Q2 Hanoi Property Market: Investor Confidence Strengthened

3:09:23 PM | 18/8/2017

Hanoi real estate market was more volatile in many segments in the second quarter of 2017. Most segments picked up from the past quarter, which was seen as a positive signal for the market in the coming time. Vietnam Business Forum would like to excerpt property segments in the second quarter of 2017

Offices rise, retail spaces fall

In the second quarter of 2017, Grade A and Grade B rental rates saw minor accelerations, with an increase of 2 per cent in Grade A and a marginal rise of 0.5 per cent in Grade B, reaching US$28.8 per square metre a month and US$18 per square metre a month, respectively. Grade A’s occupancy rate grew up by 2 percentage points quarter on quarter to achieve 84 per cent in the review quarter, while occupancy rate of Grade B experienced a slight drop of 1 percentage point quarter on quarter due to additional new supply, staying at 77.2 per cent.

The second quarter of the year welcomed one new Grade B building coming to the market, HUD Tower. The introduction of HUD Tower brought to the market an extra 24,000 square metres net lettable area. No new Grade A building was completed in the review quarter.

According to Colliers International Vietnam, Vietnam is now ranked 82nd globally in the World Bank’s Doing Business Index for 2017, an improvement of 9 places compared to 2016. The country scored well on dealing with construction permits, getting credit and registering property in particular. This bodes well for encouraging the construction activities, establishment of new enterprises and demand for further office space in the country, especially in key economic hubs such as Hanoi and Ho Chi Minh City.

In the second quarter, the average net asking rents across all segments slightly dropped by one per cent quarter on quarter, staying at US$32.7 per square metre a month. While retail podiums recorded a rental growth of 11 per cent quarter on quarter, reaching US$26.5 square metre a month, department stores remained their rates at US$34.9 per square metre a month and shopping malls marginally reduced their rents to US$33.7 per square metre a month.

The average occupancy rate was stable at 83 per cent. Among the three segments, retail podiums achieved the highest occupancy rate of 94 per cent, up three percentage points compared to the previous quarter. Shopping malls maintained their occupied rate at 80 per cent while department stores experienced a drop of four percentage points quarter on quarter in occupancy rate, fluctuating at 90 per cent.

In the second quarter of 2017, Thanh Xuan District recorded a significant growth in the supply stock with two new retail centres, providing approximately 33,400 square metres net lettable area. Located in a prime location with three street frontages, the 6-storey Artemis shopping center has been occupied by large anchor tenants such as BigC, CGV, Tran Anh Electronics Supermarket and Games Funny City. In addition, the food court with more than 4,000 square metres is leased by popular F&B retailers such as Thai Express, Lotteria, Wrap&Roll, Dairy Queen, King BBQ and Swensen’s. Hanoi Centre Point is a 7-storey mall which provides retail facilities for its internal residents as well as those in the neighbourhood. 

While the market is still dominated by fashion and cosmetics tenants, entertainment services have been growing and accounted for a large proportion of leased area. In addition, foods and beverages services have become more popular and contribute to high footfalls of newly-launched retail developments. It is estimated that 16 projects will join the market in the next three years, providing approximately 825,000 square metres.

Affordable apartment supply looks up, villa prices pick up

The second quarter of 2017 recorded more than 4,000 successful transactions across all segments. Although the number of sold units dropped 20 per cent quarter on quarter, the buyer sentiment is still positive in the midst of concerns about oversupply.

Approximately 8,000 units were launched in this quarter, down 15 per cent quarter on quarter, with above half falling into the midmarket segment. Hanoi continued to witness decentralised trend in locations with large greenfield sites and upgraded infrastructure.

It is anticipated that the affordable housing will have strong supply in upcoming years as major developers such as Vingroup, N.H.O, Muong Thanh are penetrating this market segment. This is a positive movement which can fill the existing gap between strong end-users’ demand and limited supply.

The primary townhouse sales reached a high record of more than 1,000 successful transactions in the quarter. While the primary sale price marginally increased by 0.1 per cent quarter on quarter, the secondary price had a stronger growth of 2 per cent. The new supply was limited in the review quarter with more than 300 dwellings from 4 projects, representing a drop of 68 per cent compared to the previous quarter. Newly launched projects are of small scale and mostly located in the West and East of the capital city.

The western region of Hanoi has been dynamic with a variety of projects implemented by prestigious developers like Nam Cuong, Vingroup, FLC, Bitexco, Capital Land. Furthermore, along with the market resilience, western area’s infrastructure was basically completed with key roads such as To Huu, Road 70, Van Phuc, Le Trong Tan, helping to push up the real estate market in Hanoi and boding well for this area. While end-users are the main target customers for the condominium projects, investors are the most potential buyers of villa and townhouse products. In addition, due to the fact that the price hike of apartments has led to less profit making opportunity, villa and townhouse segment has become the best alternative investment channel for affluent class.

Villa and townhouse segment in Hanoi is expected to have a positive outlook with conditions enhanced by a combination of increased investor sentiment, developments in international trade and significant government infrastructure investment. It is also forecasted that price of townhouse will grow with faster speed than that of villa due to limited pipeline and possibility of making high profit. 

Luong Tuan