APPD Market Report Article
Ho Chi Minh CitySeptember 4, 2023
Trang Le, Head of Research, Vietnam
Transaction volume in the high-priced segment continues to slow
- In 2Q23, High-end Apartment new sales totalled 1,090 units. Despite many positive signs for supply, the selling rate for High-end Apartments still fell to 39.8%, reflecting the trend of slowing transaction volumes. Developers continued to apply many flexible payment methods and policies to attract buyers, such as discounts, deferred payment policies and interest rate support.
- The transaction volume in the ready-built property (RBL) market remained limited, with only 36 units sold, resulting in the quarterly sales rate falling to just 7.44% in 2Q23. Stocks in the primary market are mainly inventories with a high transaction value (over USD 1 million per unit), which put a strain on transactions in the context of cautious market sentiment.
Thu Duc dominates new supply
- Thu Duc City, especially Thu Thiem New Urban Area, is the main source of supply for High-end Apartments in HCMC in the quarter, with 1,123 apartments from three officially launched projects. There was no new supply coming from the low-end segments in the quarter. The government has begun to issue many policies aimed at removing obstacles and resolving legal issues for commercial housing projects.
- Thu Duc City continued to dominate the primary supply of the RBL market in HCMC, with around 85 newly-launched units coming from the previously-launched projects of Masterise and Dai Phuc Group. The market continued to record no newly-launched projects in the quarter.
Selling price remains stable; developers offer incentives
- Growth in High-end Apartments’ net effective rent accelerated for the sixth straight quarter, recording an increase of +1.3% q-o-q and +8.5% y-o-y at USD 9.6 per sqm, per month. It was driven by stable leasing market activity, as renting presented a more feasible option while waiting for economic indicators and prices to further stabilise.
- The High-end Apartment primary price decreased slightly by 2.0% q-o-q to USD 5,183 per sqm. The decline was mostly due to the large discount policy of Vinhomes Grand Park subdivisions, while the asking prices of other projects remained stable. Meanwhile, capital value increased slightly by 1.6% q-o-q due to limited primary supply, especially for projects with high quality and good locations.
Outlook: Supply and demand to reduce further amid headwinds
- In 2H23, supply is expected to remain under pressure due to the uncertain economy, despite starting to receive positive policy changes. The High-end Apartment market is expected to welcome about 1,900 new units, 53% fewer than the number of new launches in 1H23, while only about 300 new RBL units are expected to come from new projects in Thu Duc City and Binh Tan District.
- Demand is forecast to remain at the current low level until new supply shifts to the lower-priced segment, and interest rate fluctuations, as well as the economic situation, become more stable. Future completion of higher-priced projects will likely raise capital value growth for both segments in 2023, amid limited new supply and cautious demand.