High-end apartment sale price reached a new high

Jones Lang LaSalle (JLL) Vietnam has just released a report on the apartments for sale market in Ho Chi Minh City in July, August and September with new apartment projects continuously setting higher price levels than before.

The average price rose 23.8% y-o-y to USD 2,067 per sqm. High-end apartments’ price reached a new high, at USD 5,320 per sqm, an increase of 64.9% y-o-y, which is the highest growth rate in the past 5 years.

This was driven by new high price level in new launches and currently restricted supply on the market. On a project basis, the primary price grew by 20.6% y-o-y on average, driven by high-end segment.

Sales totalled 17,248 units in 3Q19, from 14 projects with the large-scale Vinhomes Grand Park project contributed more than 60% of taken units (more than 10,000 units). This project has been put on the market (under soft launch) two years before its official launch (2017).

Investors, the main demand source for high-end apartments, started to shift their investment to villas/townhouses to enjoy better capital gain, given the same investment amount.

Apart from this short-term factor, the market witnessed limited supply due to the continued prolonged approval process experienced recently. About 6,000 units expected to be officially launched during 4Q19. Because of the government’s tight control in granting land use rights and construction licences, the projected supply pipeline in 2020 is subject to greater uncertainty and varies between 40,000 and 50,000 units.

Demand will remain high and price growth is mostly positive in low-priced sectors. Meanwhile, high-end apartment sector is expected to witness a slow down in demand, especially investment demand, as selling price reaching a new high level making investment in high-end apartment less attractive.

Hanoi

The average primary price stood at USD 1,473 per sqm during 3Q19, up 3.5% q-o-q. Regarding secondary market,  luxury units boasted the strongest growth with resale price up 2.4% q-o-q, in view of prime locations and high – quality projects.

An estimate of 6,400 units were added to stock in 3Q19, improved 8.7% q-o-q. In total, only 4 projects with total of 850 units were newly released in the quarter. In Premium segment, supply remained limited in 3Q19 with only one new project in Tay Ho District, launching 32 units. No new luxury unit entered the primary market in the quarter.

Sales volumes grew up by  67% q-o-q. Smaller, cheaper units continued to destock at the fastest pace. In terms of location, East suburb drove the growth in offtake of units, as sales recorded a four-fold increase compared to 2Q19.

Price growth across the apartment market is set to stabilize over the remainder of 2019. Several new projects with more than 1,000 units are anticipated to enter the sales market over the next quarter.

Going forward, we expect developers to focus on quality over quantity of new launches to ensure good sales. Approximately 93% of 23,100 residential units from the scheduled completions in 2H19 are already sold out, underpinned by upbeat sentiment from buyers.