HCMC – The Covid-19 outbreak, combined with licensing delays and the prolonged Tet holiday, reduced the launching of new supplies of housing in HCMC in the first quarter of this year, according to CBRE Vietnam.
Many projects postponed their launching events due to the government’s directive on social distancing, in an effort to curb the spread of the new coronavirus, which causes the Covid-19 disease.
The first quarter of 2020 recorded a new supply volume of 3,606 units from 11 projects, a drop of 21% q-o-q and 18% y-o-y.
The average selling price for the primary market is US$1,936 psm, up 2% q-o-q and 9% y-o-y. The price point in the mid-end segment for new supply of housing is 15-30% higher, in comparison with the level previously seen in surrounding areas.
New launches in the mid-end segment have witnessed price increases from developers, due to the limited supply and good booking (reservation) rates. Meanwhile, prices of luxury and high-end projects remain stable from the previous quarter, and higher than the same period last year, respectively, at 8% and 6%.
In the context of limited supply and rising prices, take-up remains positive, especially for the mid-end segment, and high sold rates reached 80-100% at projects that were built by reputable developers.
However, given the Covid-19 pandemic since mid-March and the social distancing measures, buying demand has dipped.
In the first quarter, 3,757 units were sold, a decrease of 32% q-o-q and 37% y-o-y. The market continues to absorb the remaining inventory from existing projects.
New supplies of housing are predicted to improve in the second half of 2020, and reach a total of 28,000 units – in the scenario in which the pandemic will be contained by the end of the second quarter this year.
“The longer it takes for the Covid-19 pandemic to be contained, the more it will impact the demand from end-users, investors and foreign buyers,” said Duong Thuy Dung, senior director of CBRE Vietnam.
With the suspension of all international flights, many foreign investors will not be able to invest in the Vietnamese property market during this difficult period. Buy-to-let investors are also being affected by flight and movement restrictions nationwide.
End-users will struggle to receive financing, as interest rates remain unstable and banks may apply a stricter credit approval process with proof of income and repayment methods, she said.
If the pandemic is contained by June, the average selling price is expected to increase 5% y-o-y, with mid-end and affordable segments forecast to have a modest growth rate of 1% to 3% y-o-y, due to a large competitive supply. Meanwhile, the high-end segment is expecting a price increase by 5% per year.
In scenario two, in which the pandemic is contained by September, there would be a significant drop in new supplies of housing at 40% y-o-y, with around 15,000 units launched in 2020. The decline in supply will mainly concentrate in high-end and luxury segments.
The primary selling price is forecast to drop 6% y-o-y, as the majority of the supply will be in the mid-end segment. Transaction volume under this scenario will plummet, due to the Government’s restrictions on meetings and gatherings in public places.
With this scenario, CBRE forecast that there would be some 13,575 units sold in 2020, down 55% y-o-y.