market insights from cbre’s hcmc quarterly report …...presented by: cb richard ellis (vietnam)...

Presented by:

CB Richard Ellis (Vietnam) Co., Ltd.

28th June 2012

Market Insights from CBRE’s

HCMC Quarterly Report Q2/2012

Adam Bury

Associate Director

Dung Duong

Manager

2 CBRE RESEARCH & CONSULTING MARKET INSIGHTS FROM CBRE’s HCMC QUARTERLY REPORT | JUNE 2012

OPENING WORDS

HCMC Real Estate – walking the fine

line between success and failure.

June 15, 2012 - Nik Wallenda becomes the first person to tightrope walk across the famous Niagara Falls in over a century


VIETNAM ECONOMIC OVERVIEW

Q 2 / 2 0 1 2 P E R F O R M A N C E

Source: General Statistics Office

Q1/2012 5M/2012

GDP (% y-o-y) 4% 4.3% (Estimated 1H/2012)

CPI (% y-o-y, e-o-p) 14.1% 8.3% (6.9% for June)

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

Export (US$ Bn) 24.52 (23.6% y-o-y) 42.9 (24.1% y-o-y)

Import (US$ Bn) 24.77 (6.9% y-o-y) 43.5 (6.6% y-o-y)

FDI Implemented (US$ Bn) 2.5 (-0.8% y-o-y) 4.5 (-0.2% y-o-y)

International Arrivals (million arrivals) 1.9 (24.5% y-o-y) 2.9 (17.5 % y-o-y)

Retail and Services Turnover (trillion dong) 569.7 (21.8% y-o-y) 952.2 (20.8% y-o-y)

CPI, VN (% y-o-y))

CPI, VN (% m-o-m)

Refinancing rate (%)

Rediscounting rate (%)

00

01

01

02

02

03

03

04

0

5

10

15

20

25

Sep-10 Nov-10 Jan-11 Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12 May-12

CPI (%

m-o-m

)

CPI

(% y

-o-y

) /

Inte

rest

rate

s (%

)

Monetary controls took effect

Monetary controls

on interest rates

Inflation surged


Inflation continuing to trend down and crucially is

now in single digit territory (6.9% y-o-y in June).

Petroleum prices adjusted down 3 times in

May/June (-8%), reducing supply chain

pressures.

• Dampened demand coupled with dropping

petroleum prices supporting inflation controls .

• Gold prices soften as interest rates and

inflation decrease, increase in trading value on

the stock market .


I N F L A T I O N

Petroleum Price Adjustments

Stock Index and Inflation

0

500

1,000

1,500

2,000

2,500

3,000

300

350

400

450

500

550Tra

din

g V

alu

e (Billions

VN

D)

VN

Index

Trading value VNIndex 2011 VNIndex 1H/2012

0

5

10

15

20

25

200.00

300.00

400.00

500.00

600.00

700.00

Feb-09 May-09 Aug-09 Nov-09 Feb-10 May-10 Aug-10 Nov-10 Feb-11 May-11 Aug-11 Nov-11 Feb-12 May-12

CPI (%

y-o-y)

VN

Index

VNIndex CPI

Time A95 A92 Chg Pct. Chg

29-Mar-12 23,400 22,900 2,100 10.10%

20-Apr-12 24,300 23,800 900 3.93%

9-May-12 23,800 23,300 (500) -2.10%

23-May-12 23,200 22,700 (600) -2.58%

7-Jun-12 22,400 21,900 (800) -3.52%


Base rate unchanged, while rediscounting rate and refinancing rate decreased 1% each

month in the second quarter of 2012, resulting in a 9% rediscounting rate and 11%

refinancing rate in June.

Deposit cap rate adjusted 3 times from 13% in March (12% in April, 11% in May) to 9% in

June (for terms of less than a year).

• Removal of the cap rate for terms of over a year, in an attempt to ensure banks have

enough long term capital.

• The deposit rate for 12-month term is currently observed to range from 10% - 12% at

commercial banks.

Low inflation rate should keep real rate positive => continue attract capital inflows

• Vietnam’s BoP, as well as the dong will still be supported

More stable USD/VND exchange rate, strict controls on USD/gold trading remain.


M O N E T A R Y C O N T R O L S

0

2

4

6

8

10

12

14

16

Jun-06 Dec-06 Jun-07 Dec-07 Jun-08 Dec-08 Jun-09 Dec-09 Jun-10 Dec-10 Jun-11 Dec-11 Jun-12

SB

V I

nte

rest

Rate

s (%

)

Base rate

Refinancing rate

Rediscounting rate


Imports growth finds a new

bottom (6.6% y-o-y)

• Dampening demand slowing

imports;

• Exports growing; 24.1% y-o-y;

• Trade deficit decreased 90.6%

y-o-y (US$622 million in the first

five months)

S&P revised the outlook on

Vietnam to stable from negative

and affirmed the “BB-” long term

and “B” short term sovereign

credit ratings;


B U S I N E S S E N V I R O N M E N T

Vietnam Trade Deficit Index, Jan 10=100

Source: Vietnamese General Statistics Office

0

50

100

150

200

250

2010 2011 2012

Exports Imports

Vietnam Trade Deficit (US$ Billions)

Source: Vietnamese General Statistics Office

-15

-10

-5

0

5

Jan Mar May Jul Sep Nov

2010 2011 2012


RESIDENTIAL FOR SALE

C O N D O M I N I U M F O R S A L E

Q 2 / 2 0 1 2 S N A P S H O T

All prices are quoted exclusive of VAT and service charges.

•“Existing supply”: is the total number of units that have been handed over for occupation.

•“New completion”: the total number of units that were handed over for occupation in the review quarter – these are added to existing supply.

•“New launch”: the number of units that were released to the market by developers (official start of sales for a project) in the review quarter.

All units in each development are included in the calculations, however, the developer may divide sales into numerous phases and thus not

all units may come online at launch date.

Source: CBRE Vietnam

LUXURY HIGH-END MID-END AFFORDABLE TOTAL

Total supply (units) 504 16,350 13,681 16,489 47,024

New completion (units) 0 802 275 1,414 2,491

New launch (units) 0 0 354 0 354

Secondary market - Average asking price (US$ psm) $3,963 $1,745 $892 $706

Q-o-q change (%) 0.1% -1.0% -1.1% -0.9%

Y-o-y change (%) -8.3% -5.7% -6.1% -2.8%


Positive signals are coming from the key economic

indicators sentiment within the market is slowly

improving;

Sales figures have not increased notably, but an

increase in enquiries and sales event attendees has

been recorded;

Developers still attempting to revive the market by

offering incentives:

• Extending payment schedules has become one

of the most popular options;

• ~30% payment upfront, the rest payable within 6 to

24 months with 0% or low interest rates;

• More options with regards to hand-over conditions:

bare house or completed apartment for example at

Tropic Garden in Dist. 2 and BCCI apartments in

Binh Tan Dist.;

• Some under-planning projects started construction,

e.g. The One, by Bitexco;

• Changing project names to “bring new fresh air” to

the project: Vo Dinh Apartment Cherry 2

Apartment, Sping Life PARCSpring



Key Findings

The One – District 1

Payment schedule at The Eastern:

1st installment:: 35% of home value: S&P signed;;

2nd installment: 60% of home value: hand-over;

3rd installment: 5% house ownership certificate




New launches: Mid-end: PARCSpring – District 2: ~VND22 million psm;

Other launches are in projects which previously had their initial launch;

Up to Q2/2012: ~94,000 units, affordable: ~40% of the supply

Supply: Launch

Supply: Completion

Completions: almost double that in Q1/2012; including Phu Hoang

Anh, Ngoc Lan, Lan Phuong MHBR, et,;

Affordable: 56.8% of completed units or 1,414 units >< Luxury: 0%

High-end: 32.2%;

Mid-end: 11.0%;

Up to Q2/2012: ~47,000 units completed, affordable: ~40%

Asking Prices

Primary market: asking price unchanged on the q-o-q basis but interest rate subsided, discounting remained and interior

furniture was sometimes offered;

Prices of new launches in the upper-tier segments have seemed to be slightly lower than that of one year ago;

Secondary market:

• Q-o-q basis: slight price decreases in affordable to high-end sector. Luxury almost unchanged given the limited supply;

• Y-o-y basis: stronger decrease across all segments as some short-term speculators want to exit their assets: 2.8%-8%;

PARCSpring – District 2

Units Completed in Q2/2012 (% by Segment)

32.2%

11.0%

56.8%

High-end Mid-end Affordable



L A N D E D P R O P E R T Y

Q 2 / 2 0 1 2 S N A P S H O T

All prices are quoted exclusive of VAT and service charges.

•“Existing supply”: is the total number of units that have been handed over.

•“New completion”: the total number of units that were handed over for occupation in the review quarter – these are added to existing supply.

•“New launch”: the number of units that were released to the market by developers (official start of sales for a project) in the review quarter.

All units in each development are included in the calculations, however, the developer may divide sales into numerous phases.


DISTRICT 7 - PRIME

DISTRICT 2NHA BE DISTRICT DISTRICT 9

OTHER

DISTRICTSTOTAL

New completion (units) 0 0 96 0 96

Total supply (units) 1,273 103 477 547 2,304

New launch (units) 62 0 0 0 62

Total launch (units) 1,278 149 625 455 2,507

Secondary market –

Average asking price (US$ psm)$3,515 $2,539 $1,503 $1,445

Q-o-q change (%) -3% -2% -6% -5%

Y-o-y change (%) -27% -9% -11% -12%

Secondary market –

Average asking price (US$/Unit)$837,487 $647,500 $365,810 $410,506


The market has warmed very slightly from the first

quarter, more units launched and completed;

As with condo market, transactions remain few:

New completions: 96 villas against 0 villas in

Q1/2012:

• Riviera Cove – District 9: 96 units;

New launches: 62 units against 0 units in Q1/2012:

2 sections of Chateau villa project – District 7:

• S8: 23 villas + 24 townhouse;

• S16: 15 villas;

Noted market trend – a shift to land plots on the

periphery of HCMC or in neighbouring provinces;

RESIDENTIAL FOR SALES

L AN D E D P R O P E R T Y

Key Findings

Villa, Units Launched and Units Completed


0

200

400

600

800

1,000

2004 2005 2006 2007 2008 2009 2010 2011 2012

YTD

Launched Completed


0%

5%

10%

15%

20%

25%

30%

0

1000

2000

3000

4000

5000

6000

7000

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

2008 2009 2010 2011 2012 2013

CP

I, Inte

rest

Rate

s

So

ld U

nits

Sold Units by Quarter HCMC Average CPI Base Interest Rate Rediscounting Rate Ref inacing Rate

Residential markets will not turn over night;

The previous inflationary cycle indicates that there was a six

month lag between inflation and interest rates dropping

below 10% and the residential market rebounding;

In addition to the above it is noted that GDP growth rate for

2012, although down, will be above that for 2009 and that

overseas remittances have come into the country during

the downturn;


A n E ye t o t h e F u t u r e

Six Month Lag Same again?

?

2008 2009 2010 2011p 2012f

Overseas

Remittance

(US$

Billions)

7.2 6.3 8.5 9.0

Real GDP

Growth

Rate

(% y-o-y)

6.3% 5.3% 6.8% 5.9% 5.5%

Source: CBRE Vietnam, HCMC Statistics Office, SBV


OFFICE

Q 2 / 2 0 1 2 S N A P S H O T

* All rents are quoted on GFA, exclusive of VAT and service charges.


GRADE A GRADE B GRADE C TOTAL

Number of buildings 9 47 244 300

GFA (sm) 304,380 805,682 826,951 1,937,013

Vacancy rate (%) 16.8% 13.1% 16.0%

Q-o-q change (pts) -2.1 pts -1.8 pts -3.6 pts

Y-o-y change (pts) -17.4 pts -3.2 pts -6.6 pts

Average asking rent (US$ psm per month) $30.79 $17.06 $20.89

Q-o-q change (%) -1.9% -3.3% -2.7%

Y-o-y change (%) -10.0% -8.8% -10.8%


Rents continued their long, downward trend.

Grade A rents decreased, but less than in Q1,

whilst Grade B rental declines have accelerated

over the last three quarters.

Grade A absorption down as the 7 mature

buildings remain almost full, and less take up at

BFT / Vincom compared to Q1.

Both Grade A & B absorption was notably down

and the two sectors combined contributed just

over 15,000 sm of net absorption in the second

quarter compared to almost 30,000 sm in the

first.

Delays in some projects (Saigon One, Le

Meridien), but some still moving forward and

towards completion (Times Square, President

Place).

No new supply in Grade A and B – four Grade

C buildings added 12,330 sm GFA to the

market.

OFFICE

H I G H L I G H T S

Vacancy (%)Grade A

Grade B

0%

10%

20%

30%

40%

2007 2008 2009 2010 2011 2012

Asking Rents (US$ psm per month)Grade A

Grade B

$0

$20

$40

$60

$80

2007 2008 2009 2010 2011 2012


Grade A future supply facing delays, but reasonable supply still available in BFT and

Vincom.

BFT and Vincom still affecting vacancy, absorption slowed in Q2, but rents remained stabile.

Grade A rents will it a short term bottom, not necessarily due to supply and demand, but new

Grade A supply which may achieve higher than market rents and pull up the average.

Grade B supply is moving ahead, 3 buildings expected to come online before the year end.

OFFICE

O U T L O O K

Saigon One – Grade A Viet Thuan Thanh and DB Tower – Grade B

Maseco Building – Grade C

BFT & VC rent vs Grade A net absorptionAbsorption

Rent

20

25

30

35

40

-

5,000

10,000

15,000

20,000

Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2

2009 2010 2011 2012

(US$

)

(sm

)

HMTC Building – Grade B


RETAIL

Q 2 / 2 0 1 2 S N A P S H O T

All rents are quoted on NLA, average rents on the ground and 1st floor, exclusive of VAT and service charges


DEPARTMENT STORES SHOPPING CENTRES TOTAL

Total supply (GFA, sm) 115,820 377,650 493,470

Vacancy rate (%) 0.2% 20.2% 15.5%

CBD average asking rents (US$ psm per month) $103.06 $109.15

Q-o-q change (%) -5.8% -2.6%

Y-o-y change (%) 0.0% -12.7%

Non-CBD average asking rents (US$ psm per month) $48.69 $29.93

Q-o-q change (%) -0.5% -3.8%

Y-o-y change (%) -2.6% -14.6%


Vietnam’s Ranking in A.T Kearney

Retail Survey

•2008: No. 1

•2009: No. 6

•2010: No. 14

•2011: No. 23

•2012: Not included on the list

THE GLOBAL RETAIL DEVELOPMENT INDEX

W I N D O W - O F - O P P O R T U N I T Y

a n a l ys i s

Source: A.T Kearney Analysis

CBRE’s ranking:

• #3 for new market entries, tied

with Ukraine

• #55 Vietnam is the fifty-fifth

most attractive country, up four

places from 2011

• #146 HCMC the one hundred

forty-sixth most attractive city, up

12 places from 2011


Removing restrictions on 100% foreign ownership;

More international retailers joined the market and achieved success:

• Big C (17 outlets), METRO (17 outlets) Lotte (2 outlets), and

Giant opening the first outlet in Crescent Mall in late 2011,

FairPrice and AOEN introducing their representative offices in

Vietnam;

Vietnam ranked third, (behind Kazakhstan and Russia, and level

with the Ukraine) for new retailer entrants in 2011. In total 9 new

brands entered the market. (Source: CBRE Global Research and

Consulting, How Global is the Business of Retail?)

Domestic retailers were expanding rapidly such as Saigon Co.op

with more than 55 supermarkets & many convenience stores –

Co.op Food;

Increasing brand awareness and thus demand for better quality

clothing such as Mango, Axara, G2000, Esprit, NineWest, Fcuk,

Gap, NafNaf, amongst others;

Increasing modern retail space from 100,000 sm GFA in 2005 to

485,000 sm GFA in 2011 (excl. supermarket, hypermarket and

convenience stores)

RETAIL REVIEW

M A R K E T A C H I E V E M E N T S

Global Retail Development Index


0

5

10

15

20

25

30

2004 2005 2006 2007 2008 2009 2010 2011 2012

Vietnam India China


Regional Comparisions

GRDI Thailand Indonesia Malaysia Phillipines Vietnam

2008 24 15 13 26 1

2009 26 22 10 25 6

2010 - 16 17 22 14

2011 - 16 21 18 23

2012 - 16 11 29 -

ENT remains an unclear challenge to foreign

retailers;

Unstable economy, most specifically interms of

GDP growth rate and inflation after the economic

crisis;

Modern retailing well represented in HCMC and

Hanoi but very little in second tier cities such as

Hai Phong, Da Nang, Nha Trang and Can Tho;

The QUANTITY of modern retail space increases

regularly but not yet the QUALITY;

Poor distribution/logistics infrastructure, which

is important to a company for deciding where to

locate an investment, build a factory, or establish

an outlet;;

Expensive retail space for example at prime

locations in HCMC, the rents usually are from

US$100 to US$300 psm per month;

RETAIL OUTLOOK

I S S U E S S T I L L T O B E S O L V E D

Vietnam, Global Retail Development Index


0

5

10

15

20

25

30

2004 2005 2006 2007 2008 2009 2010 2011 2012


GRADE A GRADE B GRADE C TOTAL

Total supply (units) 782 2,100 1,056 3,938

New supply (units) 0 0 19 19

Vacancy rate (%) 17.3% 21.0%

Q-o-q change (pts) 4.4 pp 3.7 pp

Y-o-y change (pts) 9.0 pp 6.3 pp

Average asking rents (US$ psm per month) $33.84 $25.10

Q-o-q change (%) -0.9% -2.7%

Y-o-y change (%) -10.2% -9.9%

SERVICED APARTMENTS

Q 2 / 2 0 1 2 S N A P S H O T

Note: All rents are quoted on NLA and inclusive of VAT and service charges.



New Supply: The Waterfront Residences (19 units, District 2).

Reported over 60% occupancy at quarter -end demand for

expat leasing in Thao Dien remains.

Otherwise, a slow quarter with vacancy up and rents down.

PRICING IS KEY!

• The Grade A segment saw a large increase in vacancy, up

4.4 percentage points q-o-q as compared to the q-o-q

increase of 3.7 percentage points seen in Grade B vacancy

the more affordable the rents, the quicker the units will be

absorbed.

• Grade B rents reached the lowest level

(US$25.10/sm/month) since the GFC outbreak, even lower

than the bottom seen in Q3/2011 fierce competition with

the buy-to-let substitutes.

SERVICED APARTMENTS

Q 2 A S L O W Q U A R T E R

Total Supply (sm)

Asking Rents (US$ psm per month)

Grade A

Grade B

Grade A

Grade B

0

2,000

4,000

6,000

8,000

08 09 10 11 12f 13f 14f 15f

$15

$20

$25

$30

$35

$40

$45

2007 2008 2009 2010 2011 2012


To subscribe, p lease contact…

Q 2 / 2 0 1 2 r e l e a s e d

F r i d a y , J u l y 2 0 , 2 0 1 2

© 2012 CB Richard Ellis (Vietnam) Co., Ltd. This report has been prepared in good faith and with due care by CB Richard Ellis (Vietnam) Co., Ltd. We obtained some of the information above from sources we believe to be reliable. However, we have not verified the accuracy of the information which we obtained from other sources and make no guarantee, warranty or representation about it. We include projections, opinions, assumptions or estimates which are made with careful consideration of factors known to us for example only, and they may not represent current or future performance of the market. This information is designed exclusively for use by CB Richard Ellis clients, and cannot be reproduced without prior written permission of CB Richard Ellis.

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market insights from cbre’s hcmc quarterly report …...presented by: cb richard ellis (vietnam)...

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