Last year marked a firm recovery in the Ho Chi Minh City residential property market with strong launches, positive sales volume and improved prices, particularly in the mid-to high-end property sector.
In its latest research report on the sector CBRE Vietnam reported the whole year witnessed 41,787 units being launched from a total of 78 projects, mostly in the east (47 percent) and the south (27 percent) of the city, an increase of 122 percent year-on-year.
It was the highest ever number new launches in a single year, according to the real estate firm, due to the introduction of the largest-ever project in the city – Vinhomes Central Park in Binh Thanh District with more than 7,500 units launched to date, and the second largest – Masteri Thao Dien in District 2 with more than 3,700 units.
CBRE also mentioned the continued positive market momentum that has boosted confidence among property developers, with some even repackaging long-delayed projects and relaunching them to the market with more finance, new unit layouts, sizes and price positioning – or under an entirely new brand.
CBRE reported that overall, market sentiment remained encouragingly positive throughout the year. Last year ended with record high sales volume for a single year – an estimated 36,160 units – up 98 percent y-o-y. These included sales to individual buyers and en-bloc sales to institutional investors and property sales agents. Sales to individual buyers were estimated at 33,348 units, up by 83 percent y-o-y, while Q4 alone saw estimated sales volumes of 10,340 units (a large increase of 28 percent q-o-q for both individual buyers and en-bloc buyers) and 8,218 units (a slight increase of 2 percent q-o-q for only end-buyers) respectively.
Looking closer to the sales proportions, CBRE said that mid- to high-end properties priced between VND 1.3 and VND 5 billion were the best sellers, accounting for more than 75 percent of total transactions. However during 2009 – 2014, affordable properties priced below VND 1.3 billion per unit constantly accounted for the largest proportion in the city’s successful transactions. This highlighted the market preferences have improved and have shifted to the higher-end products.
With such strong sales momentum, CBRE said that developers across all segments have confidently increased selling prices, even week by week in some cases where projects are well-developed. New projects under construction have seen sharper price increases than previously completed projects, emphasising buyers prefer new products – although the move-in dates are set two- or three-years later.
The market-wide primary price hovered at US$ 2,012 per sqm during 2015 with an uptick of 4.4 percent y-o-y and 2.5 percent q-o-q. High-end properties reported the largest surge, at 8.3 percent y-o-y, averaging US$ 2,025 per sqm, mostly contributed by those located in hotspots – particularly some premium high-end projects which are located at favourable locations and developed by prestigious developers that have pushed up their selling prices by between 10 percent and 15 percent.
Commenting on the market outlook, Dung Duong, Director of Research and Consulting, said: “Despite higher prices, projects were still quickly absorbed and busy launch activities continued, which confirmed we have moved into a new cycle.
“Looking ahead we expect that some major CBD projects will be launched above US$ 7,000 per sqm.
“After seven years of stagnancy we are finally getting to see developers regain full confidence in moving to the next level of premium, high-end and luxury developments however, we should not forget the ‘premium’ affordable and mid-end sectors where real demand is.
“With the new stimulus package for mid-end purchasers from the government, the strengthening of familiar local rivals such as Dat Xanh Group, Nam Long Group, Khang Dien Group who are now competing in various activities, including but not limited to acquiring land banks, financing to re positioning products, improving product quality by offering more facilities and better after-sales services or management, we genuinely believe this year will be another promising year for the residential market.”
CBRE expects that this year will see more than 45,000 units from 90 projects across all segments throughout the city. Among those numbers, top-tier properties will increase by 20 percent, is said.
With the overwhelming number of new supply at higher prices, the competition will obviously become fiercer which will negatively affect the absorption rate across all the projects in HCMC, particularly those located at less convenient locations and offering less competitive products.
Marc Townsend, Managing Director of CBRE Vietnam warned: “When the market grows too big, too fast and are overhyped, it easily derails. Be fearless, not foolish.
“It is wise to open training centres for property sales persons now, who have not received as much training on technical knowledge as the car sales persons, and get prepared for the next level of stronger competition with significantly widened supplied options, increasing prices and a larger client pool – particularly when the foreign buyers are involved.”
