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Dinh Vu

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Last updated: Tuesday, April 24, 2018


Hanoi Real Estate Market Overview in Q3

Posted: Monday, October 31, 2016

According to data from the General Statistics Office, by the end of August, 2016, total FDI into Vietnam was estimated at US$14.37 billion (including newly registered capital and adjusted capital), up 7.7 per cent the last year; the FDI disbursement was estimated at US$9.8 billion, up 8.9 per cent compared to the same period last year. The production and processing industry attracted the highest FDI, accounting for 68.7 per cent of total registered capital. The real estate ranked second with 8.8 per cent. Korea is the leading country with 39.2 per cent of the total new investment in Vietnam.

Industrial parks continue to be an attractive investment channel
No new industrial park entered the market in the third quarter of 2016. The overall occupancy rate of the market reached 72.5 per cent in the third quarter 2016. The average asking rents in the third quarter 2016 remained stable at VND2,476,000/m2 per lease term, equivalent to US$111/m2 per lease term. Nam Thang Long Industrial Zone has the highest rents at VND4,172,000VND/m2 per lease term (US$187/m2 per lease term).
According to the real estate company Cushman & Wakefield, up to 2020, there will be about 9 new IPs that get involved in the market, providing about 2,360 hectares, equivalent to 132 per cent of the current stock. Most of the industrial parks are in the planning stages.
Due to the impacts from the TPP and the free trade agreements that Vietnam has joined recently, along with stable economic conditions and favourable investment policy and low labour costs, Vietnam is expected to attract more manufacturers and foreign manufacturers to invest in Vietnam. With growing demand for industrial land, this segment will continue to be an attractive investment channel.
Reduced office rent
In the third quarter, 2016, the VP Bank Tower in Dong Da District, was added to the list of Grade B office space officially opening for leasing. Thus, Hanoi currently has 17 Grade A buildings and 68 Grade B buildings, providing around 400,950m2 office floor, of which 47 per cent are off downtown buildings, 34 per cent concentrated in the West and only 19 per cent located in the central area.
The office leasing situation of all segments remained stable but the occupancy rate of Grade A decreased by 3 percent while the occupancy rate of the Grade B was still 90 per cent, up 2 per cent over the same period in the last year. The average rent for two classes remained stable on a quarterly basis, but down by year. The average rent of Grade A decreased to VND631,000/m2/month, equivalent to US$28/m2/month, down 6 per cent compared with the same period last year; Meanwhile, the Grade B rents was about VND406,000/m2/month (US$18/m2/month), down 3 per cent compared to the same period last year.
According to the plan, in the fourth quarter there will be two new projects that provide more about 25,600 m2 office floor. In 2017, there will be 9 more projects with over 229,300 m2.
Apartments for rent: occupancy rate improved significantly
Hanoi currently has 13 projects with nearly 2,090 Grade A apartments and 18 Grade B projects with nearly 1,170 apartments. The urban areas account for 60 per cent of total supply, followed by the western districts with 31 per cent and only 9 per cent of the downtown area. The average occupancy rate of the Grade A has increased 2 points, reaching 87.7 per cent by quarter, and remained stable over the year while Grade B occupancy rate recorded at 88.3 per cent, down 2 points percent by quarter, but increased by 7 per cent yearly due to the downward adjustment of the rental price of some projects to help improve the occupancy rate.
Hoan Kiem district was recorded for highest occupancy rate, reaching 90 per cent. Meanwhile, the occupancy rate of the area outside the centre was about 88 per cent, of which two western districts were recorded for average occupancy rate of 83 per cent. The average asking rent of the two segments maintained stable over the quarter. The average rent of Grade A increased by 3 per cent per year, recorded at VND720,000/ m2/month, 54 per cent higher than the average rental rate class B at about VND468,000/m2/month, down 4 per cent per year.
From now until the end of the year, Hanoi has no more new projects. However, in the next 2 years, there will be about 1,000 apartments from 6 new projects entering the market and nearly half of them will be concentrated in the western region. This may impact rents and occupancy rates in the region. The real estate sectors continue to be promising due to the the Government's commitment to help Vietnam become an attractive destination for investment.
Retail market: A potential segment
The third quarter, 2016 marked a new entry of the retailer Long Bien Mipec Riverside, contributing to the total supply of retail floor area to 3.5 per cent per quarter and increasing nearly 23 per cent per year.
Thus, up to now, Hanoi has two department stores, 25 commercial centres and 24 retail podiums, providing nearly 914,770 m2 of retail floor for the market. More than 97 per cent of supply are concentrated in the suburban areas.
The occupancy rate was recorded at 88.5 per cent in the third quarter, 2016, up 4 per cent per year. While most of the retail centres in downtown are filled due to the limited supply in the prime locations. The average occupancy rate of the other area was recorded at 88.2 per cent. The average asking rents fell 4 per cent per quarter but up 2 per cent per year, recorded at VND856,000/m2/month or US$38.3/m2/month. The average asking rents in the downtown are kept stable by quarter and by year, recorded at approximately VND2,649,000VND/m2/month (US$118,7/m2/month), three times higher than the rents in the suburban areas.
In the fourth quarter 2016, there will be 3 major projects in operation, providing additional 118,960 m2 floor, 85 per cent of which come from two commercial centres Vincom Cau Giay and Vincom Dong Da. With its commitments to the WTO and the signing of FTAs, Vietnam will see more foreign retailers coming in Vietnam, leading to fierce competition between domestic and foreign retailers.
Apartments for sale: Selling prices continue to rise
In the third quarter 2016, Hanoi continued to witness the excitement of the condos sold, with nearly 7,700 apartments in both new projects and current projects in all segments. Primary supply in the third quarter 2016 increased by nearly 19,500 apartments, 45 per cent of which came from the Grade B and the Grade C. Notably, a number of new projects of the Grade A that entered the market accounts for 17 per cent of total primary supply of this quarter.
The market improved from the previous quarter but less exciting than the same period last year. Total turnover increased by 13 per cent per quarter but down 19 per cent per year. In particular, the Grade B apartment occupies 44 per cent of the total number of apartment transactions in the quarter, followed by the Grade C with 34 per cent. Tu Liem District has the highest transaction volume, representing 24 per cent of total trading volume in the quarter, followed by Ba Dinh District and Hoang Mai District with 15 per cent.
Apartment price of the Grade A and C are likely to increase, especially the Grade A increased by 5 per cent per quarter and 25 per cent per year (VND63.6 million/m2 equivalent to US$2.850/m2) and the Grade C kept stable with an increase of 21 per cent per year (US$19.2 million/m2 equivalent to US$859/m2). Selling prices increased mainly due to higher selling prices recorded since the launch of new projects. Meanwhile, the Grade B apartment price rose 4 per cent per quarter but down 5 per cent per year, recorded at VND30.8 million/m2 equivalent to US$1.379/m2.
The market is expected to remain positive in the near future, in terms of quantities of new projects and sales. The western region is expected to have the largest supply of apartments in 2016. The intermediate and advanced segments tend to recover and attract large numbers of investors.
Luong Tuan

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