APPD Market Report Article
Ho Chi Minh CityNovember 29, 2022
Trang Le, Head of Research, Vietnam
Recovering demand moves in tandem with new supply influx
- Soaring new supply has resulted in high sale volumes in high-end apartments, with 2,235 units sold (+36.1% q-o-q). Despite a new supply boom, the sale rate of new launches still fell to 61.2%, reflecting a slowing trend in transaction volumes. Consequently, many local developers continued to accelerate advertising programs and promoted discounts for investors, to increase market interest.
- Demand for villas/townhouses surged considerably by 39.3% q-o-q, with 819 units taken up, in tandem with the rise in new supply. Highlights of the quarter are The Global City (Masterise Homes) and The Classia (Khang Dien), which have earned high sale rates of 88% and 96%, respectively, despite their higher-than-average selling prices due to good location.
Large new launches from reputable developers
- The quarter saw the supply of new high-end apartments boosted to 3,305 units (up by 155.6% q-o-q), which came from both ongoing and newly launched projects. In terms of location, the eastern area, especially in Thu Duc City, contributed 73.3% of the quarter’s new supply due to the entrance of the subsequent phase of the township, Vinhomes Grand Park (Masterise Lumiere Boulevard).
- Supply of villas/townhouses, at 921 units in 3Q22, has moderately recovered, accompanied by 15.3% growth q-o-q. Dominating the new stock are projects located in developing townships such as The Global City (696 shophouses) and Vinhomes Grand Park (74 shophouses), whereas other new stock come from bustling residential neighborhoods like The Classia in District 9 (110 townhouses and villas).
High-end apartment prices and rents edge up
- Average net effective rent of high-end apartments continued to rise by 3.8% q-o-q and 12.4% y-o-y (USD 9.2 per sqm, per month). Leasing demand has largely recovered due to the economy reopening post-COVID-19, and the recent record-high rents of high-quality completed stock.
- The average selling price for high-end apartments in the primary market was USD 5,915 per sqm (+6.3% q-o-q and +16.0% y-o-y), due to the substantial supply pipeline (accounting for 20.7% of total new launches) from the ultra-luxury segment. Prices for other segments remained stable. Likewise, capital values recorded a new high, at USD 3,254 per sqm, increasing 5.2% q-o-q and 18.0% y-o-y.
Outlook: Prices are likely to keep rising in 2023
- In 4Q22, both submarkets are expected to record low new supply, hence the total new supply for 2022 should reach around 7,556 units and 2,846 units in the high-end apartment and villas/townhouses sectors, respectively. Supply numbers in 2023 are expected to recover. However, forecast figures are largely subject to change due to the global economic uncertainty and legal framework in Vietnam.
- Future completions of higher-priced projects will likely accelerate capital value growth for both high-end apartments and villas/townhouses in 4Q22 onwards, as real estate remains a safe investment option due to limited new supply. Capital values are expected to reach USD 3,498 (+5.7% y-o-y) and 3,738 per sqm (+8.4% y-o-y) for high-end apartments and villas/townhouses, respectively, by end-2023.