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Limited apartment supply continues as approval process lengthens: JLL
By Pham Nhat
Thursday,  Jan 9, 2020,09:41 (GMT+7)

Limited apartment supply continues as approval process lengthens: JLL

By Pham Nhat

An apartment building in downtown HCMC – PHOTO: THANH HOA

HCMC – The apartment market in HCMC saw sustained demand in the fourth quarter of 2019, but its sales only halved those in the same period of 2018, largely due to limited supply caused by ongoing restrictions to approval procedures.

The real estate consultancy Jones Lang LaSalle (JLL) Vietnam said in its latest property market brief that for all of 2019, citywide apartment sales totaled more than 30,000 units, albeit 35% lower than the peak year of 2017, still five to six times more than the 2012-2013 downturn period.

JLL Vietnam stated that mid-end apartment projects with a launch price of US$1,200-US$1,700 per square meter remained the top performers, accounting for 70% of units sold last year as they were situated in prime locations and offered a wide range of amenities but still had plenty of room for price increases, which was attractive to both owner-occupiers and investors.

After an exceptional quarter with more than 10,000 units from the Rainbow phase of the Vinhomes Grand Park project being launched, the market returned to quiet mode with only 3,600 units officially launched in quarter four, a result of the prolonged approval process.

For the whole of 2019, official launches totaled nearly 30,000 units, which was 20% lower than 2018’s number and 30% below the peak year of 2017.

In the fourth quarter last year, the average price reached a record high of roughly US$2,900 per square meter, up 78.2% year-on-year and 39.8% quarter-on-quarter.

JLL Vietnam pointed out the improvement in price was mostly driven by the majority of low-priced projects being sold out, leaving the basket filled with projects listed at higher-than-average prices.

The second reason was that developers whose projects were launched in the quarter had more confidence in pricing, given the tight supply.

Some 30,000-35,000 units are expected to be launched officially this year, mainly contributed by the Vinhomes Grand Park project.

The real estate consultancy noted that the number of apartments is subject to a great deal of uncertainty, given the central Government’s tight control in granting land use rights and construction licenses.

“Strong demand is set to carry on and will boost the price further across all sectors,” said the firm.

However, demand in the high-end segment, especially from investors, is likely to slow down over the long term as the already high prices and low rental yield make it a less attractive investment, according to JLL Vietnam.

International retailers continue to enter HCMC

International retailers were found to have successfully penetrated the local retail market, while those already present continued to expand their presence in the fourth quarter of 2019, according to the real estate consultancy.

The Japanese global apparel retailer Uniqlo opened its flagship store, covering more than 3,000 square meters over three floors, in the commercial center Parkson Dong Khoi in District 1.

The market also witnessed the withdrawal of the VinPro brand owned by the country’s largest private firm, Vingroup, putting a strain on the occupancy rate of the Vincom chain.

While department store closures continued in the market, existing malls saw an increase in the vacancy rate as tenants relocated to new malls nearby, which had better quality, facilities and programs to attract buyers and visitors. Therefore, the overall vacancy rate rose in the quarter.

Meanwhile, the second phase of the Crescent Mall, spanning 16,000 square meters, opened in District 7 in the quarter. The new phase focused on mid-to-high end brands and recorded a high occupancy rate of up to 90%.

The majority of malls in District 1 saw rents increase marginally both year-on-year and quarter-on-quarter, supported by their locations.

Still, rent in the rest of the city edged down slightly as the submarket was filled with old malls whose leasing activities were not so strong, as a result of competition from new malls with better quality and management services. The overall effect was a yearly decline of 3.2% in rent.

In 2020, some shopping malls in the city’s non-central business district area will enter the market, such as Satra Centre Mall, Socar Mall, Elite Mall and Central Premium Mall, taking up more than 280,000 square meters of space.

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