Da Nang started this year with a decent GDP growth rate of 7.1 percent year-on-year (Y-O-Y), higher than the country’s average of 5.5 percent, yet lower than the levels observed during 2015 and 2014, according to recent research from real estate firm CBRE Vietnam.
Similar to 2015 services and manufacturing, which account for 64 percent and 33 percent of city’s GDP, contributed most to the growth in the quarter.
In terms of the Price Index the city witnessed an increase in its Consumer Price Index (CPI) during Q1 of 0.88 percent, which was higher than 2015’s record low level. CPI is expected to continue rising during the near future, mostly from the transportation sector due to increase in fuel price. A slight increase in CPI is a sign of good consumption in the city.
During the first four months of 2016, retail and services increased 7.2 percent y-o-y and reached VND 21,000 billion.
Compared to other developing cities in Vietnam, Da Nang has shown decreasing level of FDI throughout the years, despite the city’s good ranking in terms of Provincial Competitiveness Index (PCI). One explanation for this, according to CBRE, is that Da Nang usually turns down some FDI proposals that may cause environmental issues. For example, in 2015 the city declined to implement two textile/dying projects from a Taiwanese company and a South Korean company for this very reason.
Despite the slowing FDI, Da Nang is still able to secure some significant projects in other industries such as: Da Phuoc Urban Area (US$ 250 million), a mixed-up township near City’s Memorial (US$ 200 million). CBRE noted these FDI projects are from South Korean investors, the biggest investor in the city, thanks to signed free trade agreement between Vietnam and South Korean. The investment level from South Korea is expected to continue rising significantly in the future.
Looking forward Da Nang will continue investing in developing technology/education/science projects and funds. Among the rapidly improving infrastructure, Da Nang is channeled to become the business, commercial center for central Vietnam, and the event city of Vietnam and the surrounding area.
The second home market
The condotel market in the first half of 2016 showed a strong increase in new supply, with 2,436 units from six projects, 89 percent of which came from high-end sector such as Vinpearl Riverfront Condotel Da Nang, Ariyana Beach Resort and Suite Da Nang, Alphanam Luxury Apartment, Ocean Suite (Block B), FHome (Block A), and Cocobay Ocean Condotel.
The total supply of condotel units increased to 3,084 units of which high-end developments accounted for the largest proportion of 76 percent, followed by the mid-end (16 percent) and luxury segment (9 percent).
In early Q3 two more projects are expected to come online: Tourane Condotel and Condotel Central Coast Da Nang, adding more than 800 units to the condotel market.
New supplies caused the average asking price of high-end projects to decrease by 4.8 percent and mid-end projects increased slightly by 0.4 percent compared with Q4 2015, while prices at luxury projects were unchanged. Developers were seen offering small discounts to early buyers at new launches at rates of 3 percent to 5 percent.
In terms of sale activities, as of end of May 2016 those projects that were launched in the beginning of the year recorded average sales rates of 63 percent, while projects that were launched a month ago still recorded low sales rates.
Buyers from Hanoi and northern cities dominate the second home market in Da Nang. This group accounted for approximately 75 percent – 85 percent of successful transactions, and most of them requested to access to rental pool program.
In terms of future launches, 1,629 units from six projects are expected to be launched in the next six months, most of which are in the mid-end segment.
For second home villas, the review quarter saw no new supply in the market. Market supply stayed unchanged at 788 units from 14 projects. It will welcome 16 villas from Nam An Residence Phase 2 in early Q3.
During Q1 the average sales rates of luxury and high-end segment units showed an upward trend of 5.9 percentage points and 9.4 percentage points compared with Q4 2015. Showing the same trend, several successful transactions help to increase mid-end segment sale rate by 1.2 percentage points q-o-q.
Successful transactions happened mostly at specific projects such as Furama Pool Villas, Premier Village Da Nang, Naman Residence, The Point and Vinpearl Resort & Villas Da Nang 2. Projects with guaranteed yields on a rental pool programme can be more attractive to potential buyers due to profits from rental pool programmes.
Marc Townsend, Managing Director of CBRE Vietnam, said: “Overall, both the condotel and second home markets saw lively movement in sales activity in 2015 and first half of 2016, especially in increasing sales rates at launched projects.
“In particular, vacation projects managed by well-known operators and offering fixed annual returns are proving attractive to investment buyers.”
Market average asking prices stayed unchanged in the review quarter. Asking prices are expected to remain stable at most projects during the next quarter. Developers will continue offering incentives to encourage prompt payment.
Asking prices for Da Nang’s second-home villas range from US$ 250,000 to US$ 2 million each, in which the largest proportion – 57 percent – are priced from US$ 500,000 to US$ 900,000. This was followed by units in the price range of US $900,000 to $1 million (23 percent), and those in the price range above US$ 1.5 million per unit (14 percent).
Condominiums for sale
The condominiums for sale market started 2016 with a strong increase in new supply. In the first half of the year there were 1,000 newly launched units, an increase of 44.6 percent Y-o-Y. Most of this came from mid-end and affordable projects which accounted for 78.9 percent of total supply.
In the first quarter of 2016 there were 936 new affordable units which came from Muong Thanh Son Tra Condo & Hotel.
Regarding location, most condominiums for sale located in the CBD (1,103 units) accounted for the largest proportion of the total supply (34.6 percent), followed by coastal area (33.2 percent) and CBD-fridge (32.2 percent).
The asking price of the high-end segment units remained unchanged at US$ 1,623 per sqm. The average asking price of mid-end developments was US$ 826, showing the highest increase of 3.7 percent Y-o-Y. The asking price at affordable projects was US$ 656, a decrease of 7.7 percent Y-o-Y due to the launch of Muong Thanh Son Tra Da Nang (with prices of US$ 600 to IS$ 700 on average).
During the first five months of 2016, CBRE recorded an estimated 1,000 sold units in the condominium market, a surge of 74.6 percent Y-o-Y. The affordable segment witnessed the largest sales volume (45.8 percent), followed by mid-end (36.3 percent) and high-end segment (17.9 percent).
The affordable segment recorded the highest number of sales at Muong Thanh Son Tra Condo & Hotel, and this helped to increase the average sales rates in this segment from 63.5 percent during 2015 to 87.6 percent in the review quarter.
The sales rates of mid-end developments increased from 78.7 percent in 2015 to 82.6 percent in the review quarter. This was due to high sales volume at Harmony Tower, Da Nang Plaza, F-home and The Monarchy. More than 60 percent of clients who bought condominiums in the CBD are from Da Nang, while the majority of coastal condominiums are purchased by buyers from Hanoi, HCMC and other cities in Vietnam.
Regarding the outlook, Townsend, concluded:” Asking prices are expected to remain stable at most projects in the next quarter. Developers will continue offering incentives to encourage prompt payment.
“Notably, the new housing law which came in to force in July 2015 will bring opportunities for those who are interested in the real estate market in Vietnam. Under the new law, foreigners who are allowed to enter Vietnam are also able to own condominiums and are able to lease, mortgage, contribute as capital, gift, bequest, exchange, etc.
“Although CBRE has observed the number of successful transactions made by foreign buyers has not increased dramatically due to a need for clarification on the legal situation, though there is clear foreign
Picture: Seaside Villas Premier Village Danang Resort (The Sun Villas) is being marketed by CBRE Vietnam with prices starting from VND 18 million.
