventory. This segment in coastal provinces and cities had the absorption rate of only 40 per cent, thus its inventory was up to 60 per cent.

Future

The strongest points of Viet Nam’s real estate market are huge demand and ability of liquidity, according to Nam.

The local property market in the medium and long term will be very good as urbanisation will be very high. According to statistics, as many as one million people move from rural areas to urban areas each year. “The important thing is to have quality property products for them,” Nam said.

According to a report released by property consultancy Savills Vietnam, an optimistic economic outlook, high levels of FDI and suitable monetary policies ensure that growth in Viet Nam’s property market will continue, whilst increased supply is projected in key cities to meet demand.

The majority of stock by 2020 will be grade C in HCM City and grade B in Ha Noi.

The country’s two major cities, Ha Noi and HCM City, are undergoing dynamic transformations and attracting high levels of FDI and waves of new investment.

They account for 17 per cent of the country’s total inhabitants and have the highest urbanisation rates in Southeast Asia.

Strong population growth in urban areas has created robust demand for housing.

The majority of new supply comprises lower grade apartments, directly correlating with demographics and macro fundamentals.

Between 2014 and 2018, substantial sales increases occurred in both cities.

In HCM City, transactions have been rising by 44 per cent a year for the last five years, peaking in 2018 at above 49,000.

The absorption rate recently hit its highest level in the last five years of 87 per cent.

Last year, home sales in Ha Noi increased by 20 per cent. Between 2014 and 2018, grade B accounted for 43-61 per cent of sales and grade C for 31 per cent. Grade A accounted for 8 per cent due to a combination of high selling prices and limited new supply.

The performance of the high-end segment (grade A) has improved in the last three years, attracting local and foreign buyers with competitive prices and appealing rental yields.

Last year, Ha Noi and HCM City saw high demand from international buyers. Most grade A projects quickly filled the foreigners’ quota of 30 per cent.

(source: VNA)

June 24, 2019 / by / in
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Saigon apartment prices jump as licenses dry up

Buildings seen in downtown Ho Chi Minh City, Vietnam. Photo by Shutterstock/Sam.

Condominium prices in Ho Chi Minh City rose by 10 percent a year between 2014 and 2018, Savills estimates.

A recent report by the real estate market research firm said in the period the number of transactions increased by 44 percent a year, peaking in 2018 with over 49,000. At the end of the period the average price was $1,600 per square meter.

Grade A (high-end segment) experienced the highest price rise, while grades B (mid-priced) and C (affordable) grew at a slower pace.

The absorption rate also hit the highest ever rate of 87 percent, with growth being particularly evident in grade C, which accounted for 60 percent of all transactions in the 5-year period.

Grade C is dominated by occupiers/end-users while grade B attracts upgraders and buy-to-let investors and grade A buyers are mainly long-term investors. Savills expects the majority of stock to be grade C until 2020.

A survey by VnExpress has found that the supply of affordable housing is gradually declining across the city as a result of authorities licensing few housing projects in 2018-2020.

According to the housing development plan for 2016-2020 with orientation until 2025, that was approved by the HCMC People’s Committee last November, the city will not approve construction of new high-rise apartments in inner city areas (District 1 and 3) until 2020.

This scarcity has sent apartment prices in both the primary and secondary markets surging, and as a result cheap housing projects are being moved to neighboring provinces like Binh Duong, Dong Nai and Long An.

Real estate services firm CBRE in a report on the first quarter said the average price in the primary market increased by 3.1 percent quarter-on-quarter and 14.9 percent year-on-year.

(source: vnexpress)

June 20, 2019 / by / in
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Condotel legal framework imminent

Condotel developers and buyers will breathe easier later in the year when the legal framework for the new type of property in Vietnam is to be released.

A huge increase in the condotel segment over the last five years has hastened the implementation of new regulations, Photo: Le Toan

At the discussions of the National Assembly held last week, Minister of Construction Pham Hong Ha said the standards and regulations on management and operation of condotels and officetels would be issued within 2019, to avoid any negative impacts on the new segment.

“Local authorities cannot manage thousands of condotels without a legal framework,” Ha claimed at last week’s meeting in Hanoi, adding: “We have worked with the Ministry of Natural Resources and Environment to review regulations on land use in order to consider giving ownership for this type of property, since it has not been included in any regulations so far.”

The Ministry of Construction (MoC) is now co-ordinating with the ministries of Culture, Sports and Tourism, as well as Natural Resources and Environment, along with local authorities to issue the regulations for this type of property. “This task must be done as soon as possible because there are signs of oversupply of condotels in the market recently,” Ha said.

Meanwhile, Nguyen Trong Ninh, head of the MoC’s Department of Housing Management and Real Estate Market, said as condotels have been listed in accommodation for tourism, then they must be regulated under the legal framework of the tourism sector, now under the Ministry of Culture, Sports and Tourism. Accordingly, condotel developers must be given licences by the Vietnam National Administration of Tourism.

Economist Nguyen Tri Hieu commented that the function of condotels is not yet clearly identified as for living or leasing. “If it is a product for lease, it must obey all taxation and land use regulations for business. In this case, a clear legal framework can help condotel developers take a mortgage at the bank for mobilising investment capital. If it is a housing product, it can be given a land use certificate so that owners’ rights can be protected,” Hieu said.

Meanwhile, Nguyen Tran Nam, chairman of the Vietnam Real Estate Association, emphasised that it was necessary to have a flexible plan for condotel development and investment.

“The fact is that thousands of condotels units are being constructed and any regulation would be a great impact to those, therefore the incoming regulations must be harmonised to benefit different sizes, and to benefit developers, buyers, policymakers, and local authorities,” Nam said. “The planning should be based on demand and must be designed to create demand.”

Some localities such as the central province of Binh Dinh reported that the province has experienced dramatic increases in tourism after a condotel project is developed and lessons can be learnt from this case.

Nguyen Toan Thang, director of the Ho Chi Minh City Department for Natural Resources and Environment, added that the legal framework for condotels will help developers and buyers to believe in the prospects of the condotels they have bought.

“A legal framework would facilitate the socio-economic development of any locality. Legal frameworks must be continuously updated to be suitable to the increasing demand of society,” Thang said.

According to the MoC, a condotel is a type of condominium and hotel unit not regulated in the current laws of Vietnam such as the laws on Land, Real Estate, Investment, and Housing.

The supply of condotels in the country has been strongly increasing, and now occupies 56 per cent of the total rooms for tourists, while hotel rooms occupy 44 per cent only.

Since 2014, many condotel projects have been built nationwide, especially in coastal localities such as Quang Ninh, Thanh Hoa, Danang, Quy Nhon, Nha Trang, and Phu Quoc Island. It is estimated that in 2020 there will be around 20,000 condotels units up for sale.

(source: vir)

June 18, 2019 / by / in
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Vietnam’s property ceremony nears

The annual Vietnam Property Awards, the country’s largest and most reputable real estate awards platform, is back for a fifth consecutive year.

The presentation of the Vietnam Property Awards will take place in August in Ho Chi Minh City

More real estate investors are beginning to notice Vietnam as a popular destination. With a thriving economy, and recent legislation making it easier for property investors to conduct business, the Vietnamese market has emerged as a hotspot for property investment.

There has been a giant influx of both local and international developers, all keen to get recognition from professionals, and thus develop their credibility with customers.

Vietnam’s realtors have that support via the industry-leading Vietnam Property Awards, which is held by Asia’s leading property portal group, PropertyGuru.

As part of the Asia Property Awards, a programme established in 2005, the Vietnam Property Awards are considered the most credible real estate awards platform in the country. The platform provides a venue to acknowledge the extraordinary achievements of Vietnam’s best developers and developments.

Vietnam’s local competition was introduced in 2015, and has earned praise from both participants and senior industry partners. At the fourth annual gala dinner in 2018, a total of 43 awards were presented to more than 25 companies and public-private entities.

Winners included CapitaLand Vietnam, KIEN A Corporation, Alpha King, and SonKim Land Corporation. SonKim Land went on to achieve the Best Boutique Developer in Asia at the regional Asia Property Awards Grand Finale ceremony in Thailand.

“In my new role at PropertyGuru, I am thrilled to join a team of like-minded professionals whose mission is to recognise, promote, and celebrate quality. I look forward to working with the team and taking the awards to new heights,” said Jules Kay, the recently appointed director of the Asia Property Awards.

The PropertyGuru Vietnam Property Awards has an unparalleled reputation for being credible, fair, and transparent. The competition is free to enter and the contestants are judged by an independent panel of experts.

Furthermore, to ensure the utmost impartiality throughout the competition, the judging process is supervised by BDO, one of the world’s largest auditing and accountancy networks, which has supported the programme for more than a decade.

This year’s winners will be announced at an exclusive gala dinner and presentation ceremony on August 23 at the InterContinental Saigon Hotel in Ho Chi Minh City. The occasion will be the culmination of a series of thorough judging stages, which includes the screening of nominations from the public, site visits for entrants in the development categories, detailed inspections, and final judging deliberations.

More than 500 distinguished guests and key figures in the sector will join the ceremony, including members of the Vietnam Real Estate Association, the country’s largest property organisation.

With recognition for outstanding design, construction, customer care, corporate social responsibility, green developments, and public facilities, the gala ceremony will present more than 40 competitive and special awards, showcasing the highest standards of Vietnamese real estate.

PropertyGuru’s Vietnam Property Awards has set a high benchmark, and each year the competition surpasses the expectations of the independent judging panel. With the upcoming competition, the awards will continue to ensure that the achievements of Vietnamese real estate professionals are recognised and showcased to a wider regional audience.

(source: vir)

June 11, 2019 / by / in
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Ho Chi Minh City ramps up real estate

In an effort to become more attractive to investors and feature more modern infrastructure, Ho Chi Minh City is intensifying development of its urban real estate market. Quynh Chau reports.

Projects from high-rise apartments to a safari park are on the lookout for funding, Photo: Le Toan

Paths to choose investors under current legal framework

– Decision or written ­approval of investment ­policy (based on the laws on Investment and Housing) for projects that ­investors have legal land-use already.

– Auction of land-use rights (based on the laws on Land Law and Property Auction) for projects located on clear land and compensated areas and projects which have assets on the site, and those assets are under state ownership.

– Bidding to select investors (based on the Bidding Law) for projects located in highly-valued land areas which need to be given into selection in order to build new urban areas, commercial housing and service projects, and multi-­functional complexes.

– Public-private partnership (based on the Bidding Law) in cases of projects with contracts between competent state agencies and ­investors to construct, ­renovate, operate, manage, and provide public services.

Ho Chi Minh City is offering a list of major projects which ­desire investment, with some already ­attracting ­interest from ­foreign investors.

Thu Thiem Financial Centre, located in Thu Thiem New Urban Area of District 2, estimated at VND5 trillion ($217.4 million) of investment capital, is one of the most attractive projects.

According to the Ho Chi Minh City Department of Planning and Investment, ­potential investors of the ­project should directly contact the Thu Thiem Management Board for further information.

Expected to be constructed from this year until 2021, the scheme will develop two high-rise towers with an expected height of between 20 and 50 storeys. When completed, Thu Thiem Financial Centre will be home for financial institutions, banks, investment funds, and other economic groups.

Land compensation has been completed at the site and many investors have registered to take part. Among them are domestic REE Corporation, Ho Chi Minh City State ­Financial Corporation, and a joint venture between 216 JSC and Van Phu Invest.

Meanwhile the initiative is also on the radar of foreign ­investors such as American-based Steelman Partners, and a joint venture between ­Australian group Sakkara and Singaporean group GIC.

The Ho Chi Minh City People’s Committee has ­also approved procedures for a list of 160 projects which can be developed over the next year.

Dai Quang Minh Real ­Estate JSC was approved for setting up an infrastructure ­system for three projects in Thu Thiem New Urban Area.

The $1.42 billion urban ­development area in Binh Quoi-Thanh Da was also ­recently seeking new investors after the withdrawal of ­previous developers, a joint ­venture between Bitexco Group and Dubai Emaar ­Properties.

The Binh Quoi-Thanh Da Urban Area project is the ­second-largest urban development project in the city after Phu My Hung Urban Area, but it has been in a stalled state for 18 years.

Another project highlighted is the $500 million Saigon Safari in Cu Chi district on the outskirts of the city. This project is now on the list for calling for investors after ­Vingroup withdrew from it ­recently, claiming that it is ­required to focus on its core business.

High potential for investors

According to Le Thi Huynh Mai, director of the Ho Chi Minh City Department of Planning and Investment, the city so far has offered plenty of advantages for investors.

“We are all aware that ­improving the business ­environment is one of the most important issues for us to lure investors,” Mai said. “We have simplified ­procedures, offering enough legal frameworks, as well as ­incentives for foreign developers.”

She analysed that one of the most difficult parts for those implementing their projects was the barriers on land clearance and compensation.

“Local authorities have been struggling to keep up with their land clearance and compensation commitments and they have been looking for ways to shorten the process,” Mai said.

All of these projects, Mai added, were attractive for investors. The problem was how to implement them in the most effective way.

According to Nicolas ­Audier, co-chairman of ­EuroCham Vietnam, many ­European companies have chosen Ho Chi Minh City for investing. “This proves that Ho Chi Minh City is a magnet for foreign investors, even though the city authorities still have many things to do to improve its investment environment,” Audier said.

There are many major fields in which foreign investors could join, Audier added, including real estate, urban planning, infrastructure system improvement, setting up smart and innovative cities, and green development.

Bottleneck breakthrough

In an effort to push up the urban development of the city, the local authorities have recently approved permits of 124 projects which were previously suspended for investigations and inspections.

The Ho Chi Minh City Real Estate Association (HoREA) had earlier written to the municipal authorities and the Government Inspectorate proposing quick reviews and processing of 100 halted projects.

The HoREA noted that further extensions would cause the developers of these projects to face losses from higher costs and rising loan interest rates, while they miss out on business opportunities. The high number of stalled projects has resulted in a sharp fall in the number of homes available to be put into service, thus damaging the local real estate market, the association added.

In addition to this, the local construction department has recently approved the investment procedures of another 160 projects. The projects have been approved due to their investors successfully proving they had strictly obeyed all of the regulations and detail plans which were previously committed. Among those, the southern area of Ho Chi Minh City including districts 7 and 8, Nha Be, and Binh Chanh have the highest number of approved projects, at 53.

The eastern part of the city in districts 2, 9, and Thu Duc followed with 48 projects, while fewer projects have thus far been approved in city centre districts 1, 3, and 4.

(source: vir)

June 6, 2019 / by / in
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Saigon, Hanoi premium office rents rise on low supply

The HCMC and Hanoi premium office markets continue to be undersupplied with no new buildings coming online in the first quarter.

In HCMC, the average asking rent for grade A office space has edged up to $52.2 per square meter per month from below $50 in the fourth quarter of last year, according to a report by real estate firm Colliers International Vietnam.

In Hanoi, rents were up to $35.9 from below $35.

“Rents are expected to continue to rise thanks to strong demand for office space and Hanoi’s improving economy,” the report said.

With no new building came online in Q1 2019, HCMC sees rising occupancy rate and rent. Photo by Shutterstock/Ho Su A Bi

The HCMC and Hanoi premium office markets continue to be undersupplied with no new buildings coming online in the first quarter.

In HCMC, the average asking rent for grade A office space has edged up to $52.2 per square meter per month from below $50 in the fourth quarter of last year, according to a report by real estate firm Colliers International Vietnam.

In Hanoi, rents were up to $35.9 from below $35.

“Rents are expected to continue to rise thanks to strong demand for office space and Hanoi’s improving economy,” the report said.

Both cities have high occupancy rates. In HCMC the first quarter rate was 95 percent, while in Hanoi it was 96 percent.

Despite their high rents, grade A offices are still preferred by large international companies in HCMC due to their ease of access, premium image and facilities.

In Hanoi, the improving infrastructure would continue to attract big-name office tenants to the market such as banking, finance and insurance companies.

The west of Hanoi is the up-and-coming office destination in the city thanks to the availability of land, well-established infrastructure and large supply of residential projects.

The low supply situation is set to improve with five new high-quality office buildings set to open this year in HCMC with 150,000 square meters of leasable area. Hanoi is also likely to add 150,000 square meters this year, Colliers said.

“Both cities are seeing the flexible workspace and coworking space market grow to cater to high demand from startups and small and medium enterprises.”

In the first quarter the average occupancy rate in this segment was 85 percent in HCMC, and this emergent market is promising to expand massively in the upcoming quarters, it added.

(source: vnexpress)

 

June 5, 2019 / by / in
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