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Vietnam Property Market Brief Q4 2015


​ECONOMIC HIGHLIGHTS

Vietnam’s economy grows 7.0% in 4Q15: Vietnam’s GDP growth was 7.0% in 4Q15, quickening from a revised 6.9% in 3Q15, and in 2015, Vietnam recorded a GDP growth rate of 6.9%, surpassing the government‘s 6.2% target set early 2015. Growth will be very important for the Vietnamese economy in the coming years in the context of falling world oil prices and instability in the international financial markets. In the national economic overview, the agro-forestry and fisheries sectors rose 2.4%, the construction and industry sectors rose 9.6%, and the services sector rose 6.3%. The fastest growth rate in last five years was helped by an expanding industrial sector and record foreign direct investment.

Retail sales increase, but international arrivals decline: Vietnam’s retail sales and service turnover increased 8.4% y-o-y in 2015. Vietnam received more than 7.9 million foreign visitors in 2015, a decline of 0.2% on 2014, the first decrease in the last six years. In December 2015, Vietnam’s tourist arrivals are projected to top 760,800, up 2.6% m-o-m and 15.0% y-o-y and this will be the sixth consecutive month Vietnam has recorded an increase in the number of international visitors, a rebound after 13 months of successive declines. There were increases in the number of tourists from South Korea (31.4% y-o-y) and Singapore (16.9% y-o-y). Nine-month revenues from the tourism sector were up 2.8% y-o-y.

FDI flow up: The disbursement of FDI reached USD 14.5 billion in 2015, up 17.4% y-o-y. The country attracted USD 22.8 billion in FDI during this year, a jump of 12.5% compared with 2014, including USD 15.6 billion from 2,013 newly registered projects and USD 7.2 billion from 814 added FDI projects. The processing and manufacturing sectors continued to be the most attractive sectors with a total of USD 15.2 billion (accounting for 66.9%) and the real estate sector took the third position with USD 2.4 billion (accounting for 10.5%). HCMC took the lead among the 48 localities with new FDI with a registered capital of USD 2.8 billion. Of the 58 countries and territories investing in Vietnam, South Korea continued to be the leading source of FDI, with USD 2.7 billion in newly registered and expanded capital, accounting for 17.2% of total FDI, followed by Malaysia (USD 2.5 billion), Japan (USD 1.3 billion) and the United Kingdom (USD 1.3 billion).

CPI rise in December: Vietnam’s CPI in December 2015 increased by 0.6% y-o-y and 0.0% m-o-m. This is the lowest annual rise in the past 14 years. The reason for this low rise includes a weak global fuel and commodity prices. Monthly price increases were seen in education and healthcare services and apparel products.
Exchange rate: The State Bank of Vietnam (SBV) increased the average interbank VND/USD exchange rate to VND 21,890 and also widened the trading band from +/- 2% to +/- 3%. The SBV noted that with these adjustments, the VND would be more flexible to changes in the domestic and global markets until early 2016, helping ensure the stability in the foreign exchange and the competitiveness of Vietnamese goods.

Vietnam trade deficit USD 3.2 billion: According to the General Statistics Office, the country recorded a trade deficit of USD 3.2 billion in 2015. Decreased exports of major agricultural commodities such as coffee and rice were cited as reasons behind the trade deficit. In 2015, Vietnam achieved USD 162.4 billion in export revenue and USD 165.6 billion in import value, up 8.1% and 12.0% y-o-y, respectively. The United States was the country’s largest export market in 2015, accounting for USD 33.5 billion in exports, an increase of 17.0% compared with 2014. In 2015, the largest source of imports was China, with USD 49.3 billion, a 12.9% rise from 2014.

Number of newly registered enterprises increases: The number of newly registered enterprises reached 94,754 in 2015 with total registered capital of VND 601.5 trillion, an increase of 26.6% in the number of enterprises and 39.1% in the registered capital compared with 2014. The average registered capital per newly established enterprise went up by 9.9%. The number of enterprises that finished the procedure for dissolving and terminating business activity in 2015 decreased 0.4%, to 9,467 enterprises.


HCMC OFFICE

Supply and Demand​
Total supply increases slightly
  • In 4Q15, one Grade C building came on stream, taking total supply to around 1.7 million sqm.
  • In 2015, more than 100,000 sqm of new supply came to the office market, an increase of nearly 30% compared to the 2014 figure.
Demand continues to improve
  • Net absorption in 4Q15 reached approximately 17,000 sqm, mainly from new office buildings.
  • The average occupancy rates were above 90% across all grades, with significant improvement in the Suburban sub-market.
Asset Performance​
Rent inches up q-o-q
  • The average net rent continued an upward trend from the previous quarter, with an increase of 0.6% q-o-q in 4Q15.
  • Many landlords offered USD 1-2 per sqm per month higher than the current rental rates to tenants, especially on lease renewal.
Outlook​
Supply to increase moderately
  • Around 50,000 sqm of new office space is expected for 2016. No new Grade A office buildings will come to the market in the next 12 months.
  • Most projects scheduled to complete in 2016 are under the finishing stages of construction and located in non CBD sub-market.
Rents to pick up in 2016
  • Effective rental rates are expected to increase, as business sentiment improves and landlords reduce incentive levels.
  • Relocation and expansion plans from financial and banking institutions continue to drive the office market in 2016.


HCMC RESIDENTIAL

Supply and Demand​
Supply accelerates
  • Apartments: New launches totaled 7,600 units, up 12.0% q-o-q and 64.0% y-o-y. The proportion of Premium units continued to grow considerably.
  • Villas /Townhouses: New supply amounted to 494 units in 4Q15, the highest ever. Districts 2 and 9 continue to attract the majority of development.

Strong sales momentum continues
  • Apartments: Demand expanded, with 7,572 units sold and those priced at more than USD 1,500 per sqm responsible for nearly half the volume.
  • Villas / Townhouses: Sales were up 57.0% q-o-q, double the 4Q14 figure.
Asset Performance
Prices largely on the rise
o Primary market:
  • Apartments: Prices continued to grow at a fast pace. The Affordable segment registered the highest growth at 2.9% q-o-q.
  • Villas / Townhouses: Prices edged up q-o-q, in line with increased launching and construction activity in remote sub-markets.
o Secondary market:
  • Apartments: Prices showed considerable increases but some long-standing buildings saw price declines in the range of 1-2% q-o-q.
  • Villas / Townhouses: Prices extended their recent uptrend, with some large increases of 4-6% q-o-q found in newly completed properties.
Outlook
Large pipeline supply in 2016
  • Around 25,000 new Apartment units are expected in 2016, with almost all districts recording supply additions.
  • New supply of Villas / Townhouses in 2016 is expected to reach 2015’s total of 1,150 units, with large-scale, mid-end projects dominating the market.
High-level sales anticipated for 2016
  • Demand growth will remain positive in the coming year, supported by continued strong investor sentiment and the availability of housing credit.
  • The price uptrend will continue to strengthen.


HCMC RETAIL

Supply and Demand
Supply increases
  • Two shopping centres and two supermarkets came on stream in 4Q15. Total retail supply reached approximately one million sqm.
  • Emart, a brand-new Korean retailer in the Vietnam market, introduced its first property in Go Vap District with total area of 11,900 sqm.
Demand improves significantly
  • Net absorption in the Shopping Centre segment totaled 63,000 sqm, mainly from the two new properties – Pearl Plaza and Vincom Thao Dien.
  • Take-up at shopping centres in the city’s CBD amounted to more than 3,700 sqm in 4Q15.
Asset Performance
Rents remain in negative territory
  • Rents in the CBD sub-market held steady at USD 70.4 per sqm per month for the third consecutive quarters.
  • The average gross rent of the Non-CBD sub-market stood at USD 39.1 per sqm per month, a marginal decrease of 2 bps q-o-q.
  • Rental rates in the Bazaar sub-market were stable in 4Q15.​
Outlook
Supply to increase substantially
  • Total stock is expected to record approximately 180,000 sqm of new retail space in 2016, coming from many well-known retailers.
  • With the except of Saigon Centre Phase 2, most retail properties scheduled to complete in 2016 are located outside the CBD.
Take-up rates to be at high levels.
  • With large and quality pipeline supply in 2016, total net absorption is expected to reach a record high.
  • Overall rents may decline in the next quarters as the competition among retail developers is intense but the market performance is only moderate.

HCMC SERVICED APARTMENT

Supply and Demand
Slight increase in supply
  • One new completion in 4Q15, City Living 2 in Binh Thanh District, added 18 serviced apartment units to the market.
  • The Grade B segment continued to lead the supply, with a 52.9% market share, although no new completions were recorded since end-2013.
Increased demand
  • The overall occupancy rate in 4Q15 moved up 245 bps from 3Q15, with strong performance delivered by the Grade B and Grade C segments.
  • The demand growth remained negative in some Grade A properties.
Asset Performance​
Rents on the decline
  • The overall average rent decreased 0.9% q-o-q and 5.7% y-o-y in 4Q15. Grade C was the only segment that showed an increase in asking rent.
  • The rent difference between the Grade A and Grade B sub-markets continued to be widened, from 37.7% in 3Q15 to 39.1% in 4Q15.
Outlook
Abundant supply in 2016-17
  • There will be approximately 800 new serviced apartment units from five development projects entering the market in the next two years.
  • District 1 and District 3 are likely to remain the most desirable destinations of the city, accounting for around 85% of the new supply.
Demand to moderate
  • Vacancy rate of the overall market is expected to increase significantly when new completions enter the market.
  • The recent downtrend in rent is likely to continue in the next quarters, mostly caused by the large pipeline supply.​


HANOI OFFICE​

Supply and Demand
Supply increases
  • Two new office buildings, with more than 36,000 sqm, were completed. Total office supply stood at more than 1.6 million sqm as at end-2015.
  • Supply additions in 2015 were limited, with only the Grade B segment reporting positive figures.
Demand moderates
  • Net absorption totaled approximately 25,500 sqm in 4Q15, and remained driven by the Grade B segment.
  • New leases in the quarter were mostly small- to mid-sized office units. Pre-commitments recorded for the new completions were limited.
Asset Performance
Rents decline
  • The average rent continued a downward trend in all segments, but the pace of reduction slowed from the previous quarter.
  • Rents at most buildings held relatively stable in 4Q15, but a few buildings with high vacancy rates experienced double-digit decreases in rent.
Outlook
Supply to increase in 2016
  • Around 115,000 sqm of new office space is expected to come on stream in 2016.
  • Demand for office space is likely to be driven by the new supply, especially in the new CBD sub-market.
Rental growth to remain in negative territory
  • Rents in the coming year are likely to face downward pressure from the moderate demand and excess supply.
  • However, rents at good quality buildings in new CBD sub-market may experience a slight increase in the next quarters.

HANOI RESIDENTIAL

Supply and Demand
Increased launching activity across the markets
  • New supply in 4Q15 reached 8,800 units, up 18.0% from 3Q15, and increased the 2015 total to 28,300, exceeding the combined rate of 2013-14.
  • Construction progressed well in many developments during 2015, with a total of 23,200 newly completed units reported at year-end.
Demand at an all-time high
  • Take-up was up 8.0% q-o-q to 8,500 units in 4Q15, nearly half of which was priced between USD 1,000 and USD 1,500 per sqm.
  • In 4Q15, Hoang Mai District led the sales with 2,100 units, followed by Hai Ba Trung, Thanh Xuan and Nam Tu Liem Districts with 1,300 units each.
Asset Performance
Price rises continue
o Primary market
  • ​Price growth was higher at 1.8% q-o-q in 4Q15, with projects launched during the year seeing large quarterly increases of 3-5%.
  • In 4Q15, prices in the Premium segment moved at the fastest pace, of 3.2% q-o-q.
o Secondary market
  • Prices kept increasing, but at a slower pace than in 3Q15.
  • The proportion of properties lowering their asking prices in the total secondary supply increased from 12.0% in 3Q15 to 23.0% in 4Q15.
Outlook
High-level supply expected for the coming year
  • Around 21,000 units will complete in 2016, 85.0% of which were already sold. Of the projected total, the Mid-end segment will form the largest part.
  • Abundant new launches are expected, as the improved sentiment should draw more developers and development projects to the residential market.
Residential markets to continue to show strong performance
  • Demand growth will remain positive in the coming year, supported by continued strong investor sentiment and the availability of housing credit.
  • The price uptrend will continue to strengthen.
​​

HANOI RETAIL

Supply and Demand
Two large shopping centres come on stream
  • The total supply increased by more than 127,000 sqm, thanks to the completion of AEON Mall and Vincom Nguyen Chi Thanh.
  • Convenience stores became increasingly more popular in Hanoi, with a considerable amount of new openings in recent times.
Demand declines
  • Negative absorption was witnessed in many shopping centres.
  • However, high occupancy rates of more than 90% were achieved at the quarter’s two new properties.
Asset Performance
Rent marginally lower q-o-q
  • Average rents in the Shopping Centre segment stood at USD 30.0 per sqm per month, a decline of 1.0% q-o-q and due to lowered rents at underperforming properties.
  • In the CBD sub-market, ground-floor base rents were stable at more than USD 100 per sqm per month.
Outlook
Supply to expect little change in 2016
  • No new shopping centres are scheduled to open over the next 12 months. However, an increasing number of supermarkets and convenience stores are expected to come on stream.
  • Limited supply additions and moderate demand are expected to keep occupancy levels stable in the coming quarters.

Rents to decline
  • The unsatisfactory performance of both supply and demand is likely to strengthen the recent downtrend in rent.
  • Weak consumer buying power will remain one of the most challenging factors in the retail market.


Vietnam Property Market Brief is a quarterly publication providing market updates for different real estate sectors in different cities. It is part of the comprehensive research package from JLL Research that covers Vietnam along with other major countries in Asia Pacific









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