3q 2013 colliers vietnam research & forecast report en

Q3 2013 | VIETNAM OVERVIEW

research & forecast reportvietnam

www.colliers.com/vietnam

economy of Vietnam• Vietnam’s economy sees positive signals in Q3 2013• new legislations were reviewed to rescue the market• Vmac buys Us$110 million of agribank’s bad debts

ho chi minh city and hanoi’ s economic Updateho chi minh city infrastrUctUre Updateho chi minh city property market

office• market overview• market performance• market outlookretail• market overview• market performance• market outlookresidential• market overview• market performance• market outlook

hanoi property marketoffice• market overview• market performance• market outlookretail• market overview• market performance• market outlookresidential• market overview• market performance• market outlook

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table of contents

Q3 2013

Office Retail Residential

Rent Occupancy Demand Rent Occupancy Demand Primary price

Secondary price

Sold rate Demand

HCMC healthy weak healthyHANOI stable healthy healthy

Vietnam property market at a Glance

VIETNAM | Q3 2013 | ECONOMIC UPDATEVietnam’s economy see positiVe siGnals in Q3 2013Vietnam’s Gross domestic product (Gdp) in Q3 was higher than previously forecasted by the Government thanks to prioritized efforts to help maintain macro-economic stability and curb inflation. the Gdp has increased 5.54% compared with the same period in 2012 and is steadily improving quarter over quarter (first quarter: 4.89%, second quarter: 5.00%).

foreign direct investment (fdi) is estimated at Us$15 billion in the first nine months of 2013, exceeding the target of Us$13-14 billion for the whole year. fdi capital expenditure during this year also continued to rise from the last year representing a 6.4% y-o-y increase and approaching the entire 2013 target of Us$10.5-11 billion.

in the industrial manufacturing sector production levels have increased while the production index jumped 5.4% in september. however, import growth rates of raw materials remained modest, suggesting that inventory stocks are being reduced and production efficiencies are being examined.in the retail sector, January-september retail sales of goods and services increased by 12.5% against the same period last year but profit margins of retailer have seen a decline with the offering of incentives and price reductions to entice purchasing of goods.

p.1 | colliers international

Vietnam’s Gdp GroWth rate

Vietnam’ s cpi month-on-month

reGistered & disbUrsed fdi

eXport & import tUrnoVer

total retail sales of Goods and serVices reVenUe

Vamc bUy Us$110 million of aGribank’s bad debtsthis year has seen the Government take increased action to control bad debts. the Vietnam asset management company (Vamc) which opened on July 26. is a wholly-state-owned business directed entirely at managing the bad debts of the financial industry. the first bad debts purchase between agribank and Vmac on october 1, and there are several more banks preparing to do the same. While this will transfer debts off the books of lending institutions, plans to resolve and sell these debts have yet to materialize.

applicable purchaser can only buy properties with a maximum land plot area of 500 sq m. it is hoped that these changes, if approved, will give a boost to the residential market.the state securities commission (ssc) has submitted to the government the plan to raise the ceiling foreign ownership ratio, to encourage foreign investment and securities. they hope to raise the ceiling from 49% to 60% which would bring big changes to listed companies.

neW leGislations Were reVieWed to rescUe the market

Vietnam continues to improve its economic environment and increase foreign capital investment.

a recent proposal by the ministry of construction, will allow foreigners who have been granted a residence visa of over three months to be allowed to buy dwellings. suggested legislation will also include foreign investment funds and commercial banks, as well as branches and representative offices of foreign companies currently in operation in Vietnam. the ministry has also proposed that foreigners may rent, sell or donate houses that they own 12 months after the house ownership certificates have been granted. however, the report suggested that

source: Gso

source: Gso

source: Gso

source: Gso

source: Gso

HO CHI MINH & HANOI | Q3 2013 | ECONOMIC UPDATE


ho chi minh city economic Updateas reported by its statistics office of ho chi minh city, recorded

a growth rate of 10.3% in the third quarter of 2013, up 0.7%

against the same period in the previous year. year to date, the

committee has licensed 291 new fdi projects with a total regis-

tered capital of Us$650.7 million.

in addition, 94 projects increased their investment capital with

of Us$604.8 million. total retail sales of goods and service was

estimated at Vnd 441,076 billion from January to september,

up 12.2% and the september’s consumer price index increased

3.13% compared to the previous month.

international arrivals went up 3% to 2.8 million, fulfilling 68%

of its 4.1 million yearly target, and estimated revenue generated

from arrivals was Vnd 62,396 billion, a year-on-year increase of

20%, 77% of this year’s target.

hanoi economic Updatehanoi’s Gdp growth in Q3 2013 reached 7.88%, a 21% increase

from last quarter.

the service industry showed the greatest growth in Q3 of 8.9%,

followed by construction and industry at 7.42%. increase in pe-

troleum, tuition and health services fee, contributed to a jump in

hanoi’s consumer price index (cpi). inflation stands at 6.17% in

the first a month over the same period last year.

hanoi has attracted a total of $741.92 million of new registered

fdi this year, approximately. 57% of its annual target for 2013.

based on y-o-y comparison, the registered capital decreased ap-

proximately 17% although the number of projects increases 6.5%.

international visitors to hanoi this year reached 1.3 million, a

20.1% y-o-y increase.

Gdp GroWth ratecpi month-on-month

retail sales GroWth rateforeiGn inVestment capital

HO CHI MINH CITY & HANOI | Q3 2013 | INFRASTRUCTURE

source: Gso source: Gso

source: Gso source: Gso

HO CHI MINH & HANOI | Q3 2013 | ECONOMIC UPDATE HO CHI MINH CITY & HANOI | Q3 2013 | INFRASTRUCTURE

Ho Chi minh Cityplans are underway for a dau Giay – phan thiet expressway. targeted

for completion in 2019, this four-lane, 100-kilometre expressway will

connect hcmc to the south-central city of phan thiet – significantly

reducing travel time.

the bitexco Group has already been selected by the Government and

the World bank as part investor for the Us$757 million dau Giay –

phan thiet expressway project, with a secondary bidding round to se-

lect the second investor for the project taking place in the year ahead.

Q3 also swathe completion of:

> two steel flyovers in 3/2 - ly thai to in district 10 and hoang hoa

tham - cong hoa in tan binh district.

> a five-kilometre section of the tan son nhat - binh loi outer ring

road opening to traffic on september 28 and running from nguyen

thai son intersection to national highway 13.

> the saigon 2 bridge linking district 2 and binh thanh district. the

bridge is expected to serve around 40% of the traffic crossing the

sai Gon river from the city.


daU Giay - phan thiet eXpressWay

neW proJects in ho chi minh city

cat linh - ha donG metro roUte

national road no. 5 prolonG

Hanoiduring Q3/2013, hanoi managed to speed up its metro project. Until

July 2013, the 2a route connecting cat linh and ha dong districts has

finished land clearance for the 23.3-ha depot in ha dong district and

9.7 of 13km railway are ready for construction. 255 of 421 bridge piers

and 7 of 12 stations have been constructed. Whereas the training plan

for management and operation team of this project have been finished,

the main contractor epc is seeking for train providers. this route is

expected to come into operation in Q1/2015.

in the new expansion area of hanoi, the national road no.5 prolong

is one of the focus projects with strong support from hanoi’s people

committee. the original completion date was set in 2008 but has been

delayed to Q2/2014. to reach this new adjusted target, land clearance

was expedited and has been handed over to the contractor in august.

source: internet

source: internet

source: internet

source: internet

HO CHI MINH CITY | Q3 2013 | OFFICE MARKET


market oVerVieWin Q3 2013, the lim tower, located at 9-11 ton duc thang street in

district 1, entered the market. suggested to be a Grade a building

was 34 upper floors and two basements, comprising of 34,000 sq m

of commercial office space. 60% of the building has already been oc-

cupied by techcombank and puma.

landlord of Grade b and c buildings are well as outlying developments

are still offering incentives to entice potential tenants. this has led to

a stronger absorption in Q3 than previous quarters, increasing month

by month because of the limited of supply and slight uptick in demand.

lessors of Grade a buildings are increasing their rents slowly given

the limited Grade a space available, limited new supply and increased

in demand from premier organisations where location and quality of

service is a major factor.

average overall market occupancy rates increased to 89.9%, from

88.2% in previous quarter.

market performanceall three grades’ asking rent declined in Q3, continued their downward

trend. the average asking rent of Grade a decreased nearly to 4%

q-o-q, to Us$37.4/ sq m/ month. overall occupancy rates increased,

slightly to 86.9% from 85.5% in previous quarter with the uptake of

1,610 sq m of space though minor tenants over numerous buildings.

the average asking rents of Grade b also showed a decrease of 6% q-

o-q, remaining at Us$18.8/ sq m/ month. because most of the Grade

b is located outside the central business district (cbd) has a lower

rent than previous quarter, some of them were the lowest price since

Q2 2012. however Grade b performed best when occupancy rate was

approximately 91% in this quarter.

Grade c office asking rents dropped from Us$15.6/ sq m/ month to

Us$14.1/ sq m/ month, a decrease of 9% q-o-q. Vacancy levels fell by

12.3% compared with the previous quarter.

market oUtlook

the demand of the market will be healthy in the foreseeable future due

to a steady increase of ho chi minh city’s demand. new office con-

structions has been modest with only several new buildings opening

next year. sunny tower has showed good progress while Vietinbank

tower, Vietcombank tower, and le meridien saigon are expected to

complete in 2014.

from now to the end of the year, expect asking rents to climb slowly.

sUpply by Grade, Q3 2013

askinG rent by Grade, Q3 2013

occUpancy rate by Grade, Q3 2013

Vietcombank toWer

HANOI | Q3 2013 | OFFICE MARKET

source: colliers international



source: internet

HO CHI MINH CITY | Q3 2013 | OFFICE MARKET HANOI | Q3 2013 | OFFICE MARKET

market oVerVieWduring Q3 2013, 3 new grade office buildings came online in Western

hanoi (new cbd), with a total supply of around 45,000 sq m, bringing the

total supply to approximately 1.5 million sq m nfa.

new supply continues to outpace demand, applying a steady downward

pressure on rents. tenants continued to move out the cbd to higher

quality and less expensive options in outlying districts. landlords are fight

a losing battle against new supply to retain current tenants as well as at-

tract new ones, yet leading to price and services competition. there is no

sign of the market floor as prices have continued to decline steadily over

the last two years.

market performanceduring Q3 2013 Grade a rents decreased slightly over the same period to

Us$32.10/ sq m/ month. expect rents to fall in Q4 as new incentives and

rent reductions continue to roll out.

the good news is that occupancy has increased slightly 74% up from

72% in Q2. several Grade a buildings have achieved 90% occupancy and

continue to absorb new tenants with flexible terms and superior building

design.

the Grade b segment increased rents to Us$18/ sq m/ month from

Us$17/ sq m/ month and sacrificed occupancy which fell 5% to 68%.

fierce competition in Western hanoi is being exacerbated by the new

supply.

market oUtlooklotte centre hanoi had its topping ceremony this quarter which

strongly remind the market of their imminence impact. 45,000 sq m of

grade a office in the area between old and new cbd shall challenging

much greater competition threat to both sides. the building is taking

inquiry from tenants who can be move in beginning Q2 2014.


sUpply by Grade, Q3 2013


Grade a office performance


Grade b office performance


estimated fUtUre sUpply

source: internet

HO CHI MINH CITY | Q3 2013 | RETAIL MARKET


market oVerVieWthe retail market declined over the quarter with both average asking

rents and occupancy rate dropped slightly. discounts and sales

promotions have been offered by many commercial centers to boost

sales, however, customers continue to reduce spending amid worries

about recession, unemployment, and high prices. in the central

business district (cbd), an increasing number of vacant kiosks have

not changed landlord rental strategy as high rents are forcing retailers

to consider leaving commercial centers and seek more affordable

locations. according to our retail leasing team, tenants prefer high -

street shop houses which offer affordable rental and large space over

the malls in the cbd.

although purchasing power has weakened due to the slowdown,

hcmc, is sorting to see gains in consumer’s demand. in Q3, hundreds

of convenience stores and food & beverage (f&b) have joined the

retail market and expanded their chain stores such as starbucks,

kfc, circle k, shop & go, coffe bean, burger king. in the middle of

July, the world most famous fast food chain, mcdonald’s, has officially

announced their appearance in Vietnam through a franchise to Good

day hospitality company. their first store will open in Q1 2014.

aVeraGe market performance, Q3 2013

min - maX aVeraGe askinG rent

eXistinG sUpplyQ3 2013

cantaVil premier

HANOI | Q3 2013 | RETAIL MARKET

market performanceoverall, the retail market declined slightly in the review quarter. the average rent of retail market dropped 3% q-o-q to Us$49.24/ sq m/ month. occupancy rate remained low and continuous went down, fell q-o-q from 86.2% to 82.2%. the highest rental was retail podium, nearly Us$61.4/ sq m/ month while the best occupancy was in the department store segment, staying at 87.3%.

oUtlookalthough the retail sector has been in decline over the past two years due to the declining buying power, the market is still appealing to foreign investors via mergers and acquisitions.

alternatives such as f&b, online shopping, mini-supermarkets and convenience stores with low operating costs have become popular with consumers.new supply will be came from retail podiums such as saigon airport plaza, cantavil premier, times square, thao dien pearl, and city Garden.

the landlords are going to upgrading and restructuring their owner building, also offer more policy, incentives contracts to support the tenants, especially non-cbd landlords.

saiGon airport plaZa






HO CHI MINH CITY | Q3 2013 | RETAIL MARKET

sUpply by type, Q3 2013

aVeraGe rent by types

HANOI | Q3 2013 | RETAIL MARKET


market oVerVieWin Q3 2013, hanoi retail market welcomed the new Vincom mega mall

royal city. the concept is brand new in the hanoi market is highly

anticipated. retail space within cbd is showing signs of stagnation as

prices remain high while the luxury and mid end retailers continue to

struggle. on the other hand the market in the outer cbd is growing

strongly as retailers more into the low and middle income areas setting

the stage far a strong rebound in near future.

market operationthe average market rent was recorded at approximately Us$61/ sq m,

a decrease of 7% q-o-q. this drop in price mainly comes from new

space within the old cbd trying to re-launch and offer more competi-

tive pricing to attract retailers.

the launch of Vincom mega mall was very successful attracting many

people to the mall. accessibility and parking are current problems

which should resolve it self as the novelty wears off.

oUtlooklotte mart is re-launching at mipec tower Q1 2013 and opening lotte center hanoi Q2 2014. their two large shopping centers will stir up the market and covering a large audience between the old and new cbds. retail space in both cbds will face this new challenging busi-ness concept from the korean giant. meanwhile on the demand side, purchasing power remain weak due to the slow economy. however, international retailers are targeting the rising middle class and helping shape a new trendy lifestyle. We can expect the retail market recover faster than any other real estate sector.following Vietnam’s agreement to join the Wto, regulations are gradu-ally loosen up, which is creating a better investment environment and attracting fdi, opening the door for more retailers make their presence in the next several years.Vincom meGa mall royal city


Grade a office performance




HO CHI MINH CITY | Q3 2013 | RESIDENTIAL MARKET


in the primary market, average asking price dropped from Us$889/

sq m to Us$819/ sq m, a slight decrease of 7% q-o-q. in this quarter,

the market saw an increase in transactions due to discounts

extension of payment terms, and free management fees.

While in the secondary market, average asking rent went up from

Us$962/ sq m to Us$1047/ sq m in this quarter. most of transactions

were apartments in district 2 and district 7, which have affordable

prices

oVerall market operation, Q3 2013

primary market, Q3 2013secondary market, Q3 2013

estimated fUtUre sUpply

happy Valley

HANOI | Q3 2013 | RESIDENTIAL MARKET

market oUtlookaccording to the housing and real estate market management department, in hcmc, inventory of 121 apartment projects were 14, 816 units. to reduce these inventories, the developers will need to further reduce prices or convert commercial apartments to social apartments. sentiment in the market is beginning to turn bullish as we are rebounding from the floor.the authorities will revise law to encourage foreign investment in the property market, including making it easier for foreigners to own property. however, foreigners investors are still hesitant in the face of high taxes and poor

infrastructure

market oVerVieW

in Q3, the government released a new policy which discounted value

added tax (Vat) to the sale and lease of commercial apartments with a

floor area of less than 70 sq m, which are sold at a price below Vnd15

million per sq m, from July 1, 2013 to June 30, 2014. the government also

reviewed a proposal by the ministry of construction, which would allow

the foreigners to buy homes in Vietnam.

approximately 1,700 units were launched in Q3, an increased of 45%

q-o-q. some of outstanding projects were sunrise city (north segment),

scG nguyen cuu Van, ehome 3 and happy Valley. a discount of 10%-

30% have been common headlined, especially the developer - novaland

was discounted 50% in sunrise city for their tower (north), however

the product was reduced someway so the clients should be noted when

tending to buy these kind of apartments. While the another developers

were expected higher price in future so they want to launch their building

later.

market performance




HO CHI MINH CITY | Q3 2013 | RESIDENTIAL MARKET HANOI | Q3 2013 | RESIDENTIAL MARKET


market oVerVieWin Q3 2013, the low income Vnd 30,000 billion stimulus package has fail

to make any significant impact on the market. only a small amount of

transactions, that qualified and managed to get the special loan, was re-

corded by the authority, 350 individuals borrowing only slightly over Vnd

100 billion. the hanoi market has shown cautious movement, launching

1900 units, and the average market price remained almost unchanged

from the previous period.

the primary marketin Q3 2013, hoang thanh tower opened its model house marking the

return of high end residential for sale. together with other projects

such as iph and royal city, the high end sector is making a return

with positive momentum. it is worthy to note that hoang thanh sales

were recorded at more than Us$4.000 per sq m. this bodes well for

the high end segment as demand is still out there for projects that

can show a realistic touch and feel for the buyer. With good construc-

tion quality and reliable construction progress, buyers would be more

willing to sign contracts - a marked difference from the past where

buyers were purchasing yet-to-built units and expecting handovers

several years.

the secondary marketsecondary market continues to suffer from low liquidity as the fight

between investor and developer continues. asking prices in ha dong

decreased as much as 5% while long bien, hai ba trung and dong

da were also down by 3 to 4 percent. as developers in the primary

market are reducing the selling price publicly or discreetly, second-

ary investors, especially ones who own unfinished units, are being

squeezed. the market is strongly a buyer’s market who have turned

to deal hunting.

oUtlookfollowing Q2 2013, this quarter provided more light at the end of the tunnel for the residential market. With prices near bottom, home buy-ers and long term investors are looking for their deals with cautious optimism. secondary market at certain good quality projects showed a slight increase in prices. demand for units that are close to comple-tion with reliable construction progress is high as evidenced by actual transactions. distinctive developers have differentiated themselves from others through their progress and capital strength.

neWly-laUnched Units, Q3 2013

aVeraGe neWly-laUnched price

aVeraGe secondary price

hoanG thanh toWer




RESEARCH & FORECAST REPORT | Q3 2013 | VIETNAM

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