A corner of Phu My Hung urban area in HCM City (Photo: VNA) HCM City (VNA) – Ho Chi Minh City’srealty sector experienced a hazy first half of the year, with dwindling supplyof both high-end and pocket-sized apartments, according to insiders.
Small supply of housing products
Chairman of the Ho Chi Minh City Real Estate Association (HOREA) Le Hoang Chausaid though the property market bounced back thanks to the Government and localauthorities’ efforts to remove bottlenecks, it has not developed stably, andrisks still lie ahead.
During January-June, the municipal Department of Construction proposed thelocal People’s Committee approve investment for 10 commercial housing products,82.2 percent the figure of the same time last year.
There were only 24 projects eligible to sell apartments in the six-monthperiod, with a total of 7,213 units, down 29.4 percent and 24.3 percent,respectively, year on year. Particularly, supply in the high-end segmentdropped 43.8 percent to 2,227 apartments while that of affordable products declined34.7 percent to 1,249.
In line with the CBRE’s forecast by the end of 2018,HCM City’s condominium market was quiet in the first three months of 2019, withnew launches down significantly due to the long traditional lunar new yearholiday and slow licensing process. The number of newly launched projects wasthe lowest in the last three years, with only 12 projects compared to thenormal 18 to 20.
In thecontext of limited supply, good sold rates were recorded in all segments. The totalnumber of units sold dropped purely because of the reduction in new launchsupply. A sold rate from 90 percent to 100 percent was observed at projectsfrom reputable developers with reasonable prices, with 5,924 sold in Q1, adecrease of 28 percent quarter on quarter and 39 percent year on year. The totalnumber of units sold was 1,500 higher than new launches, indicating the marketis absorbing inventories from previously launched projects.
Interms of market segmentation, the mid-end segment accounted for 55 percent ofthe total new supply in Q1. This segmentation is expected to supportsustainable growth for the city’s condominium market by focusing on end-users.In terms of location, HCM City’s condominium market continued to expand towardsthe east and the south, with new projects in Districts 2, 8, 9 and Binh ChanhDistrict.
Theaverage primary selling price in Q1 was 1,764 USD per square metre, an increaseof 3.1 percent quarter on quarter and 14.9 percent year on year. This pricegrowth was partly due to the emergence of some luxury projects with highselling price. In general, new luxury projects launched in the last threequarters have set a new pricing level for the market with selling prices from 7,50012,000 USD per square metre.
According to Senior Director and Head of Professional Services at CBRE VietnamDuong Thuy Dung, sluggish license granting from 2018 brought the number ofapartments put up for sale to the lowest level in the past five years.
A total of 4,124 units were launched into the market in the second quarter, down7 percent from the first quarter and 34 percent from the same time last year.Of the total, the mid-end segment had the lion’s share with 56 percent,followed by high-end units with 40 percent.
Despite price hikes from 5-10 percent, absorption rate was high at more than 80percent during March-June, Dung said.
She attributed the good liquidity to a fall in the number of available realtyproducts. Inventory in HCM City was absorbed gradually with 2,000 units peryear in average for the last three years. Currently, the city has 15,000 unitsunsold, accounting for 5 percent of total accumulated supply from 1999.
The average price on the primarymarket was recorded at 1,873 USD per square metre in Q2, up 5 percent quarteron quarter and 20 percent year on year thanks to the short supply and good saleperformance in previously launched projects. Increases in primary price wereobserved across the market. District 2, District 7 and District 9 recorded the highestprice escalation of 15-25 percent year on year.
Tale of two halves
Experts expect a brighter scenario for the second half of 2019 as large-scaleprojects will be rolled out very soon.
In termsof segments, mid-end and affordable will continue to dominate while new launchesfrom luxury and high-end will only account for a small proportion. The eastwill continue to be a market hotspot with new projects in District 2 andDistrict 9. Inventory will be absorbed in the next few quarters thanks tolimited new launch supply.
Ho Chi Minh City’s realty market will welcome abundant supply from easternareas, led by Vinhomes Grandpark in District 9 with more than 10,000 units, andfive new projects in District 2.
The supply will come from other areas like the west with AIO City, Akari Cityand D-Homme projects, and the south with Eco Green Saigon, Sunshine City Saigonand Lovera Vista.
In total, there will be more than 23,000 units launched in the second half ofthe year.
According to Troy Griffiths, Deputy Managing Director at Savills Vietnam, HoChi Minh is a large hub, thus, it has great impact on the realty market inVietnam.
The time is ripe for housing developers, particularly with an increasing numberof immigrants into the city who want high-quality houses, he said.
Although grade-C apartments are dominating the market, the market has seen thepresence of grade-A & B products, which are situated in desirable locationsand built in line with international standards.
Regarding housing prices, the CBRE said the primary prices surge about 7percent each year, and the growth rate is reckoned at 5-10 percent during2020-2021. Scarcity of luxurious products will drive the price to grow 10percent. Meanwhile, the high-end segment will have its price increase 6percent, and that of affordable segment will be 3 percent a year.-VNA
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