fearless forecast - amcham vietnam · fearless forecast “do not let a good crisis go to waste”...

Fearless Forecast “Do not let a good crisis go to waste” F e b r u a r y 2 0 1 2

Presented by:

Marc Townsend Managing Director CB Richard Ellis (Vietnam) Co., Ltd.

CBRE Vietnam CBRE Vietnam | Fearless Forecast 2012

HCMC 2011… Changes

Times Square Saigon M&C Tower Eden A

Taken on January 12, 2012




Vietcombank Tower VietinBank BIDV Tower





Saigon Centre (phase 2)

Ben Thanh Towers



CBRE Vietnam CBRE Vietnam | Fearless Forcast 2012

2011 MOST Fearless Forecasts

Office Tenants • Multiple choices and softening rents

Hospitality • Ritz Carlton, St. Regis, Mandarin Oriental, Shangri-La and Four

Seasons to enter market within the next 5 years

Retail • Refurbished retail areas appear (Saigon Square #3) –

Shipyards moving towards development

• Growth of mini-malls due to lack of land (< 3,000 sm)

• Larger retail areas coming up outside of traditional areas – District 5 (Tan Da Shopping Center), and Binh Duong (Becamex New City)


2011 MOST Fearless Forecasts

Investors • Property investment remains dangerous for your health

• Change in asset class as gold dips and people moved in other directions

Developers • Marketing spend TRIPLES as developers search for new ways to sell / lease

their units

• Increased use of technology in property – building management systems, CRM systems

• Local companies seek capital through IPO’s and more sophisticated financial structures

• Some residential developers will convert units for sale to units for lease due to unsold units in completed buildings, or instituting rental pools (guarantees)

• Demand for data centres grows due to the continuing movement online, as our businesses become more immediate with wi-fi, smart phones and iPads. Developers prepared to deliver with the requirements needed to support these trends will profit.


Source: Historical data by GSO, 1GSO , 2SBV, 3 IMF, 4 SJC, 5 World Bank, 6 Ministry of Investment, 7Oxford Economics

2011 Vietnam Economic Overview 2008 2009 2010 2011 e 2012 f

GDP Growth Rate (y-o-y) 6.2% 5.3% 6.8% 5.91 6.3 3

Lending Rate 12% 12.75%

Down from 21% in Q3

16%-17.0% (Late 2010) 22% - 25%2 N/A

Inflation (Average, y-o-y) 22.9% 6.9%1 9.2%

(Dec‘10: 11.8%) 18.58%1 12.1% 3

Exports US$62.7 bil US$57.1 bil US$71.6 bil US$96.3 bil US$105.4 5

Imports US$80.7 bil US$69.9 bil US$84.0 bil US$105.8 bil US$113.3 5

Gold Price (per Tael)

VND17.8 mil (Dec. 31, 2008, up

7.2% y-o-y)

VND26.7 mil (Dec. 31, 2009, up 50% y-o-y)

VND36.1 mil (Dec. 31, 2010, up

35.2% y-o-y)

VND41.8mil4

(Dec. 30,2011. up 15.8% y-o-y)

N/A

US$/VND (Commercial banks)

17,400 (Dec. 31, 2008)

18,497 (Dec. 31, 2009)

19,500 (Dec. 31, 2010)

Devalued by 5.4% vs. Dec. 2009

21,036 (Dec.31, 2011)

Devalued by 7.9% vs Dec. 2010)

21,7357

US$/VND (Unofficial market)

17,510 (Dec. 31, 2008)

19,470 (Dec. 31, 2009)

21,010 (Dec. 31, 2010)

21,275 (Dec. 31, 2011) N/A

Committed FDI US$71.7 bil US$22.6 bil 1 US$18.6 bil

(US$6.8 bil real estate)

US$14.7 bil 1

(US$845.6 mil real estate)

US$15 - 16 bil 6

Implemented FDI US$11.7 bil US$10 bil US$11 bil US$11 bil1 N/A


2011 Regional Economic Comparison

Source: Oxford Economics, Vietnamese General Statistics Office, World Bank, Goldprice.org, goldpricethai.com, pecunix.com

Hong Kong Thailand Singapore China Malaysia Vietnam Indonesia

GDP Growth Rate 4.9% 1.6% 5.0% 9.0% 4.9% 5.9% 6.3%

Consumer Price Index 5.3% 3.9% 5.0% 5.6% 3.2% 18.6% 5.4%

Gold Price ( per gram in US

$ equivalent) US$51.80 US$50.50 US$52.18 US$51.88 US$52.17

US$53.00 2.2% higher

than regional average

US$52.72

Trade Balance -$55.4 bn $27 bn $48.3 bn $111.9 bn $47.1 bn -$9.5 bn $38.2 bn

FDI (net inflow in current US$,

2010) $68.9 bn $6.3 bn $38.6 bn $185.1 bn $9.5 bn

$8.0 bn (Source: World

Bank) $13.3 bn


A look ahead to 2012

2012 GDP (% y-o-y)

CPI (% y-o-y)

Vietnam 5.8 11.5 Hong Kong 3.5 3.6

Thailand 4.5 2.9

Singapore 3.3 2.8

China 8.1 3.5 Malaysia 4.9 2.8

Source: Oxford Economics. Note: GDP growth for Vietnam in 2012, The World Bank, IMF and ADB range between 6.1% – 6.5%.

With demand from the eurozone and US expected to remain weak for some time, emerging East Asia should continue to work toward increasing intraregional trade and financial integration, and expanding links with other emerging economies.

- ADB, Asia Economic Monitor, December 2011 -


-

2

4

6

8

10

12

14

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010 p

2011 p

FDI (

US

$ B

illio

ns)

Implemented FDI

2011 Economic Overview – FDI

Source: Ministry of Planning & Investment


2011 Economic Overview – Currencies

As per 2010, in 2011 the US Dollar appreciated in Vietnam. However, in 2011 the US Dollar also appreciated against the Thai

Baht and Singapore Dollar

Source: Google Finance


2011 Vietnam Stock Market

Source: FPT Securities

At the beginning of 2011, some expected a rise. Going into 2012, some are wondering where the bottom is.

VN Index dropped 28%, real estate companies fell approx. 45% Little support from those holding gold 2012 YTD: the stock markets are up 19%!


2011 Regional Stock Market Comparison

Source: ADB

Since 01/01/2012 some Asian markets have picked up!?


2011 Gold Market

Vietnam market: in 2011, Gold price increased 25.7% y-o-y Global market: 2012’s average gold price to be US$1,766 per

ounce, 12.3% increase from 2011’s, according to a survey by The London Bullion Market Association. HSBC predicts is US$1,850 per ounce.

Source: kitco.com

CBRE Vietnam CBRE Vietnam | Fearless Forcast 2012 Source: vov.vn; giadinh.net.vn; tuoitre.vn ; 1star1objet.fr

2012: Gold Supply in Vietnam Increases

The magic from Trinh Duc’s performance in the Rugby World Cup is overshadowed by: • Quy Phuc is expected to win the gold in 100 m

freestyle • Anh Tuan is expected to win the gold in <56 kg

weightlifting • Ha Thanh is expected to win the gold in the floor

exercise


Car Sales

Nguyen Van Linh – the automobile hub, further growth expected;

Kia New Morning VND357,000,000 (US$17,000);

Entry Level Mercedes VND1,500,000,000 (US$70,000);

Car Sales by Manufacturer in Vietnam


2011 Government Decrees

New in 2011:

• Pricing in Dong – Decree 95/2011/ND-CP states that VND must be used for quotation or advertising of goods and

services, etc.

• Relating to Apartment Service Fees – Decision No. 4520/QĐ-UBND provides that the statutory Apartment Service Fee Rates shall be

applied only when the parties has not yet agreed on the Apartment Service Fee in advance

• Non-Agricultural Use Tax – Decree No. 53/2011/ND-CP – Pilot program for NALU Tax, Prior to enforcement of Decree No. 53 on January 01, 2012, The

Ministry of Finance is unrolling a pilot program to collect non-agricultural land-use tax in certain local areas of Hà Nội, Cần Thơ cities and the Bắc Ninh province.

– The pilot stage will focus on identifying taxation areas as well as connecting and exploiting the databases of local agencies on tax and natural resources.

• Requirement for Environmental Impact Statement – Decree No. 29/2011/ ND-CP dated April 18, 2011 is the first guidance on the assessment on

environmental impact – Proscribes many requirements and procedures to that are required for specific development projects


The Original Golden Sites

Of the 20 Golden sites: • 2 completed • 2 under development • 16 sites awaiting action


Infrastructure 2011 Milestones

Roadways • T3 – Thu Thiem Tunnel • The ten year Nhieu Loc - Thi Nghe Canal Road

widening project is completed • On August 24, the first Bus Rapid Transport (BRT)

route in the city opened from Ben Thanh Market, to Mien Tay Bus Station.

Metro lines • The expected cost of Metro Line 1 has almost doubled,

with progress in compensation. • Tramway Line No. 1 is being restructured into a Bus

Rapid Transit (BRT) system at reduced cost.

Air • Da Nang’s new airport terminal opens! • Prime Minister Dung officially approved Long Thanh

International Airport’s master plan. • The airport has an area of 5,000 hectares with

investment capital of US$6.7 billion for the first phase. • Vietjet Air, a new private airline, started operation. (1

Airbus, 2 on order).

Nhieu Loc - Thi Nghe Canal Road Source: www.info.vn

Da Nang New Terminal Source: Tuoi Tre


2012 Infrastructure

Roads: • Construction of the four main roads in the Thu

Thiem new urban area will start in July, 2012 Completion is expected 2015.

Bridge: • Saigon Bridge No. 2, with four lanes, will start

constructed in April, 2012, and will take 22 months to be completed.

Bus system: • In 2012, the city will focus on improving the bus

system and services, implementing solutions to improve the backbone of the city’s transportation.

East – West Highway


All Future Projects HCMC Hanoi Da Nang Can Tho Nha Trang (Khanh Hoa)

Vung Tau

Hai Phong

Office 267 245 43 22 16 35 13

Retail 86 33 18 7 4 11 5

Hospitality and SA 44 53 28 12 37 19 6

Residential 311 268 134 10 22 32 9

Projects Under Construction HCMC Hanoi Da Nang Can Tho Nha Trang

(Khanh Hoa) Vung Tau

Hai Phong

Office 166 88 15 15 6 19 7

Retail 42 24 6 6 3 1 3

Hospitality and SA 25 32 17 5 10 8 2

Resi 142 104 19 3 5 14 5

According to BCI Asia…

Source: www.bciasia.com; CBRE Vietnam


Office - Rents Grade A Rents (US$ psm)

Grade B Rents (US$ psm)

Grade C Rents (US$ psm)


Office - Vacancy

Grade C Vacancy

Grade B Vacancy

Grade A Vacancy


3 Year Residential Price Movement Luxury Condominium (US$ psm)

High-end Condominium (US$ psm)

Mid-end Condominium (US$ psm) Affordable Condominium (US$ psm)


Take-up vs. Hangover

Unsold Units Accumulated (Units)

Take-Up Rate (%)

Some are waking up with their head in their hands


The Residential Nightmare

Q1 5,078 launches

2,229 sales

Q2 4,926 launches

1,390 sales

864 launches 1,867 sales

Q3 1,096 launches

846 sales

Q4

Resolution 11 Dong Devaluation

(9.3%)

US$6,000/unit in Binh Duong

2012 Death,

Discount or Opportunity

?

Doc. 8844 /NHNN-CSTT: Remove 4 real estate groups out of the non-

productive outtsatnding loan category

Goldora Villa sold to ICC

Discount Headlines

Property sector, the most attractive investment channel, but more cautious to invest in 1-3 years

(survey by Grant Thornton Vietnam)

More incentives to stimulate sales

More strictly control on dolarisation price list

in VND

The Ascott signed Diamond Island (D.

2)

Int’l banks stopped mortgage lending


Retail

The past 18 months has seen shopping centre rentals create a buzz;

2012, we expect department store rentals to come back to the forefront: • Lack of quality space in the CBD; • Still a softening on rents

2012, shopping centre rentals in the CBD to remain soft; • Saigon Centre phase 2, the CBD retail hub on the

horizon; • First new supply in CBD with department store;

Department Store vs. Shopping Centre

1st quality shopping centre outside the CBD – Crescent Mall;

However, rentals still softening as retailers have multiple options and established SHOPHOUSE location remain popular;


Hotels 2012 Occupancy and RevPAR both

showing signs of growth in 2011.

Coastal markets such as Phu Quoc, Nha Trang and Da Nang showed a higher

RevPAR growth rate than HCMC:

Phu Quoc continues to lead the coastal market with 20% y-o-y increase in

RevPAR, expected to be an attractive destination for investors in 2012.

The operation of new Da Nang International Airport terminal in December,2011 facilitates more direct international flights to Da Nang from locations such as Seoul and Kuala Lumpur.


Da Nang Hotels/Resorts/2nd Home 2012 2011 y-o-y increase in visitors was 34%, of which international visitors

increased 44% y-o-y

The Hyatt Regency came online in Q4 with 200 five-star rooms, 2012 expects InterContinental, Le Meridien, Melia and Pullman to enter DN

In 2012, the DN hospitality market will target Russian tourists with direct Russia – Da Nang flights in consideration

Da Nang market continues to perform with 60% of the 40 villas launched at The Point sold within three months

No construction expected in 2012 without pre-sales

Projects away from the coast see action too – WTC leasing (anchors already signed) and Azura to complete Q2


Serviced Apartments 2011

Demand derived from 3 sources: • Professional expatriates – main source

– Both from Asia and the West – Hanoi: employees in the Embassies

• Returning Overseas Vietnamese • Wealthy Vietnamese ← a new and growing trend

“Vietnam will be the 11th most common destination of companies sending staff on international assignments up to 2013. Therefore, this is likely to ensure that the demand for accommodation from companies sending staff into Vietnam is likely to remain strong in the next three years”.

--- Trends in Managing Mobility Survey 2010, ECA International

H1/2011 work permits issued to foreigners in HCMC: • Achieved 85.1% of entire 2009 • Down 16.5% against H1/2010

$0 -$1200 $1200 - $2500 $2500 - $3500 $3500+

Q4/2010 10.0% 40.0% 40.0% 10.0%

Q1/2011 17.9% 41.5% 29.2% 11.3%

Q2/2011 20.5% 48.2% 24.1% 7.2%

Q3/2011 11.7% 52.1% 26.6% 9.6%

Source: CBRE Residential Leasing

Proportion of Housing Budget (US$/month)

TOP DEMAND!


• Logistics component becomes a must in industrial park zoning.

• Logistics to grow as Asian regional trade buoys economy through Eurozone crisis and slower US growth.

• Japanese investment KEY. Both from Japan directly, and from Japanese companies relocating out of Thailand.

• Potential growth areas: • Food & Beverage for South Vietnam • Electronics for North Vietnam.

• Ready Built Factory rental rates come down as more supply than ever before.

• With the increasing profile of industrial in Vietnam, more investors seek wholesale purchases of operating IPs.

ILS 2012 Forecast


The Rise of Investment - The Institutional Deal And a notable variance in yield

At least three more

institutional deals to come

in 2012

Pacific Place, Hanoi Q4 2010 – Reported 12%

CentrePoint, HCMC Q2 2011 – Reported 10.6 – 11.3%

Saigon Tower, HCMC Q4 2011 – Reported 8.5%


CBRE’s 10 Most Fearless Forecasts

1. Nguyen Trai still the retail king! 2. Square office buildings back in fashion! The best tenant deals will have happened

in the first half of 2012. 3. Any residential project that hasn’t broken ground will gravitate to the affordable

(new middle class, less than 21,000,000VND psm) segment. 4. Luxury residential in the CBD WILL sell. 5. Golf – Boom or Bust?!?

6. Revenue from cleared sites skyrockets as they are converted into drive-in movie theatres and Circle K.

7. Burger King opens at Da Nang airport and Sushi Bar opens in Phu Quoc as overseas visitors increase a further 20%.

8. In the short-term the new Pudong is not Thu Thiem, it is District 4.

9. Gold price declines with new supply from Vietnam’s two gold medals at the London Olympics 2012.

10. Registered FDI into real estate triples in 2012 as Vietnam sees 20 new foreign investors.

11. Jack Dorsey to spend Christmas 2012 in Vietnam, @Townsend_Marc to have 50,000 followers

On December 31, 2012…


The most insightful real estate publication in Vietnam!

Plan your future with two quarter and eight quarter forward looking analysis.

CBRE Vietnam - HCMC & Hanoi Quarterly Reports

© 2012 CB Richard Ellis (Vietnam) Co., Ltd. This report has been prepared in good faith and with due care by CB Richard Ellis (Vietnam) Co., Ltd. We obtained some of the information above from sources we believe to be reliable. However, we have not verified the accuracy of the information which we obtained from other sources and make no guarantee, warranty or representation about it. We include projections, opinions, assumptions or estimates which are made with careful consideration of factors known to us for example only, and they may not represent current or future performance of the market. This information is designed exclusively for use by CB Richard Ellis clients, and cannot be reproduced without prior written permission of CB Richard Ellis.

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