HO CHI MINH PROPERTY MARKET REPORT Q2 2019
Overview The Vietnamese economy sees positive signals although the world economy is under unfavorable conditions. Due to the ascending US-China tension, the large foreign capital from Chinese investors flows into Vietnam. Although Vietnam is predicted to be benefitted from US-China trade war, it is the fact that the largest foreign capital comes from China while the capital from other countries such as Japan, Korea and Singapore has downward trend. The U.S. is refraining from labeling Vietnam a currency manipulator; however, Vietnamese currency is still on the US watch list and this may constrain the economic growth of Vietnam. The real estate market in Ho Chi Minh city has optimistic signals in recovery when the authorities start to make decisions on the delayed projects and fix their internal problem. The Ho Chi Minh apartment market mainly welcomes new release of the high-end segment while the others are making no noise. The villas/ townhouse and land plots market in this quarter are relatively quiet and the projects are generally concentrated on the East region. In terms of commercial property, the remaining vacant leasable area of office and retail is not much and the new projects tend to move to the CBD fringe and Non-CBD region. There is no significant change in the industrial sector between first and second Quarter of 2019. This is because industrial parks are waiting for new price regime approval; therefore, the leasing activities temporarily postpone.
HCMC Properety Report | Q2 2019
ECONOMIC HIGHLIGHTS World Economic Performance Global PMI Index The world economy tends to slow down. Global PMI index continues to decline in June 2019, which implies a diminishing health of manufacturing around the world.
The political
tension has signs of rising complexity. Recently, US slaps duties on steel from Asia in Trade enforcement. They also propose $4 billion in tariffs on EU goods. Japan, South Korea and Turkey are threatened to be face US sanctions if they Source: Bloomberg
continue importing Iranian oil. Crude Oil Price (WTI Spot Price FOB) Oil price will be a challenge to the world economy when USIran tensions still escalates. It can be seen an upward trend in crude oil price during the period of May 2016 – May 2019. This trend is predicted to increase in the current context that US prepares to impose new sanctions on the Islamic Republic. Whereas, Iran will not ready to open discussion with US if they do not leave all sanctions put against Iranian oil and other areas
Source: Thomson Reuters
Vietnam 2Q2019 | Economic Updates
Vietnam
1H2019
Y-O-Y
The economy in the first 6 months continued to grow
GDP Growth
6.8%
positively despite of the increasing risks from the
Services Growth
6.7%
political and economic instability in the world. The
Industry - Construction Growth
8.9%
increasing number of foreign visitors to Vietnam is the
Agriculture-Forestry-Fishery Growth
2.4%
positive sign for tourism sector. However, the newly
CPI
2.6%
registered foreign investment capital decreases in comparison with the same period of 2018
Vietnam foreign direct investment 2017-2019 The foreign capital into Vietnam sees an upward trend of Chinese investors. China, Korea, Japan and
Export (billions USD)
122.7
7.3%
Import (billions USD)
122.8
10.5%
Foreign investment capital (billions USD)
10.3
-36.3%
Total retail sales (billions USD)
102.6
11.5%
Foreign visitors (thousand)
8,481
7.5% Source: GSO
Singapore are known as the major investors of Vietnam. In 2017 and 2018, Japan was the largest investor of Vietnam. However, since the US-China tension occurs, the foreign capital from China has increasingly shifted into Vietnam. As a result, it is noticeable that China is the leading country in foreign direct investment into Vietnam in the second quarter of 2019. Source: GSO
HCMC Properety Report | Q2 2019
Number Of Enterprises Registered For New Establishment By Quarter The rising establishment of new enterprises shows an optimistic signal of the economy. During the first half of the year, the number of newly established businesses increases 3.8% (YoY). Both the number of enterprise and registered capital has shown ascending trends since 1Q2018 Source: GSO
Registered Business Establishment Retail is still the leading sector to receive new establishment registration during the period. In particular, the retail sector accounts for the highest proportion (29%), followed by the construction sector and manufacturing sector (13% each). Source: GSO
Visitors to Vietnam The number of both domestic and international visitors to Vietnam has increased from 2010 to 2018. In the first half of 2019, total number of international visitors to Vietnam reached 8.5 million, up by 7.5% compared to the same period last year. Moreover, as the government is preparing the new regulation on condotel, officetel and resort villa, the sustainable development for the tourism property market is expected to be promoted. Source: GSO
The Vietnamese market attracts high attentions from foreign investors. This quarter is highlighted with the significant deal of SK Corporation purchases 6,1% stake of Vingroup, Samsung SDS commits to buy 25% stake in CMC, Mitsui purchases 35,1% stake of Minh Phu Seafood company and Taisho Pharmaceutical Co., Ltd. buys by nearly 67% of DHG Pharmaceutical Corporation.
HCMC Properety Report | Q2 2019
The table below presents some noticeable investment deals of foreign companies into Vietnamese market from 3Q2018 to now. Time
Business transaction
Amount of capital (USD)
Aim
Jul-18
Furniture manufacturer “Man Wah Holding� has acquired a company producing and exporting the sofa in Viet Nam
68 million
Diversifying activities and avoiding commercial war risks.
Jan-19
Goertek (Hong Kong) Co., Ltd invests in Que Vo (Bac Ninh) Industrial Park (expansion part).
260 million
Building factory to manufacture electronic equipment, network equipment, media and multimedia audio products.
Jan-19
Deli (China) Co., Ltd. Investment registered in Yen Phong Industrial park (expansion part).
25 million
Building factory to manufacture stationery.
Jan-19
TSE ( Korea) Co.,Ltd. invests in VSIP Bac Ninh Industrial park.
19 million
Building factory to manufacture circuit boards, electronic circuit boards and testing equipment circuit boards.
Jan-19
Cybertan (B.V.I) Investment Corp from the UK invests in the Dai Dong - Hoan Son Industrial park.
9 million
Producing module wireless networking, router, cable modems, set-top television signals.
Jan-19
Novatech Co., Ltd invests in Que Vo III Industrial park.
5 million
Producing and processing products from the magnet used in the tablets, coated tablet products manufacturing.
Feb-19
Beerco Co., Ltd contributes capital into Vietnam Beverage Co., Ltd.
3.85 million
Brewing and malt fermentation in Hanoi.
Mar-19
Royal Pagoda Private Co.,Ltd invests in Vinhtex project
200 million
Producing and dyeing knitted fabric in Nghe An
Mar-19
Universal Alloy Corporation Asia Pte., Ltd company invests in Sunshine project
170 million
Building factory for producing and assembling aerospace components made of aluminum and composite in Da Nang.
Mar-19
Golden Hill (British Virgin Islands) Investment Joint Stock Company invests in Complex building
147.5 million
Building skyscraper for sale in HCMC.
Apr-19
Guizhou Advance Type Investment co., Ltd (China) invests in Advance Tire Co., Ltd Vietnam
214.4 million
Producing and consuming tires, rubber and related products in Tien Giang.
May-19
SK Corporation purchased 6,1% stake of Vingroup
1 billion
May-19
Samsung SDS committed to buy 25% stake in CMC.
May-19
Mitsui purchased 35,1% stake of Minh Phu Seafood company
May-19
Taisho Pharmaceutical Co., Ltd. has bought by nearly 67% of DHG Pharmaceutical Corporation.
Infrastructure development, mergers and acquisitions.
25% stake of CMC
Developing intelligent factory and network security
35.1% stake of Minh Phu Seafood company
Invest digital technology, including AI in the ponds and the processing plants, promoting efficiency of the shrimp supply chains from farms markets in Minh Phu company
147.8 million
Diversifying activities
HCMC Properety Report | Q2 2019
RESIDENTIAL PROPERTY Apartment New Supply in 2Q2019
Apartment Inventory Performance
High-end and mid-end are two major segments
This quarter is fulfilled with the existence of high-end
released to HCMC apartment market in this quarter. The residential market in Ho Chi Minh city saw new release of more than 13,800 units to High-end apartment and 3,200 units to Mid-end segments. In which, most of
apartment projects. About 20,352 units of high-end segment are available for trading, which is nearly four times as high as the outstanding stocks of mid-end apartment
them come from non-CBD region with total of 13,802 high-end units and 2,796 mid-end units.
Source: Vietvalues Research
Source: Vietvalues Research
Villas/Townhouse and Land Plots
Land Plots Primary Market
The new projects of villas/townhouse are quite limited
Similarly, the market of land plots in this quarter is still
with the outstanding stocks mostly located in non-CBD
quiet. The land plots projects are mostly located in East
area, especially in East and South region. About 1,677
and West region with around 2,000 vacant plots.
units are available in South region with asking price at 3,200 USD per sqm while 8,492 units are situated at East region and released at around 2,865 USD per sqm.
Source: Vietvalues Research
Source: Vietvalues Research
HCMC Properety Report | Q2 2019
COMMERCIAL PROPERTY Office Office Net Leasable Area Breakdown by Grade CBD region is known as the homeland of office with the total net leasable of both three grades at about 1,158,000 sqm. However, more than 97% of the current supply have been occupied. In general, grade B occupies the highest proportion in CBD and CBD fringe office market while grade C is more popular in Non-CBD region with 202,760 sqm.
Source: Vietvalues Research
Office Net Absorption and Average Price In 2Q19, the market welcomes the entering of 9,360 sqm of Five Star Tower to Grade A segment while no new Grade B and Grade C supply is recorded. The leasable area of grade A in the whole HCM office market is about 11,250 sqm, while the figure of Grade B is approximately 30,850 sqm, and Grade C is 11,400 sqm. The average monthly asking rent of Grade A office buildings is estimated at USD 53,2 per sqm, Grade B is about 29,5 per sqm and Grade C is about USD 17 per sqm. Given the lack of upcoming supply, Co-
Source: Vietvalues Research
working spaces and Business Centre are good choices for Costconscious tenants
Retail Total Supply And Average Price Per Month Of HCMC Q2/2019
Retail This quarter saw the new release of TNL plaza in district 4 with 11,179 sqm of net leasable area. No new supply in the shopping centres and department store segment is recorded in this quarter. Noticeably, the Parkson city Plaza in Tan Binh district is acquired by Vietjet and named at Vietjet plaza. Retail projects tend to be developed in CBD fringe and Non-CBD. Particularly, in the next quarter, Central Premium Mall (district 8) and The Mall (district 10) are expected to handover about 100,000 sqm of net leasable area. Moreover, Outside D-Mall (district 6) is also projected to complete in 2020 with net leasable area of 25,000 sqm. At the present, the total retail area in CBD fringe accounts for the highest and following by non-CBD. It can be seen from the figure that about 450,000 sqm of total retail supply are situated in CBD-fringe and 420,000 sqm in non-CBD. In addition to, CBD-fringe and Non-CBD are promising destinations
Source: Vietvalues Research
Retail property sees potential developments as most of leasable are occupied. At first glance, the average occupancy of the CBD is about 97,5% while the proportion of CBD-fringe and non-CBD reaches to 98% and 99%; respectively. Occupancy Rates
for retail projects as the average rent prices at these regions are still low. Specifically, the average asking rent price of retail podium in CBD fringe and non-CBD is about 28 USD per sqm while it is approximately 115 USD per sqm in CBD. Moreover, the average asking rent prices of Shopping Centres and Department Store also observes about 40 USD per sqm greater price in CBD region rather than CBD fringe and Non-CBD by around 90 USD per sqm.
Source: Vietvalues Research
HCMC Properety Report | Q2 2019
HO CHI MINH INDUSTRIAL PROPERTY
Industrial Market Performance by District
1. Current Performance Some industrial parks are postponing the leasing to wait for the approval of new price regime. Therefore, the occupancy of the vacant land was unchanged between first and second quarter of 2019. There are only small pieces of vacant land left, which are mainly located in Nha Be, Cu Chi and Binh Chanh districts. The average asking rent price in the next quarter is expected to increase when the new price regime is approved.
2. Opportunities and Challenges
Source: HEPZA, Vietvalues Research
Opportunities Escalating US-China trade tension is the reason that many companies are moving into Vietnam to avoid the war. This is the opportunity for Vietnam to foster the manufacturing and exporting, leading to the increasing demand for industrial land.
Moreover, the infrastructure now is highly concentrated to develop and hopefully to boost the industrial sector. Recently, Ho Chi Minh authority has announced to the public that ringroad 2 will be completed in 2023. At present, part 3 of the ringroad 2 is being constructed and is expected to finish in 2020. Moreover, the construction of Long Thanh international airport and the ringroad 3 and 4 will promote the construction progress of factories and companies in South region of Vietnam.
Source: Vietvalues Research
HCMC Properety Report | Q2 2019
Challenges Infrastructure and administrative procedures of the industrial sector have not developed in line with the growth yet.
Moreover, infrastructure outside the IPs and EPZs is usually overloaded, leading to increasing production costs and decreasing competitiveness of enterprises. Flooding and traffic jam are the common issues that companies in the Industrial Zones face. Besides, the supporting infrastructure to improve the
Most of the HCMc EPZs and IPs have been established since the 90s of the last century, hence the system for receiving and treating waste in general is quite outdated. Furthermore, the land for rent
quality of workers’ life such as schools, accommodation, and hospitals has not yet been properly thought about. Besides, the administrative procedures are still long-lasting, lacking transparency and complicated that cause delays and uncertainty for enterprises and investment projects The formation year of industrial parks in Vietnam
at these EPZs and IPs has been almost occupied and rental rates are higher than the EPZs and IPs of the other provinces. In this quarter, the total vacant land of Ho Chi Minh Industrial park is only about 294.06 ha at the average price of more than 142 USD/sqm/term. The price will likely be higher in the next quarters when the new price regime is approved
Source: HEPZA, Vietvalues Research
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