HCM City’s housing market gloomy in first half hinh anh 1A corner of Phu My Hung urban area in HCM City (Photo: VNA)

HCM City (VNA) – Ho Chi Minh City’s realty sector experienced a hazy first half of the year, with dwindling supply of 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 Chau said though the property market bounced back thanks to the Government and local authorities’ efforts to remove bottlenecks, it has not developed stably, and risks still lie ahead.

During January-June, the municipal Department of Construction proposed the local 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-month period, 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 segment dropped 43.8 percent to 2,227 apartments while that of affordable products declined 34.7 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, with new launches down significantly due to the long traditional lunar new year holiday and slow licensing process. The number of newly launched projects was the lowest in the last three years, with only 12 projects compared to the normal 18 to 20.

In the context of limited supply, good sold rates were recorded in all segments. The total number of units sold dropped purely because of the reduction in new launch supply. A sold rate from 90 percent to 100 percent was observed at projects from reputable developers with reasonable prices, with 5,924 sold in Q1, a decrease of 28 percent quarter on quarter and 39 percent year on year. The total number of units sold was 1,500 higher than new launches, indicating the market is absorbing inventories from previously launched projects.

In terms of market segmentation, the mid-end segment accounted for 55 percent of the total new supply in Q1. This segmentation is expected to support sustainable growth for the city’s condominium market by focusing on end-users. In terms of location, HCM City’s condominium market continued to expand towards the east and the south, with new projects in Districts 2, 8, 9 and Binh Chanh District.

The average primary selling price in Q1 was 1,764 USD per square metre, an increase of 3.1 percent quarter on quarter and 14.9 percent year on year. This price growth was partly due to the emergence of some luxury projects with high selling price. In general, new luxury projects launched in the last three quarters have set a new pricing level for the market with selling prices from 7,500 12,000 USD per square metre.
According to Senior Director and Head of Professional Services at CBRE Vietnam Duong Thuy Dung, sluggish license granting from 2018 brought the number of apartments 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, down 7 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 80 percent during March-June, Dung said.

She attributed the good liquidity to a fall in the number of available realty products. Inventory in HCM City was absorbed gradually with 2,000 units per year in average for the last three years. Currently, the city has 15,000 units unsold, accounting for 5 percent of total accumulated supply from 1999.

The average price on the primary market was recorded at 1,873 USD per square metre in Q2, up 5 percent quarter on quarter and 20 percent year on year thanks to the short supply and good sale performance in previously launched projects. Increases in primary price were observed across the market. District 2, District 7 and District 9 recorded the highest price 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-scale projects will be rolled out very soon.

In terms of segments, mid-end and affordable will continue to dominate while new launches from luxury and high-end will only account for a small proportion. The east will continue to be a market hotspot with new projects in District 2 and District 9. Inventory will be absorbed in the next few quarters thanks to limited new launch supply.
Ho Chi Minh City’s realty market will welcome abundant supply from eastern areas, led by Vinhomes Grandpark in District 9 with more than 10,000 units, and five new projects in District 2.

The supply will come from other areas like the west with AIO City, Akari City and D-Homme projects, and the south with Eco Green Saigon, Sunshine City Saigon and Lovera Vista.

In total, there will be more than 23,000 units launched in the second half of the year.

According to Troy Griffiths, Deputy Managing Director at Savills Vietnam, Ho Chi Minh is a large hub, thus, it has great impact on the realty market in Vietnam.

The time is ripe for housing developers, particularly with an increasing number of immigrants into the city who want high-quality houses, he said.

Although grade-C apartments are dominating the market, the market has seen the presence of grade-A & B products, which are situated in desirable locations and built in line with international standards.

Regarding housing prices, the CBRE said the primary prices surge about 7 percent each year, and the growth rate is reckoned at 5-10 percent during 2020-2021. Scarcity of luxurious products will drive the price to grow 10 percent. Meanwhile, the high-end segment will have its price increase 6 percent, and that of affordable segment will be 3 percent a year.-VNA