APPD Market Report Article
Ho Chi Minh CityAugust 26, 2022
Trang Le, Head of Research, Vietnam
Demand moves in tandem with new supply
- Demand for high-end apartments in 2Q22 moved in tandem with new supply and sizeable inventory from previous launches, totalling 1,642 units sold, three-times higher than the previous quarter. To capitalise on pent-up consumer demand after the pandemic, many local developers launched vigorous marketing campaigns and generous promotions, resulting in a sales rate of 82.6% (up from 42.1% in 1Q22).
- A total of 588 villas/townhouse units were sold in 2Q22, a decrease of 50.4% q-o-q due to fewer new supply additions during the quarter. The townhouse product with a price range of USD 300,000-400,000 per unit in Ho Chi Minh City attracted the most activity due to its affordable selling price, accounting for 70.0% of total units sold.
Uptick in developer confidence results in abundant new launches
- New supply in high-end apartments totalled 1,293 units, from both ongoing and newly launched projects, reflecting the improvement in market sentiment. Notable projects included Celadon City – Diamond Century and D-Homme, both offering 746 and 445 units, respectively.
- The total newly launched supply of villas/townhouses in Ho Chi Minh City reached 799 units in 2Q22, a fall q-o-q, mainly driven by limited new supply in the quarter. Of the total, there are 175 high-priced units, including Van Phuc Group’s Jardin Villas and the first branded residence project, The Rivus.
Primary prices edge up in both markets
- Net effective rent for high-end apartments achieved a moderate growth with an increase of 2.1% q-o-q and 6.3% y-o-y, reaching USD 8.8 per sqm per month by end-2Q22. Leasing demand has essentially returned to pre-COVID-19 levels as demand sentiment has improved.
- Market sentiment has improved, and together with the lack of affordable projects, pushed up prices in the high-end sector. Capital values recorded a new high, at USD 3,092 USD per sqm, an increase of 4.6% q-o-q and 16.2% y-o-y. For villas/townhouses, an unprecedented high price in a newly launched project drove significant growth in primary price in the quarter, by 17.8% q-o-q and 30.4% y-o-y.
Outlook: Healthy demand is expected for the remainder of 2022
- For the rest of 2022, the market is expected to welcome about 6,337 units and 449 units in high-end and villa/townhouse sectors, respectively. Due to the high acquisition cost and limited landbank in the CBD, combined with the gradual improvement of transport infrastructure, the market will likely expand along East-West corridors, with Thu Duc City dominating the supply pipeline (>83%).
- Activity in the residential sales market is anticipated to pick up in 2022, backed by economic recovery. Prices continue to rise and the market will likely see many record high-priced projects in convenient and densely populated areas with well-developed facilities. In addition, yield is forecasted to compress further as capital value growth will likely outpace rent growth.