APPD Market Report Article
Ho Chi Minh CityMay 31, 2022
Local developers drove demand through marketing strategies
- Given limited options in the newly launched supply, demand for high-end apartments switched to the inventory basket, with 505 units sold it was down by 82% q-o-q. Local developers generated demand in the quarter through efficient marketing efforts, with Masterise Group being the most notable and its projects dominating the sold basket in the quarter (78.6% of the total).
- Newly sold villas/townhouses in 1Q22 were considered low, with 1,185 units moving in tandem with new supply, such as One Palace 2, Classia, etc. The majority of newly sold units came from integrated projects in Suburban areas that have better infrastructure and connections to the CBD area.
Limited supply owing to long public holidays in the quarter
- The first quarter of the year is typically the low season owing to long public holidays during the quarter. No new projects were recorded in 1Q22. All stock came from on-going projects, with the total number of new launches reaching 452 units.
- In the villa/townhouse sector, new launches totalled 992 units, nearly three times the average quarterly level since 1Q19. The increase in new launches in the quarter was attributable to the successful approval of large-scale projects in Suburb areas, such as Zeitgeist developments, which accounted for 38% of total 1Q22 new launches.
Rental market slowly resumed to pre-pandemic performance level
- Rents slowly recovered to the pre-COVID-19 level, reaching USD 8.66 per sqm per month, an increase of 1.9% q-o-q and 3.4% y-o-y. The reopening of the economy and the resumption of international flights prompted landlords to improve their rental performance.
- High-quality supply in new NUA areas, such as Thu Thiem, aided capital value growth by 8.4% q-o-q to USD 4,889 per sqm. The recent surge in land and development costs have also pushed up market prices. Given the substantial new supply, the capital value of villas/townhouses remained stable with a meagre change of 0.28% q-o-q to USD 2,991 per sqm, by end of 1Q22.
Outlook: Market expected to resume solid performance
- Future supply will be concentrated in East-West corridors, with Thu Duc City leading the way, accounting for up to 67.6% of total new supply. For the remainder of 2022, the HCMC market expects to welcome around 4,678 units in the high-end apartment sector and 2,292 units in the villas/townhouse segment. All projects are ready to launch.
- Yield will likely contract further as capital value growth outpaces rent growth. Limited supply in the face of strong demand will help increase the primary selling price, and this, along with a limited land bank in the inner area, will compel new supply in all sectors to move to further areas.