MARKET INSIGHTS - CBRE Vietnam...6 MARKET INSIGHTS FROM CBRE’S HANOI QUARTERLY REPORT | Q2 2013,0...

CBRE RESEARCH & CONSULTING MARKET INSIGHTS From CBRE’s Hanoi Quarterly Report

Q2 2013

ECONOMIC OVERVIEW

3 MARKET INSIGHTS FROM CBRE’S HANOI QUARTERLY REPORT | Q2 2013

Q2 2013 ECONOMIC OVERVIEW

VIETNAM ECONOMY

Source: Vietnamese General Statistics office

Q2/2012

Y-o-Y

Q1/2013

Q-o-Q Q2/2013

GDP (% y-o-y) 4.8% 4.8% 5.0%

CPI (% y-o-y, e-o-p) 6.9% 6.6% 6.7%

Exchange rate (e-o-p) 20,828 20,828 21,036

Export (US$ Bn) 28.6 29.7 32.4

Import (US$ Bn) 29.0 29.2 34.3

FDI Implemented (US$ Bn) 2.9 2.7 3.0

International Tourist Arrivals (million arrivals) 1.5 1.8 1.7

Retail and Services Turnover (tril. dong) 567.7 636.1 639.3

20700,0

20800,0

20900,0

21000,0

21100,0

Feb-12 Apr-12 Jun-12 Aug-12 Oct-12 Dec-12 Feb-13 Apr-13 Jun-13

Inte

rba

nk

exch

an

ge

rate

1% adjustment Stable exchange rate


GOVERNMENT POLICIES

Expansion Monetary Policies Fiscal Policies - Tax Cut

Devaluation of the dong 1% versus the dollar

( to VND21,036)

The interest-rate ceilings on short-term

dong-denominated bank deposits: lowered to

7.0% from 7.5%

The ceiling on dollar deposits:

• For institutional depositors: fall to 0.25%

from 1.0%

• For individual depositors: fall to 1.25%

from 2.0%.

Corporate Income Tax:

• Cut from 25% to 22%; Effective 1/1/2014.

• In 2016: cut further to 20%.

For SMEs that have less than VND20bn revenue per year:

• The tax rate will be 20%

For social housing:

• Corporate tax rate: 10%; VAT: cut from 10% to 5%.

Personal income tax:

• The level of deduction: increased to VND9 million/per month

from VND4 million/ month;

• The level of deduction for each dependent: increased to

VND3.6/ month from VND1.6 million per month for one.

dependent.

• Boost domestic consumption and production

• Improve trade balance

• Reduce banks' funding costs => Lend

at lower rates

• Encourage to exchange USD for VND

• Bolster its foreign-exchange reserves


Q2 2013 ECONOMIC OVERVIEW Gold Price And Bank Deposits Become Less Attractive

Global gold price: decrease 24%

YTD.

Local gold price: reached its

trough in June (22%) and

currently downed 19% YTD

Policy rates: 800bps reduction

over the last 18 months.

-1

0

1

2

3

4

0

5

10

15

20

25

Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13

CPI (%

m-o

-m)

CPI (%

y-o

-y)

/ In

tere

st ra

tes

(%)

CPI (y-o-y, Vietnam) Rediscounting Rate Refinancing Rate CPI (m-o-m, Vietnam)

Monetary contraction

Inflation surged

Monetary expansion

Inflation controlled

1,000

1,200

1,400

1,600

1,800

2,000

30

34

38

42

46

50

09/2011 12/2011 03/2012 06/2012 09/2012 12/2012 03/2013 06/2013

Glo

bal gold

price

(U

S$)

Loca

l gold

sell p

rice

(VN

D m

illion)

LOCAL GOLD GLOBAL GOLD

Source: SJC

Source: State Bank of Vietnam


,0

500,0

1000,0

1500,0

2000,0

2500,0

3000,0

300

350

400

450

500

550

Jun 11 Sep 11 Dec 11 Mar 12 Jun 12 Sep 12 Dec 12 Mar 13 Jun 13

Tra

din

g V

alu

e (

Bill

ions V

ND

)

VN

Index

Trading value VNIndex

Q2 2013 ECONOMIC OVERVIEW

Regional stock markets, 1

year return as of July 05,

2013:

Thailand (SET) up 21.1%;

Singapore (SGX) up 15.2%;

Indonesia (JCI) up 15.8%;

Vietnam (VNINDEX) peaked

at 528 points in June, up

26%, currently up 21.1%.

Stock Market Recovers, Real Estate Will Come Back To Focus

REAL ESTATE INDEX 2Y 1Y 6M 3M 1M Current

Real Estate Holding &

Development Listed

Companies

55.5 44.8 39.5 41.9 42.2 45.4

Real Estate Services Listed

Companies 84.4 25 23.8 25.3 22.3 26.1

Source: Stockbiz

Source: FPTS, gold.org

Source: Bloomberg


Vietnam Hanoi

GDP (% y-o-y) 5.00 (↑) 7.84 (↑)

CPI (% y-o-y, average) 6.55 (↓) 5.4(↓)

Exchange rate (e-o-p) 20,828 20,828

Export (US$ Bil.) 33.1 (↑) 2.63 (↑)

Import (US$ Bil.) 34.8 (↑) 6.55 (↑)

FDI Registered (US$ Bil.) 4.44 (↓) 0.3 (↑)

FDI Implemented (US$ Bil.) 3.00 (↑) -

FDI Real Estate (US$ Bil.) 0.17 (↓) -

International arrivals (mil.) 1.74 (↓) 0.5 (↑)

Hanoi Economy At A Glance

HANOI ECONOMIC OVERVIEW

Credit growth ↑ to 3.31% from 0.1% in Q1

GDP ↑ to 5% from 4.76% in Q1

FDI inflow ↑ 15.9% y-o-y

NPL ↓ to 4.65% from 6% in Q1

IIP ↑ to 6% from 4.5% in Q1

Domestic conditions start to improve while policies

continue to focus on unresolved problems and growth

Credit Growth (%)

-5%

5%

15%

25%

35%

45%

2009 2010 2011 2012 Q1/2013 Q2/2013

Vietnam Hanoi


HANOI ECONOMIC OVERVIEW

Number of enterprises (y-o-y)

• Went bankrupt ↑ 35.4%

• Stopped operating ↑ 5.4%

• Newly registered ↓ 12.5%

Decree 02: VND 30tril packages for home buyers - A Push For Real

Estate or A Slat in the Lake?

• Doesn’t solve the core problem of the real estate market as the package

concentrates on helping low-end segment. By the end of Q1/2013, the value of real

estate firms’ unsold stocks is estimated to reach VND 112tril, focused primarily on

mid to high-end segments… contradiction in markets.

• Unclear mechanism between eligible buyers, banks, and eligible developers,

complicated and vague borrowing procedures limited the effect of the policy upon the

market.

Challenges ahead


Q2 Highlights

HANOI INFRASTRUCTURE

Cat Linh – Ha Dong

Urban railway: By

Q2/2013, total

construction progress

reached 39%, side

clearance of 9.2/13.5km

main route

Nhat Tan – Noi Bai

Bridge: Total

construction progress

reached 67%,

expected completion in

Q3/2014

Dai Co Viet – Tran Khat

Chan Flyover: expected

completion in Q3/2013

Kim Ma – Nguyen Chi

Thanh Flyover: The

intersection between Kim

Ma-Nguyen Chi Thanh

has been closed down

for 2 months from May to

July for construction,

expected completion in

Q3/2013

O Cho Dua Flyover:

Side clearance

completed ; issues

remain around Xa Tac

Historical Monuments

RESIDENTIAL MARKET Condominium for sale and Landed Property


CONDOMINIUM FOR SALE Supply: Launched vs. Completed

New Launch Supply (Units)

0

5,000

10,000

15,000

20,000

25,000

2007 2008 2009 2010 2011 2012 2013

Q1 Q2 Q3 Q4 Whole year

0

2,000

4,000

6,000

8,000

10,000

2007 2008 2009 2010 2011 2012 2013

YTD

Q1 Q2 Q3 Q4 Whole year

New Completion Supply (Units)

YTD

Number of units launched in Q2 up slightly compared to Q1 (+7%) but number of

launches up 88% lower units per launch

Number of units launched in H1 2013 ~ 36% of 2012 and ~14% of 2011, but

Number of units completed in H1 2013 ~90% of 2012 and ~167% of 2011


CONDOMINIUM FOR SALE New launches continued to focus on low- to mid-end segments

0%

20%

40%

60%

80%

100%

2008 2009 2010 2011 2012 2013YTD

Luxury High-end Mid-end Low-end

Units Launched by Grade

25%

12%

6%31%

7%

8%

11%

Hai Ba Trung

Thanh Xuan

Cau Giay

Tu Liem

Ha Dong

Long Bien

Others

2007 – 2011: luxury + high-end accounted for 25% of new launches on average

2012 – now: luxury + high-end account for less than 10% of new launches

Launches trending to reflect real demand - end user

Units Launched by District


CONDOMINIUM FOR SALE Prices: Where is the bottom?

0%

20%

40%

60%

80%

100%

2008 2009 2010 Q1

2011

Q2 Q3 Q4 Q1

2012

Q2 Q3 Q4 Q1

2013

Q2

Below $1,000 psm $1,000-$1,250 psm

$1,250-$1,500 psm Above $1,500 psm

-6%

-2%

2%

6%

10%

14%

2009 2010 2011 2012 2013YTD

Distribution of Primary Prices Secondary Price Changes


CONDOMINIUM FOR SALE Prices: Where is the bottom?

Prices offered in 2013 launches are

significantly lower than average of last

5 years due to the shift to low to and

mid-end segments.

Issue of unsold stock has pushed

developers to lower prices in re-

launches.

• But even at lower prices, developers

have to differentiate to secure sales

• In some projects a 30%-50% price

reduction has increased sales

Secondary prices have been falling

for 8 consecutive quarters since 2011

~70% units are traded at discounts

compared to original purchase prices.

Zero liquidity in slow construction

projects even at heavy discounts.

HOWEVER

32% projects saw stable prices in Q2,

compared to only 18% in Q1.

This suggests that prices might have

reached bottom in certain projects.

Primary Market Secondary Market


CONDOMINIUM FOR SALE Demand and Trend

Buyer profile: limited short-term investors,

caution oriented. Owner occupiers prevail.

Investment purposes:

• Primarily long-term / rental purpose.

• Stock, gold, and savings disappoint.

Psychological factors: fear of the boom

and bust, although confidence slowly on its

way back.

Home buyers and Long-term investors.

Price is No. 1 concern - wait and see

attitude is still dominant.

But other factors are important:

• Flexible payment terms and financing support.

• Management services, transparent.

• Facilities quality.

• Community oriented.

Demand Trend: Who buys What?

Q4 2012 Q1 2013

Job prospects 34% positive 39% positive

Saving plan 60% 71%

Intention to

invest in stock 5% 11%

Of people interviewed

Source: Nielsen


Investors are looking at quality products at

reasonable prices.

Price range of VND15-20 mil per sqm appear as

best sell/ target market.

Even at the right price, buyers will need to be

convinced that they will be provided quality

management and facilities.

Real commitment is the key to gaining buyers’

confidence.

Market prices are expected to fall toward the end

of 2013, but fewer projects will experience

decreases as they hit the point where cost exceeds

saleable price

The VND30 trillion package

• Limited impact due to limited eligible buyers

• Unclear mechanism between eligible buyers,

banks, and eligible developers

Outlook

CONDOMINIUM FOR SALE

Hoang Thanh Tower – Hai Ba Trung Dist

• 187 units

• Current asking price: From VND85 mil psm

• Official launch date: July 18

Upcoming Launch


LANDED PROPERTY Supply

New supply

70 units from Dang Xa NUA (Long Bien

Dist) launched in 20/05, to be handed

over in Q4/2013.

Sudico launched 173 landed properties in

June at prices from VND17.8 mil, down

8.3% compared with initial offering price.

Unresolved issues in new supply

Lack of facilities in newly completed

projects.

Values will continue to decline if

supporting and essential facilities are not

added in a timely manner.

Dang Xa NUA Sudico South An Khanh NUA


Downward trend persists

Selling prices in Me Linh dropped (largest) with average decrease of 30%. Tu Liem price declined

about 20% depending on the projects design and facilities, infrastructure being critical.

Long Bien and Hoai Duc, price reduction is 5% -7%. Hoai Duc off a previous high decline.

Projects in Cau Giay, Thanh Tri and Tay Ho slight fall, only 2-3% due to established infrastructure

and Tay Ho is a prestige property after location.

Certain projects in Ha Dong, prices slightly higher than the previous quarter near 10%, near the city.

Secondary asking price

LANDED PROPERTY

Secondary price of landed property (VND mil per sqm)

-20%

-15%

-10%

-5%

0%

5%

10%

-

20,000,000

40,000,000

60,000,000

80,000,000

100,000,000

120,000,000

140,000,000

Q1/11 Q2/11 Q3/11 Q4/11 Q1/12 Q2/12 Q3/12 Q4/12 Q1/13 Q2/13

Average market price Average market change


Low transactions volume although landed

properties are still in demand;

• More projects are completed at attractive price

points; some are even cheaper than some

condominiums.

• “Wait and see” attitude

• Still the preferred property purchase in Hanoi.

• Developers refocused on customer demand at

projects with affordable prices.

Potential: foreign investors

• Investors are reviewing real estate with bad debt

issues, lower price projects or projects facing

finance raising problems.

• Foreign investors can make investment by

investing through capital funds.

• 2013 will be a good year for investors who have

cash in hand to invest in projects.

Vincom Village Project completed

LANDED PROPERTY

Demand

ParkCity now 100% owned by Pernada Parkcity


LANDED PROPERTY

Macroeconomic factors in the market;

• Interest rates down, market did not react.

• Cheap house finance also no impact.

• Gold price declines sharply plus stock market fluctuates, should drive free cash into real estate.

• Time lapse to swap into other investments.

Me Linh, price decrease 50%

Outlook

Outlook

• Asking price is nearer to cost price after

adjustment.

• Buyers expected to regain some confidence

off the back of strong price declines.

• Developers are adjusting prices to match real

market demand.

• In the near future projects will be under

pressure to reduce price where transactions

are slow and prices don’t reflect the current

price trends.

COMMERCIAL MARKET Office & Retail


New supply: Q2 2013

OFFICE

Hong Ha Center, lettable area about 11,000 sm

Seven buildings completed this quarter,

supplying more than103,000 sm. Includes:

VCCI Tower

Ngoc Khanh Plaza

Star Tower

Capital Building

Hapulico Complex

Star City Le Van Luong

Song Hong Parkview

Hong Ha Center

VCCI Tower

CBD Supply

Non-CBD Supply


OFFICE

Asking rent

• Average asking rent for Grade A, small

movement of only -1%. New supply and

some price reductions. City owners still

reluctant to price adjust against the West.

• Grade B asking rent continues a downward

trend from Q1, decrease 10% q-o-q. New

supply and landlords waiting to attract or

keep tenants. Discounting will continue.

Vacancy

• Grade A: Average vacancy, slight change,

-2.32% decrease mainly due to Hong Ha

Center entering the market.

• Grade B: Average vacancy 19%, no

movement compared with last quarter. New

supply and tenant movements within the

same category.

Office Asking Rents

Office Vacancy

$0

$10

$20

$30

$40

$50

$60

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2

2009 2010 2011 2012 2013

Grade A Grade B

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2

2009 2010 2011 2012 2013

Grade A Grade B

Market Performance


OFFICE

Projects in the West under pressure to reduce rents as supply is large, new competitors for Grade B

category. Still a tenants market.

• Tenants have bargaining power and control.

• CFO are driving the decision process, then landlord promotions and supporting services are other

key drivers.

• Safety and condition in buildings are a growing and important factor. OH and S a key point with

foreign firms as well as local occupiers.

• Tenants will consider good options and terms to relocate.

Landlords

• Currently, price is a strategy to compete. Landlords alternatively are focused on discounting, rent

frees and extended fit out periods to improve their market position.

• Landlords have also matched the market and some buildings that previously were offering a

higher grade rent have had to adjust down.

• Landlords to meet the tenants expectations have had to upgrade facilities and amenities to

compete with better buildings entering the market.

Outlook


Future supply Q3 and Q4 2013

OFFICE

Grade B

Seven buildings, supply of more than 153,000

sm. Including:

PVI Tower

Diamond Flower Tower

Capital Garden

Diamond PVCI Building

Royal City

MD Complex Tower

Hei Tower

PVI Tower

Royal City office building


RETAIL The future, from traditional markets modern shopping centers

Hang Da Galleria - closed

Cua Nam Market – soft performance

Cho Mo Shopping Center – opening date

postponed serveral times

Will it be successful?


RETAIL Q2/2013 Review

Market performance

• Average rents declined q-o-q across shopping

centers and retail lobbies.

– Rents in CBD and non-CBD declined by 3.7 –

3.8% q-o-q.

– Rents in non-CBD declined sharply y-o-y (13.1%)

– CBD rents declined slightly (0.8%) y-o-y. Trang

Tien Plaza entered the market at high asking

rents.

• Occupancy declined 2.7% q-o-q. 1.8% y-o-y.

– Retail lobbies remained stable.

– Department stores highest decrease in

occupancy (-11% q-o-q), Parkson

Keangnam had a decline in sub let tenants.

Demand

• 62 stores opened while 60 stores closed in

shopping centers (compared to 121 stores

opened and 172 stores closed in Q1/2013)

Retail Ground Floor Rents

Retail Vacancy

-10%

0%

10%

20%

30%

2008 2009 2010 2011 2012 2013 Q2

CBD non-CBD

$0

$20

$40

$60

$80

$100

$120

2007 2008 2009 2010 2011 2012 2013 Q2

CBD non-CBD


RETAIL Market Outlook

Future supply anticipated

• 670,000 sqm from 10 near complete

projects.

Investment channel

• Amended ENT: Foreign invested enterprises

may be exempted from the economic needs

test (ENT) process when opening additional

retail outlets:

• Ocean Group continues expanding

investment in retail with Star City Centre

(180,000 sqm, under planning).

• Ministry of Industry & Trade’s planning up to

2020 requires Vietnam to develop 1,200 –

1,300 supermarkets (increased by 600

compared to 2011), 180 trade centers

increased by 82 compared to 2011) and 157

shopping centers.

0

200,000

400,000

600,000

800,000

1,000,000

2013f 2014f

Fitting-Out Under Construction Under Planning

Future supply

Star City – under planning


RETAIL Future projects

Parkson Landmark Shopping center (Tu Liem)

• Level 2,3,4 in Keangnam

• Total area: 5,500 sqm

Ocean Mall, Thang Long International Village

(Cau Giay)

• Total area: ~10,000 sqm

• Ocean mart occupies level1

Ho Guom Plaza Shopping center (Thanh Xuan)


• Tran Anh anchor tenant

• 60% commited, Tran Anh electronics and

supermarket

Ocean Mall, Trung Hoa Nhan Chinh (Cau Giay)

• Total area: ~18,000 sqm

• Expected opening: Q4/2013


RETAIL Future projects

Vincom Mega Mall, Royal City (Thanh Xuan)


• Expected opening time: Q3/2013

• 85% pre-committed

Vincom Mega Mall, Times City (Phase 1)

(Hai Ba Trung)


• Expected opening time: Q4/2013

• Retail space for lease

Warburg Pincus Consortium invested US$200

Million in Vincom Retail

Royal City Mega Mall

Times City Mega Mall

HOSPITALITY Hotel & Serviced Apartment


HOTEL Market Snapshot

Two new 4-star

hotels: Candeo

Hotel (72 rooms),

Hilton Garden Inn

Hanoi (86 rooms)

Hilton Garden Inn Hanoi


0

100

200

300

400

500

600

2009 2010 2011 2012 Q2/2013

HOTEL

Supply

• Current: 8,831 rooms, Hoan Kiem & Ba Dinh in

the main

• Supply up 2.8% y-o-y

• New projects: Hoan Kiem (Hilton) Ba Dinh

(Candeo)

Market Performance

• 4-star hotel ADR increased 0.17% q-o-q and 0.4%

y-o-y

• 5-star segment declined (Occupancy ↓0.19%,

ADR ↓4.4%, RevPar ↓0.8%, q-o-q)

Demand

• International overnight visitor, 1st 6 months 2013,

Hanoi: 929 000, up 21.5% compared with first 6

months 2012. Domestic visitors, up 12%.

Q2 Review

-8%

-6%

-4%

-2%

0%

2%

4%

5-star 4-star 3-star

Occupancy ADR RevPAR

Y-o-Y Changes by Grade (Q1/2013)

Visitor Arrivals to Hanoi (thousand)


HOTEL

Future Supply

• Q3/2013

– InterContinental Hanoi Landmark (359 rooms),

JW Marriot (450 rooms),

• End 2013 (existing and future supply)

– 9,840 rooms, up 13.5% y-o-y.

– 5 star hotels, market share 47%.

Outlook

0

2,000

4,000

6,000

8,000

10,000

12,000

1995 2000 2005 2010 2011 2012 2013 Q1 2013f

5-star 4-star 3-star

Historical Supply by Grade

Demand

• Tour costs are high compared to some cities in the region (US$200 for 4-day trip in

Cambodia, US$ 300 for a Hanoi – HCM two-way flight).

• Visa registration fee US$ 25/ person to US$ 45/ person (Cambodia US$ 20).

Investment Channel

• Over supply especially 5-star segment.

• Disinvesting: many hotels are offered for sale.


SERVICED APARTMENT Market Snapshot

New projects: Candeo Hotel (70 rooms), My Way Hotel & Residence

(62 rooms), Dolphin Plaza (70 rooms)

Candeo Hotel Hanoi Dolphin Plaza My Way Hotel


SERVICED APARTMENT

Occupancy

• International operator groups: 88%, down from 90%

• Self-managed group: 81%, up from 79%

Asking rents

• Decrease of 2.2% q-o-q (International operators)

• Decrease of 1.5% q-o-q (Self-managed projects)

Q2/2013

$0

$20

$40

$60

2007 2008 2009 2010 2011 2012 2013

International Operator Self-managed

Average

Average asking rents (US$/sqm/month)

Historical Vacancy & Supply

0

500

1,000

1,500

2,000

2,500

3,000

3,500

0%

5%

10%

15%

20%

25%

30%

2007 2008 2009 2010 2011 2012 2013

Supply Vacancy Rate (%)

10%

22%

25%

31%

4%

7%Hoan Kiem

Ba Dinh

Tay Ho

Cau Giay

Hai Ba Trung

Tu Liem

Me Linh

Supply by district, Q2/2013


SERVICED APARTMENT

Demand

• Volume of enquiries declined slightly, budgets

lower by ~9% q-o-q (US$1,500 - 2,000)

• Further company budget cuts expected.

• Enquiries: Japanese: CBD, Westlake, movement

to the west (lower grade). Relocations to the West

by many large companies.

Market outlook

• Upcoming serviced apartments:

– Elegant Tay Ho, 140 units (Q4/2013)

– Lotte Center Hanoi, 260 units (2014)

• Market trend: Buy to Let… Royal City, Hoang

Thành, Times City etc.

• Hotels consider converting part into serviced

apartments.

Demand & Outlook

Lotte Center Hanoi, 2014

T +844 2220 0220

F +844 2220 2010

CBRE QUARTERLY REPORT

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CBRE Vietnam – Research & Consulting – Hanoi Office

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MARKET INSIGHTS - CBRE Vietnam...6 MARKET INSIGHTS FROM CBRE’S HANOI QUARTERLY REPORT | Q2 2013,0...

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Transcript of MARKET INSIGHTS - CBRE Vietnam...6 MARKET INSIGHTS FROM CBRE’S HANOI QUARTERLY REPORT | Q2 2013,0...