APPD Market Report Article
Ho Chi Minh CityFebruary 28, 2023
Trang Le, Head of Research, Vietnam
Most transactions recorded for existing buildings
- Sales in the High-end Apartment submarket faced challenges in the context of increasing interest rates, with only 171 units sold in 4Q22, down 92.3% q-o-q. Investor-buyers, the majority demand source, remained cautious. To attract buyers, many developers continued to offer more aggressive discounts of 3%-5% for fast payment schemes and extended payment levels.
- Villas/Townhouses demand witnessed an immense drop of 71.9% q-o-q, with only 230 units sold due to limited new supply, and most buyers have adopted a wait-and-see strategy amid the legal uncertainty and potential economic slowdown. The majority of transactions came from existing buildings, The Classia, The Global City, Vinhomes Grand Park and Van Phuc City.
Market slowdown amid high interest rates and legal issues
- Only one new High-end Apartment project, The Horizon from Phu My Hung Group, was launched in the quarter, with 166 units. Economic headwinds and legal issues were among the obstacles that soft-launch projects faced to reach the stage of signing SPAs. Some developers had to change their launch strategies to accommodate the weakened market demand.
- As developers delayed their launches, there was an absence of new Villa/Townhouse projects introduced in 4Q22. New supply fell by 80% q-o-q and 17.5% y-o-y, with only 184 newly launched units. The quarter’s new launches were contributed by the remaining stock of projects that were introduced by well-known developers, such as Masterise and Khang Dien.
Selling prices remained resilient amid weak market sentiment
- Average High-end Apartments net effective rent stayed on a growth trajectory, up 1.2% q-o-q and 9.2% y-o-y to USD 9.3 per sqm, per month. In the last quarter of 2022, most landlords tended to increase prices upon contract renewals in response to potential rises in inflation and interest rates.
- The High-end primary price fell to USD 5,830 per sqm, a decrease of 1.4% q-o-q. Many developers rolled out special offers in order to boost sales and improve cash flow amid cautious investor sentiment and legal issues. Meanwhile, the capital value (CV) of the High-end Apartment segment remained resilient, rising 1.0% q-o-q to USD 3,287 per sqm.
Outlook: Residential market to face headwinds in 2023
- Both demand and supply are under pressure due to cautious sentiment amid economic uncertainty and prolonged legal issues. High-end Apartment and Villa/Townhouse segments are expected to welcome about 6,200 units and 1,700 units, respectively, in 2023. Most come from well-known players with sufficient financial resources to offer incentives to entice buyers and proceed with SPA signings.
- Future completions of higher-than-average-priced projects will raise CV growth in both High-end and Villa/Townhouse segments due to limited new supply, but growth will likely be slower as demand remains cautious. CV is expected to reach approximately USD 3,474 (up 5.7% y-o-y) and USD 3,730 per sqm (up 6.7% y-o-y) for High-end Apartments and Villas/Townhouses, respectively, by the end of 2023.