Positive Outlook As Absorption Increases
By Dinh Dung
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| A&B building in HCM City managed by CBRE |
According to the just released CBRE Quarterly Report, after the lackluster first quarter, the local property market was back on the fast track of recovery in the second quarter given positive economic signals. The market will continue to move forward as absorption in all sectors has grown recently.
The Central Steering Committee for Housing Policy and Real Estate Market has released a report which says the local property market has improved with investment capital flowing into the market strongly regardless of the global economic downturn. Earlier this year, outstanding loans for the property segment reached nearly VND219 trillion, a 36% jump compared with the same period last year. Foreign direct investment (FDI) pouring into the property segment registered at US$7.6 billion, accounting for one third of total FDI the country attracted.
“Vietnam has emerged from the global financial crisis with a renewed appetite and vigor for economic growth and diversification, though there may still be some shaking moments ahead in the global economy,” Marc Townsend, managing director of CB Richard Ellis Vietnam (CBRE), said in a quarterly report released last week.
Townsend said continued economic growth in the second quarter indicated a positive outlook for the local real estate market, which anticipates fast pace in the residential, retail and office building sectors with take-up in those sectors increasing significantly.
According to CBRE, the office market in HCM City, across all grades, saw an increase in gross floor space of 9.6% during the second quarter. The increase in office space was a reflection of nine new buildings coming onto the market which provided some 124,600 additional square meters. The most significant of these buildings was Vincom Center, which offers 75,900 square meters of space, making it the largest office building in HCM City. The addition has resulted in a 32% increase in Grade A vacancy; even when Vincom Center is left out of the analysis, it is apparent that vacancy within the Grade A market increased to 17% at the end of the second quarter. In contrast, the Grade B market saw the vacancy rate decrease to around 10% despite the addition of two new buildings which provided 25,600 square meters of gross floor area.
Although there is a space surplus in the market, and some new big players down there in the city are fighting to get tenants, the whole market is drawing a positive picture as absorption continues to be strong and improves on the amount seen in the first quarter.
The market research and consultancy firm highlights that the market recorded some 72,700 square meters of absorption in the second quarter of this year. Therefore, the absorption for the first half of 2010 stood at 130,700 square meters, approximately reaching the 154,460 square meters in 2009.
Rental rate for Grade A buildings decreased to US$37.5 per square meter, from US$39.60 in the first quarter. The increase in space and the decrease in rental prices were reflected in the Grade B office market which saw the rental rate decrease to US$19.3 per square meter per month.
“It was inevitable that with a significant amount of space coming on stream, particularly in the Grade A market, we would see a softening of rental rates,” Townsend said. “Of greater interest is perhaps the increase in the absorption that we have seen, with it being almost entirely inevitable that the 2010 absorption will outstrip that seen in 2009, which emphasizes the fundamental strength of HCM City’s economy and the long term prospects for the office market.”
In the residential segment, the CBRE Reseach & Consultancy Services Department says enquiries for purchases increased by approximately 25% in the second quarter, and the market saw an increased confidence that Vietnam has shaken off the ill-effects of the global financial crisis.
The period saw 17 projects launched to the market for the first time, with the affordable sector accounting for over half of these. Given the move towards the affordable and mid-end sectors, it is now apparent that condominium developers are becoming more geographically diverse than ever before. It is hoped that this diversity and maturity will help to achieve a sustainable residential market as it provides Vietnamese nationals with the opportunity to climb the housing ladder.
CBRE says the residential market has become increasingly competitive for developers in the past 12 months and they thus have looked at alternative options for profit generation. Through diversification of products, developers have given momentum to the market and offered potential buyers a greater range of options.
“Buyers have responded to this more mature market with enthusiasm, with enquiries and prices rising, showing slight increases,” Townsend said, “While significant supplies are coming to the market, we don’t see demand falling and thus we expect the market to remain stable in the foreseeable future.”