I NT R O D UCTIO N
JOURNEY TO THE EAST:
PA RT 1:
The Residential Market
C BRE RESEARC H | SEPTEMB E R 2 0 2 0
C B R E R e s e a r c h | Vi e t n a m S p e c i a l R e p o r t |
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PART 1: THE RESIDENTIAL MARKET
6.
CONTENTS
4.
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| CBRE R e se a rc h | Vie t n am Sp e c ial Re p o r t
E
xecutive Summary
I
ntroduction
16.
F
12.
I
20.
uture Developments in The Eastern City
onclusion
30. ase Studies
mpact on the Residential Market
Note: The East of HCMC includes District 2, District 9, Binh Thanh District and Thu Duc District .
C B R E R e s e a r c h | Vi e t n a m S p e c i a l R e p o r t |
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PART 1: THE RESIDENTIAL MARKET
1.
Executive Summary In May 2020, the Ho Chi Minh City Department of Home Affairs issued proposal No. 1932 / TTr-SNV detailing a comprehensive development plan for all districts and wards in Ho Chi Minh City (HCMC). The proposal calls for the merger of Districts 2, 9 and Thu Duc in East HCMC to create a new and independent administrative entity informally dubbed “The Eastern City” or “Thu Duc City”, to complement and coexist with HCMC. New infrastructure currently under construction will facilitate the linkage of The Eastern City with the rest of HCMC. Projects already underway include Metro Line No. 1 - a 19.7 km mass transit line connecting Ben Thanh Station in District 1 to Long Binh Depot in
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District 9, which is due to be completed by the end of 2021 - and Thu Thiem Bridge No. 2. There has been a significant increase in real estate development and investment in the areas that will eventually form The Eastern City. Developers began to acquire sites near the site of future metro stations several years ago, with residential properties attracting no shortage of interest from investors and end-users. Between 2015-2020, within the high-end segment, price increments of residential properties in District 2 surpassed HCMC’s average by 2%, with significant potential for additional growth. Part 1 of this Special Report by CBRE explores the impact of the eastern expansion of HCMC metropolis and the creation of The Eastern City on the residential market and identifies opportunities for residential developers, investors and end-users. Subsequent parts of this report to be released in the coming months will focus on the impacts for the office, retail and hotel sectors.
E X E C UT I VE S UMMA RY
Between 2015-2020, residential sales prices in District 2 increased by an average of 7.3% per year for the high-end segment, well beyond the citywide average. There is still significant room for appreciation thanks to the huge potential of this area. Residential supply in The Eastern City is expected to grow at an annual rate of 11.5% between 2020-2025, equivalent to 15,000-16,000 new units per year on average, exceeding the South (4.6%) and the West (5.3%). The addition of new infrastructure connecting The Eastern City with the rest of HCMC and subsequent development of new residential projects in the area have led to a surge in land prices across many areas.
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PART 1: THE RESIDENTIAL MARKET
2.
Introduction A
long with Dong Nai, Binh Duong, Ba Ria – Vung Tau, Binh Phuoc, Tay Ninh, Long An and Tien Giang Provinces, HCMC comprises part of Vietnam’s Southern Key Economic Zone. In recent decades, HCMC has made considerable progress in socio economic development and established a prominent role for itself within this zone, whilst also extending commercial and economic support to neighbouring provinces.
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I NT R O DUCTIO N
THU DUC DIST. 9
DIST. 2
HO CHI MINH CITY
CBD
The Eastern City
A
ccording to the HCMC Master Plan up to 2025, the future development of HCMC will be directed to the east and south. In the east, the construction of several major new infrastructure projects will help create a Transit-Oriented Development (TOD) corridor from the HCMC Central Business District (CBD) to the East and to Dong Nai province. The plan to develop the east recently received a major boost from the Ho Chi Minh City Department of Home Affairs’ issuance of proposal No. 1932/ TTr-SNV, which features a comprehensive development plan for all districts and wards in HCMC. The proposal calls for the merger of Districts 2, 9 and Thu Duc in the east to create a new and independent administrative hub to complement and coexist with HCMC – an entity that has been dubbed “The Eastern City”. Within this area, District 2 has been designated HCMC’s new administrative and financial centre; District 9 will be established as the city’s technology hub; and Thu Duc District will be an education hub. Owing to its strategic location within the “The Golden Triangle” of HCMC, Binh Duong and Dong Nai provinces, The Eastern City will play a key role in linking HCMC with adjacent provinces in terms of both transportation and economic activity.
New infrastructure currently under construction will facilitate the linkage of The Eastern City with the rest of HCMC. These include Metro Line No. 1 - a 19.7 km mass transit line connecting Ben Thanh Station in District 1 to Long Binh Depot in District 9, which is due to be completed by the end of 2021 - and Thu Thiem Bridge No. 2. Since construction of Metro Line No. 1 began in 2012, many residential and retail developments have been built adjacent to the route, especially on the Hanoi Highway at Thao Dien, Binh An and An Phu wards of District 2. Other hotspots in The Eastern City include Thu Thiem NUA, a 657-hectare site located in District 2, which is now home to numerous major residential projects such as Sala Dai Quang Minh Township, Empire City, The Metropole, The River, Thu Thiem Lakeview and The New City. As new infrastructure comes online, existing commercial developments such as Sofic Tower and Socar Mall - the commercial components of Sala Dai Quang Minh Township – and new projects in the pipeline will gain traction and attract more office and retail occupiers to the area – accelerating the decentralisation trend witnessed in recent years.
C B R E R e s e a r c h | Vi e t n a m S p e c i a l R e p o r t |
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PART 1: THE RESIDENTIAL MARKET
HOC MON
4
4
DIST. 12
METRO LINES HO CHI MINH of CITY
GO VAP
4
4
The urban rail-way network comprises six MRT lines with a total length of 109 km, together with two monorail routes and a tramway.
2
2
2
TAN BINH
1 2
4
Ben Thanh – Long Binh Depot: 19.7 km
5
5
PHU NHUAN
2
An Suong – Thu Thiem: 19 km
2 5
TAN PHU
Tan Kien – Hiep Binh Phuoc: 28.3 km
4
Ben Cat Bridge – Nguyen Van Linh: 24 km
5
A northern inner semi-loop line
2 2
6
DIST. 10
5 5
6
5
DIST. 11
BINH TAN 3
3
3
3
3
DIST. 5
A north-south section in the western suburbs 3
5
DIST. 6
DIST. 8
5
Note:
5
Under construction Under planning
3
3
Ba Son Station Underground Work BINH CHANH
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4
2
6
3
6
2
I NT R O D UCTIO N
1 1
1
4
3
1 1
3
THU DUC
1
3
1
DIST. 9
3
BINH THANH 5
1
3
5
4 1
1
1
1
3
4
3 2
4
DIST. 3
3 2 3
DIST. 1
3
2
3
30 KM TO LONG THANH INTERNATIONAL AIRPORT
3
1
2 2
1
4
THU THIEM NUA
2
1
3
DIST. 2
HCMC CBD DIST. 4
4
DIST. 7 4 4
NHA BE
Opera House Station
Opera House Station
Opera House Station
Source: CBRE Vietnam, Q2 2020. C B R E R e s e a r c h | Vi e t n a m S p e c i a l R e p o r t |
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PART 1: THE RESIDENTIAL MARKET
THU THIEM’S DEVELOPMENT
Planning for Thu Thiem began
TIMELINE
THU THIEM NEW URBAN AREA
1996
Relocation of existing residents officially began
2002
Source: http://www.thuthiem.hochiminhcity.gov.vn
EAST-WEST HIGHWAY Connecting The West to Thu Thiem NUA to residential and commercial districts to the east
THU THIEM BRIDGE NO. 1 Linking Thu Thiem with Binh Thanh District. Opened in 2008
THU THIEM BRIDGE NO. 2 Linking Thu Thiem with District 1 (at one end of Ton Duc Thang Str.) Investor: Dai Quang Minh Under-construction, set to open in 2021
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PEDESTRIAN BRIDGE Linking Thu Thiem with District 1 (at Me Linh Square) Investor: Dai Quang Minh Under Design and Concept Contest
I NT R O D UCTIO N
Thu Thiem Bridge No. 1 opened
2008
Thu Thiem Tunnel opened
2011
1/2000 master plan unveiled
2012
FOUR MAJOR ROADS Total length: 11.9km Investor: Dai Quang Minh Construction started in 2014, to be completed in 2021
Thu Thiem Bridge No. 2 commenced construction
2/2015
Launch of the first residential project in Thu Thiem by Dai Quang Minh
7/2015
Four projects providing a total of 5,351 units were completed. Selling prices increase by 95% compared to 2015.
2020
THU THIEM BRIDGE NO. 4 Linking Thu Thiem with District 7 Under-planning
THU THIEM BRIDGE NO. 3 Linking Thu Thiem with District 4 Under-planning
THU THIEM TUNNEL Linking Thu Thiem with District 1 Investor: Thu Thiem Authority Opened in 2011
C B R E R e s e a r c h | Vi e t n a m S p e c i a l R e p o r t |
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PART 1: THE RESIDENTIAL MARKET
3.
Impact on the Residential Market C BRE expects the completion of Metro Line No. 1 and Thu Thiem Bridge No. 2 to attract young couples, small households, retailers and office occupiers to reside, shop and work in The Eastern City. Thu Thiem NUA will be one of the more vibrant areas, with a substantial pipeline of new commercial and high-end condominium projects expected to be built.
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I M PA C T O N T H E R E S I D E NT I AL MA RKET
R
esearch in several markets worldwide has found that residential properties within walking distance of metro stations typically command higher selling prices than those that are not – a price premium that often emerges well before metro lines and stations are fully completed. HCMC’s Metro Line No. 1 is expected to be 85% completed by the end of this year, with operations scheduled to commence in Q4 2021. Once completed, the line will connect Districts 2, 9 and Thu Duc with the HCMC CBD, and is expected to lead to significant additional price growth. CBRE data show that price growth in The Eastern City, especially in District 2, began to accelerate after the active construction of Metro Line No. 1 in 2015, while the number of units sold rose by 4x compared with 2010-2014 period (Fig. 3.1). Between 2015-2020, residential sales prices in District 2 increased by an average of 7.3% per year for the high-end segment, well beyond the citywide average, with significant potential for additional growth. Since 2018, capital gains on the secondary market have been considerable as the metro line nears completion, with current average asking prices 25%-75% higher than launching prices (Fig. 3.2 and 3.3). C B R E R e s e a r c h | Vi e t n a m S p e c i a l R e p o r t |
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PART 1: THE RESIDENTIAL MARKET
Figure 3.2: HCMC Condominium, Average Primary Price by Location
30,000
Sold units
25,000 20,000 15,000 10,000 5,000 0
District 2
District 9
2004 - 2014
6,000
Average primary selling price (US$ psm)
Figure 3.1: HCMC Condominium, Sold Units by Location
Thu Duc District
5,000 4,000 3,000 2,000 1,000 -
2015 - 2019
2011 2012 2013 2014 2015 2016 2017 2018 2019 Q2 2020
An Phu
Thanh My Loi
Thao Dien
Thu Thiem
HCMC
Source: CBRE Research, June 2020.
Same side with metroline station Launching price
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Centum Wealth (2018)
Saigon Gateway (2017)
Price growth rate
*Secondary asking price, Q2 2020. Years indicate time of launching
Source: CBRE Research, Q2 2020.
Figure 3.4: HCMC Condominium, Future supply by location Accumulated Launch Supply (units)
F
Him Lam Phu An (2016)
On the other side with metroline station
Current price*
rom 2020-2025, new supply in The Eastern City is considerable, with new residential stock in the area expected to expand at an annual rate an annual rate of 11.5%, equivalent to 15,000-16,000 new units per year, eclipsing new supply growth in the South (4.6%) and West (5.3%) of HCMC. CBRE expects primary prices for new residential projects in the east to increase by around 20% in the coming years, while prices for those new projects along the metro line will increase by 40%. While proximity to the metro line will be a key factor in driving price growth, other aspects such as housing tenure and type, construction quality, amenities and security, will also be important.
Estella Heights (2015)
Cantavil Premier (2010)
The Estella (2008)
Masteri An Phu (2018)
Q2 Thao Dien (2018)
Lavita Charm (2017)
Lavita Garden (2015)
The Nassim (2015)
Gateway Thao Dien (2015)
Masteri Thao Dien (2014)
90% 80% 70% 60% 50% 40% 30% 20% 10% 0%
Price growth rate (%)
4,500 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0
Thao Dien Pearl (2010)
Selling price (US$ psm)
Figure 3.3: HCMC Condominium, Current Price and Launching Price
250,000 200,000 150,000 100,000
DIST.
50,000 0
2020
Central
2021
East
2022
West
2023
2024
North
Source: CBRE Research, Q2 2020.
2025
South
I M PA C T O N T H E R E S I D E NT I AL MA RKET
NOTABLE CONDOMINIUM THU THIEM AND PROJECTS INALONG METRO LINE NO. 1 KEYS
1
Luxury
High-end
Future supply
Mid-end
1
THU DUC
Richland Hill
Saigon Gateway Centum Wealth
Lavita Charm Lavita Garden
1
1 Metro Star
DIST. 9
River City
Wilton Tower Apartment
Thao Dien Pearl
Pearl Plaza Apartment
City Garden
1
The Manor
Sunwah Pearl
Sunshine Venicia
1
Masteri Parkland
Q2 Thao Dien Masteri An Phu
1 The Vista An Phu
Imperia An Phu Lexington Residence
D'Lusso
Laimian City Saigon Broadway
Paris Hoang Kim
1
1
30 KM TO LONG THANH INTERNATIONAL AIRPORT
Vinhomes Central Park Saigon Pearl
Vinhomes Golden River
1
1
1
Gateway Thao Dien
Mozac Thao Dien
The Nassim
BINH THANH
Masteri Thao Dien
Him Lam Phu An
New City
2
ROME by Diamond Lotus
DIST. 2
The Sun Avenue The River Thu Thiem
Thu Thiem Lakeview
Water Bay
Sadora
The Metropole Thu Thiem
Sarina Sala Thu Thiem
1
Sarimi Empire City
Sarica
©CBRE RESEARCH 2020
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U TH IEM TH GE ID BR 4
PART 1: THE RESIDENTIAL MARKET
4.
Future Developments in The Eastern City W hile Vietnam has managed to contain COVID-19 extremely well by global standards, the impact of the pandemic has inevitably filtered through to the real estate sector. Due to licensing issues since 2018 and restriction of public events due to COVID-19, new project launches fell substantially in Q1 2020. However, new openings picked up after social distancing measures were eased in Q2 2020, with several new projects coming online in Thu Thiem and elsewhere. The pipeline of new supply remains substantial, with several new projects to be launched in H2 2020 including The River Thu Thiem and The Opera Residence in The Metropole Thu Thiem project. Where land supply allows, large new mixed-use developments will be developed in the suburban areas of the Eastern City. These projects will consist of condominium, office, hotel, retail and education components along with supporting amenities and cultural attractions.
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F UT UR E D E VE L O P M E NT S I N T H E E A S TERN CITY
PRODUCTS WITH BETTER OFFERINGS: Projects in Thu Thiem and along Metro Line No.1 typically offer better design and facilities and offer a more unique and liveable environment for end-users.
modern facilities and enjoying active lifestyles, CBRE expects to see strong demand and premium prices for modern homes. However, high-end products may be beyond their budget, with high-priced larger units unlikely to hold much appeal.
o Within Thu Thiem – a major urban redevelopment area in District 2 - new projects predominantly target the luxury segment and typically feature larger unit sizes, wider corridors, more space allocated to green areas and iconic design. In line with the Eastern City’s vision of becoming an innovation hub, future luxury projects in this area are expected to be pioneers in smart features linking and optimising security, utilities, entertainment and building management – a trend that will accelerate in the coming years.
ACTIVE RENTAL MARKET ALONG THE METRO LINES: CBRE expects to see an active rental market for residential properties along Metro Line No. 1, which will be keenly sought after for their convenience. Accommodation platforms such as Airbnb have already recorded rapid growth through offering rentals in existing condominium projects around stations along Metro Line No. 1 in Binh Thanh, Thu Duc and Saigon Hi-Tech Park (SHTP).
o Outside of Thu Thiem, projects within walking distance to Metro Line No. 1 will attract strong demand from young professionals and families. With this demographic seeking convenience,
Prime areas close to metro stations in the Eastern City will also attract upcoming branded residences, which to date have been confined to District 1 only.
400
2,400
300
1,800
200
1,200
100
600
0
The Residences at The St Regis Bangkok
The Sukhothai Residences
The Ritz Carlton Residences
2011
2011
2017
The Residence at Four Seasons Banyan Tree The Residences at Mandarin Oriental Private Residence Residences Sindhorn Bangkok Bangkok Riverside Bangkok Kempinski Hotel Bangkok 2019
Supply
2019
2019
Distance to nearest station (m)
Branded residence (supply)
Figure 4.1: Bangkok Case Studies, Branded Residences and Distance to The Nearest Station
0
2020
Distance (m)
Source: CBRE Research, June 2020.
NEW F E AT U RE S O F C ONDOMINIUM PR OJE CT S
Low number of units per floor
Glass lifts enabling passengers to enjoy outside views
Wide corridors and iconic design
Concierge service (future)
Smart features (future)
Sky villa units with large garden in each unit
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PART 1: THE RESIDENTIAL MARKET
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F UT UR E D E VE L O P M E NT S I N T H E E A S TERN CITY
D E V E L O PME NT C H A L L E NGE S Like any major city, HCMC suffers from a range of urban challenges such as excessive noise, traffic congestion and safety. To mitigate the impact of these issues, CBRE advises developers to place a stronger emphasis on building design, such as by providing noise reduction features and designing entry and exit points for convenience and easy access. Other major development challenges include land disputes, which typically involve the illegal confiscation of land from residents. The most prominent dispute occurred in 2018 and subsequently led to an investigation by the Government Inspectorate.
Although the completion of Metro Line No. 1 will provide a welcome boost for the real estate market in The Eastern City, public transportation in HCMC has yet to fully develop into an organised, connected and holistic system capable of catalysing significant real estate price, demand and development growth. CBRE also expects it to take some time for the metro system to fully mature and for local people to become accustomed to using it. In addition, while infrastructure and connectivity are undoubtedly indispensable to supporting property market growth, the systematic development of residential and commercial real estate alongside supporting facilities and amenities will be essential to bringing The Eastern City to life.
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PART 1: THE RESIDENTIAL MARKET
5.
Case Studies 5.1
M E T RO LI NE
R
esidential properties located near public mass transit systems typically command higher rents and sales prices than those that are further away due to the added convenience they offer. In other markets across Asia, the price premium for homes in locations close to public transport ranges from 6% to 25%.
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C A S E S TUD IES
Metro systems have long been a key driver of urban development. While the first urban rail transit systems – such as the London Underground (1863) and New York City Subway (1904) – were completed in the West more than one hundred years ago, many developing countries have only recently built their own. Aside from Japan, where the Tokyo subway commenced operations in 1927, most countries in Asia did not see the construction of underground metro systems until the 1970s. Major milestones included Hong Kong’s MTR (1979), Singapore’s Mass Rapid Transit (1987) and Bangkok’s Skytrain (1999).
Tyne & Wear Metro, Newcastle, U.K. (Opened: 1980, 74.5 km) Prices of houses within 200 m of metro stations increased by 2%. New retail openings and office developments in proximity to stations do not appear to be directly linked with the development of metro lines.
The construction of new infrastructure such as new transport corridors and metro systems in densely populated Asian metropolises including Bangkok, Manila and Jakarta have opened new areas of those cities, attracted investment and stimulated new demand for housing and other types of real estate. Given that the number of residential property owners or renters is far greater than the number of consumers of other types of real estate, the impact of new metro lines on the property market is typically most noticeable in the residential sector.
Vienna S-Bahn, Austria (Opened: 1962, 14 km) Dallas Area Rapid Transit (DART) (Opened: 2002, 144.8 km)
Districts located along the S-Bahn corridor have witnessed an 18.7% increase in the number of new housing units over a ten-year period compared to 4% and 10% in more remote locations.
Price of property located within walking distance of the nearest railway or metro station increased by 7.5% over other locations. The impact was most significant at a distance of 500-750 m, as opposed to adjacent locations, where values dropped. In the best locations, residential prices increased by 11%. Helsinki Metro, Finland (Opened: 1982, 21.1 km)
The value of property near the DART lines is 25% higher than similar real estate in other areas.
Between 1985 and 1995, 25% of new offices, 13% of new commercial premises and 25% of new residential dwellings in the city were built adjacent to the metro system. Nantes Tramway, France (Opened: 1985, 43 km)
The average price of apartments rose between 4.1% and 7.9% after construction was announced and between 3.9% and 5.4% after the locations of the stations were unveiled. For an apartment located within 200 m of a station, the average price increase was 7.4% after the announcement of construction and 5.3% after the locations of the stations were unveiled. For an apartment located between 600 and 800 m away, the average price rise was 5% and 3.8%, respectively. Santiago, Chile, Line 4 (Opened: 2005, 23.9 km)
Source: Claudio A. & Gastón P. 2008 Hack J. 2002.
C B R E R e s e a r c h | Vi e t n a m S p e c i a l R e p o r t |
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PART 1: THE RESIDENTIAL MARKET
CASE STUDY
MANILA, PHILIPPINES
Studies have indicated that the completion of LTR1 has had both positive and negative impacts on residential land values1 . Firstly, evidence suggests that residential land in closer proximity to the line have higher values, while plots located further away from stations are incrementally lower in value. At the same time, however, factors such as increased noise, congestion and pollution resulting from the metro line must also be considered – as shown by an analysis of distance to the LRT1 line and residential land values. Properties immediately adjacent to the line have seen land values decline, but this negative impact begins to fade further away from the line, before finally disappearing at around 900 m.
Figure 5.1: Distances to LRT1 and residential land values and correspondence with other observed effects. Positive values IMPROVEMENTS LRT Station LRT Line
Distance
NUISANCE
INDIVIDUAL EFFECT
Negative values Positive values IMPROVEMENTS NUISANCE LRT Station LRT Line
Distance Negative values
COMBINE EFFECT
457 414
Changes in residential land-value 1993 - 96 (US$/m2)
T
he Manila Light Rail Transit System Line 1 (LRT1) was completed in 1984 and was the first metro line of the Manila Light Rail Transit System. As of 2020, LRT1 contains twenty stations along an elevated route of 19.65 km.
371 328 285 242 198 155 112 69 26 -17 - 60 3600
3300
3000
2700
2400
2100
1800
1500
1200
900
600
300
Distance to LRT1 (meters to the line) 1 Assessing the impacts of Light Rail Transit on urban land in Manila, Javier F. Pacheco-Raguz, 2010
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Source: Assessing the impacts of Light Rail Transit on urban land in Manila, Javier F. Pacheco-Raguz, 2010
C A S E S TUD IES
CASE STUDY
BANGKOK, THAILAND
B
angkok’s rapid transit systems currently consist of the BTS Skytrain (Sukhumvit Line and Silom Line), the MRT Subway (Blue Line and Purple Line) and the Airport Rail Link.
Figure 5.2: Land value premiums by urban rail transit for every km closer to BTS Skytrain/MRT Blue Line station. % 25
Bangkok’s BTS Skytrain opened in 1999 along a route covering the city CBD and inner-city area and now carries just under 700,000 people per day, many of which are residents living along the routes who use the BTS commute to workplaces and avoid heavy traffic.
% 20 % 10
Land value premium
16.06% % 15
Along with the Metropolitan Rapid Transit (MRT), studies have shown that the BTS has significantly lifted the price of real estate located near stations, especially condominiums2. Consumers are willing to pay more for properties conveniently located nearby stations due to the time and money they can save in commuting.
20.55%
9.47% 6.50%
5%
After the commencement of operations on the MRT Blue Line Network, residential and non-residential land parcels fell by between approximately THB 7,000 (US$226) and THB 16,500 bht (US$532) per sq. m. for every additional km further away from the nearest station on the line.
0%
Following the completion of the Sukhumvit line (Light Green line) from Mo Chit to On Nut, residential and non-residential land plots were discounted by between approximately THB 2,100 (US$68) and THB 9,700 baht (US$313) per sq. m. for every additional km further from the nearest BTS station.
BTS Skytrain
Non - Residential
MRT Blue Line
Residential
Source: The Influence of Rapid Transit Systems on Condominium Prices in Bangkok, Chuti Thamrongsrisook, 2011
The Influence of Rapid Transit Systems on Condominium Prices in Bangkok, Chuti Thamrongsrisook, 2011
2
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PART 1: THE RESIDENTIAL MARKET
5.2
P U D O NG C A S E STUD Y
T
hu Thiem has several similarities with Shanghai’s Pudong district in terms of its geographical location, connectivity and ambitious vision of creating a new CBD to complement an existing one across a river.
Figure 5.3: Condominium selling price in most expensive districts in Shanghai, 2018
Selling price (US$ psm)
25,000
20,000
15,000
10,000
5,000
0
Jing'an District
Huangpu District
Source: CBRE Research, 2018.
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Changning District
Hongkou District
Xuhui District Pudong District
C A S E S TUD IES
CASE STUDY
PUDONG
2020
BA C KG R O U N D
T
he rapid redevelopment of Pudong commenced in 1990, when a policy of “developing and opening up Pudong” was officially announced. This was followed by the creation of the Special Economic Zone in Chuansha, which created the Pudong New Area, followed by the designation of the Lujiazui Finance and Trade Zone at the western tip of the district.
More than three decades on, Pudong is now Shanghai’s main financial district and hosts many of the world’s largest financial firms as well as the city’s stock exchange. Major buildings such as Oriental Pearl Tower, the Jin Mao Tower, Shanghai World Financial Centre and Shanghai Tower now command higher rents than properties in Puxi, the historic centre of Shanghai on the opposite side of the river.
C B R E R e s e a r c h | Vi e t n a m S p e c i a l R e p o r t |
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PART 1: THE RESIDENTIAL MARKET
PUDONG CASE STUDY
Development Timeline Lujiazui Financial District
1999
Jinmao Tower
Height: 420 m
1994
Oriental Pearl Tower
Height: 468 m
COMMENCEMENT
SLOWDOWN
Area established Attracted several financial institutes in China, including CBC ICBC, Shanghai Stock Exchange Market Cooperated with CHIA TAI, Mori Building Co.
Development stalled due to the 1997 Asian Financial Crisis. Developed municipal facilities
600,000 sq. m.
1,750,000 sq. m.
1990 - 1997
Mainly office
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1997 - 2001
Mainly office, exhibition centre and retail
C A S E S TUD IES
Incentives
Authorities introduced a number of incentives to encourage development in Pudong. These included:
1990: Tax deductions, exemptions and other incentives for infrastructure investment.
“One-stop” approval procedures introduced for foreign-invested projects.
1992: Pudong permitted to issue stocks and bonds to attract investment.
Reform of local administration to a simplified two-level structure. The Government of Pudong has authority equivalent to that of a sub-provincial Chinese city, half a level above the authority given to Shanghai’s other districts.
2002: Gold and diamond exchanges moved from downtown Puxi to Pudong. 2005: Foreign banks allowed to do business in local currency. Projects in Pudong given status as “National Priority Projects”. Allocation of Pudong annual Government loans of US$90 million.
Introduction of a Special Economic Zone strategy. Pudong was granted status as a Pilot Free Trade Zone allowing a series of projects which are subject to lower levels of regulation.
2015
2002
Shanghai Tower
Height: 632 m
Bocom Financial Towers
Height: 230 m
2008
Shanghai World Financial Center
ACCELERATION 2001 - 2008
Height: 492 m
MATURITY 2008 - NOW
2002, Super Brand Mall opened (a large-scale shopping centre) Developed offices, housing and hotel
Core area fully developed, In 2007 expansion to the east began Improved supporting services 229 multinational headquarters, 308 companies named in the Fortune Global 500 and 143 headquarters of local companies
3,000,000 sq. m.
3,500,000 sq. m.
Continued office construction, but increased residential and retail development
Continued office construction, but increased residential and retail development ©CBRE RESEARCH 2020
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PART 1: A RESIDENTIAL PERSPECTIVE
Pudong: 30-Year Summary Statistics 1990
RMB
billion
RMB
711 290
billion
RMB
billion
billion
RMB
RMB
Fiscal revenue
6 1
RMB
Gross Domestic Product
2019
2014
1,270 432
billion
billion
Source: Pudong New Area Government
1,075 83
registered financial institutions
foreign-funded asset management companies
2,902
high-tech companies
332 240
regional headquarters of multinational corporations
foreign-funded research and development centres
350
hectares of green area in 2019
*In the first four months of 2020, eight regional MNC headquarters have been established in Pudong.
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C A S E S TUD IES
L E S S O N S L E AR NE D FR OM P U D ON G
T
he Chinese government promoted Pudong globally to raise finance for infrastructure development of this area at a very early stage. However, HCMC authorities are unlikely to pursue a similar approach for The Eastern City. However, as in Pudong, The Eastern City is likely to see the creation of a special economic area along with other incentives, establishing Thu Thiem in District 2 as its financial and business centre.
With Huangpu District and Pudong located on either side of Shanghai’s Huangpu River, there are certain similarities with District 1 and Thu Thiem in HCMC. However, while the average selling price in Pudong is 30-40% lower than Huangpu District, CBRE believes that due to its smaller scale and closer distance to District 1, Thu Thiem’s price differential with the historic CBD will be lower. In the longer term, residential properties in Thu Thiem may even command prices similar to the CBD thanks to the area’s better planning, newer infrastructure and enhanced connectivity.
The successful development of Pudong has a number of key lessons for city governments elsewhere, such as HCMC, who are looking to establish new financial and commercial districts adjacent to existing CBDs.
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PART 1: THE RESIDENTIAL MARKET
6.
Conclusion B U IL D IN G A D VA N TA G E IN A RA P ID LY C H A N G ING B U S IN ES S EN V IRON M EN T DEVELOPERS/INVESTORS The rapid appreciation in land prices in The Eastern City may pose a challenge to new players or developers lacking financial capacity. The availability of developable land in Thu Thiem New Urban Area is particularly tight. New developments in The Eastern City within existing and well-planned commercial/residential hubs will be keenly sought after by buyers and are expected to command a premium. The most popular areas will be An Phu, Thu Thiem and the Saigon Hi-Tech Park (SHTP). Developers with land banks in The Eastern City will need to create new and attractive concepts in their residential developments to attract buyers and renters who may be spoilt for choice.
HOME BUYERS End-users and buy-to-let investors are advised to purchase residential units in developments located along metro lines within The Eastern City due to the better connectivity they offer to other areas within the city and to the HCMC CBD. Buyers must thoroughly research issues such as noise and traffic congestion around metro stations and pay close attention to developers’ reputation, a project’s legal status and construction progress.
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C O N CLUS IO N
Figure 6.2 Average Land Price,
District 2, 2011 – 2020
District 9, 2011 – 2020
4,500
4,500
4,000
4,000
3,500
3,500
Land price (US$ psm land)
Land price (US$ psm land)
Figure 6.1 Average Land Price,
3,000 2,500 2,000 1,500 1,000
3,000 2,500 2,000 1,500 1,000
500
500
0
0 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
District 2, Thanh My Loi
District 2, An Phu
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
District 2, Thao Dien
District 9, Lien Phuong
District 9, Suoi Tien
Figure 6.4 Land Price, CAGR 2018 - 2020,
Thu Thiem, 2011 – 2020
District 2 & District 9
Land price (US$ psm land)
Figure 6.3 Average Land Price,
14,000
60%
12,000
50%
10,000
40%
8,000
30% 6,000
20%
4,000
10%
2,000 0 2013
2014
2015
2016
2017
2018
2019
2020
0%
Thu Thiem
Thanh My Loi
An Phu
District 2
Thao Dien
Lien Phuong
Suoi Tien
District 9
Source: CBRE Vietnam, Q2 2020.
Please note the land price ranges included in this page have been included as a broad guide only. Readers should not make investment decisions without first doing a detailed study on the subject site and obtaining a formal valuation. Land prices are subject to various positive and negative attributes, including but not limited to, proposed/approved plot ratio, permitted uses, land size, location, clear legal status, land tenure and other restrictions. CBRE Vietnam does not accept any liability under any cause of action including negligence for any loss arising from use of or reliance upon this information.
C B R E R e s e a r c h | Vi e t n a m S p e c i a l R e p o r t |
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PART 1: THE RESIDENTIAL MARKET
CO N TACT DESMOND SIM Executive Director, Head of Research, Singapore and South East Asia
JONATHAN HILLS Senior Director, Research Asia Pacific
DUNG DUONG Senior Director, Head of Research Vietnam
THANH PHAM Associate Director Head of Research, HCMC Vietnam
desmond.sim@cbre.com.sg
jonathan.hills@cbre.com.hk
dung.duong@cbre.com
thanh.pham@cbre.com
JOURNEY TO THE EAST:
THE EXPANSION OF HO CHI MINH CITY METROPOLIS PA RT 1 :
The Residential Market
CB RE RE SE ARC H | SE P TE MB E R 2020
Š 2020 CBRE (Vietnam) Co., Ltd. All materials presented in this report, unless specifically indicated otherwise, is under copyright and proprietary to CBRE. Information contained herein, including projections, has been obtained from materials and sources believed to be reliable at the date of publication. While we do not doubt its accuracy, we have not verified it and make no guarantee, warranty or representation about it. Readers are responsible for independently assessing the relevance, accuracy, completeness and currency of the information of this publication. This report is presented for information purposes only, exclusively for CBRE clients and professionals, and is not to be used or considered as an offer or the solicitation of an offer to sell or buy or subscribe for securities or other financial instruments. All rights to the material are reserved and none of the material, nor its content, nor any copy of it, may be altered in any way, transmitted to, copied or distributed to any other party without prior express written permission of CBRE. Any unauthorised publication or redistribution of CBRE research reports is prohibited. CBRE will not be liable for any loss, damage, cost or expense incurred or arising by reason of any person using or relying on information in this publication.
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