Vietnam ResidentialAsian Cities - 1H 2021

Retail sales in Beijing were up 4.4% year-on-year to RMB539.8 billion in 1H 2018

SPOTLIGHT

Savills Research

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Vietnam Residential

Viet Nam is now among the top world growth markets for branded residences

ECONOMY The positive economic outlook suggests bright prospects for branded residences. Against other major Asian economies in 2020, Viet Nam led with GDP growth of nearly 3%. This strong performance during the pandemic is complemented by growth forecasts of 7% per annum over the next fi ve years, according to the Ministry of Planning & Investment.

GRAPH 1: Viet Nam Branded Residences, 2017 to Q1/2021

Source Savills Research & Consultancy

0

5

10

15

20

25

30

0

500

1,000

1,500

2,000

2,500

2017 2018 2019 2020 Q1/2021

Supply (LHS) Projects (RHS)

NO

. OF

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ITS

NO

. OF

PR

OJE

CT

S

GRAPH 2: Supply By Province, Q1/2021

Source Savills Research & Consultancy

Kien Giang49%

Da Nang16%

Quang Nam9%

Quang Ninh9%

Khanh Hoa7%

Ha Noi4%

Thua Thien Hue4%

Ba Ria Vung Tau2%

In 2020, remittances of US$15.7 billion ranked Viet Nam as the ninth largest globally. Over the last fi ve years between 16% and 20% of these were invested in real estate.

Branded residence investment became more appealing after moves to ease mortgage rates, raising the prospects of higher capital fl ows into real estate.

SUPPLYBranded residences resonate with the buying public regardless of how COVID-19 aff ected real estate in 2020. In terms of market size, recent Savills Global Research found Viet Nam is now among the 10 fastest world growth markets.

From 2017, stock in Viet Nam has risen by 11% per annum on average to over 2,200 units from 24 projects, by Q1/2021. Completed branded residences in Viet Nam are to be found in major tourism cities and provinces such as Kien Giang, Da Nang, Quang Nam, Quang Ninh and Khanh Hoa. Most are high-end villas on land of up to 2,500 sq m on the beach, or with sea views and private pools.

Branded residences have mostly been supplied by local developers including Sun Group with a 39% share, followed by BIM Group with a 9% share of the market.

In terms of operator, Accor leads with over 1,200 units from nine projects or 56% of completed supply, followed by Wyndham with 245 units from two projects or 11% while IHG, Furama and Radisson Blue accounted for 6% each.

PERFORMANCELimited new supply has seen absorption of 88% in Q1/2021. Land prices range from US$1,000 per sq m to over US$7,700 per sq m with the highest from the InterContinental Ha Long in Quang Ninh. Asking prices are US$500,000 to US$7,000,000 with the highest from Regent Villas, and Resort Phu Quoc in Kien Giang Province.

Kien Giang had a 54% share of sales and the highest absorption rate of 86%. Phu Quoc is one of the fastest growing destinations in the country, with arrivals growth of 54% per annum from 2015 to 2019.

Da Nang with 16% had the second highest share of sales with absorption of 79% in Q1. Da Nang pioneered branded products over ten years ago and early policies supporting resort development included priority infrastructure investment projects, promoting destinations and regional cooperation.

There have been examples of branded residences off ering guaranteed returns

3

Vietnam Residential

The recent emergence of branded residences in Viet Nam is supported by a move up the residential value chain as increasingly expensive properties enter the market. A strong domestic economic performance and historically low stock levels are also pushing up demand and with it, prices.

GRAPH 4: Supply By Operator, Q1/2021

0 200 400 600 800 1,000 1,200 1,400

Accor

Wyndham

Furama

IHG

Radisson Hotel Group

Fusion Hotel Group

Hyatt

Dusit

Cross Hotels & Resorts

Marriot

Best Western

Four Seasons

Meliá

Shilla

Current stock Future supply

Source Savills Research & Consultancy

(GRs) of up to 18% per annum for a three-year period and GRs of 9% to 10% per annum for a ten-year period. GRs are slowly being phased out by the market, however, as they require subsidies from the operation which may be burdensome. Recent projects such as Wyndham Skylake, Fusion Resort & Villas Da Nang, Meliá Ho Tram Phase 2 - The Hamptons, Sun Premier Village The Eden Bay do not off er GR schemes.

DEMAND Luxury brands have proved appealing to the newly wealthy, as a mark of success.

Owning a branded property is seen as status affi rming and a smart investment choice. Purchasers of branded residences are assured of a quality product, limited in supply with premium brand values. Pre-existing brand awareness means the residential product gets a wider profi le and with that, access to a larger demand base.

Target markets include local high net worth individuals (HNWIs) and overseas buyers, which so far, have been mostly from China, Hong Kong, Taiwan, and Korea. In 2020, Viet Nam’s HNWIs comprised around 19,500 people, up 6% per annum from 2015 to 2020. By 2025 the HNWI population will reach over 25,800 placing the country fourth in Southeast Asia after Thailand, Indonesia, and Singapore.

There has been increased overseas interest in high-end products, with legally established project quotas quickly taken up. This trend is expected to continue for well located, premium projects. Regionally, Viet Nam prices are competitive while capital growth prospects, together with appealing yields, are piquing foreign interest.

Around 65% of buyers are longer term investors; 30% are occupiers, while speculators represent around 5%.

Real Estate policies have been gradually eased for foreign buyers, and for developers - with development criteria tightened to better protect purchasers. There is no additional tax for luxury properties. Overseas nationals are allowed to own properties as stated in commercial contracts but are limited to a 50-year leasehold tenure.

GRAPH 3: Branded Residence Performance, Q1/2021

Source Savills Research & Consultancy

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

0

200

400

600

800

1,000

1,200

KienGiang

DaNang

QuangNam

QuangNinh

KhanhHoa

Ha Noi Thua ThienHue

Ba RiaVung Tau

Total stock (LHS) Sales (LHS) Primary price (RHS)

NO

. OF

UN

ITS

US

$ P

ER

SQ

M

Thua ThienHue

Ba Ria Vung Tau

Vietnam Residential

For more information about this report, please contact us

Neil MacgregorManaging Director+84 28 3823 4754nmacgregor@savills.com.vn

Savills Vietnam

Savills plc: Savills plc is a global real estate services provider listed on the London Stock Exchange. We have an international network of more than 600 offi ces and associates throughout the Americas, the UK, continental Europe, Asia Pacifi c, Africa and the Middle East, off ering a broad range of specialist advisory, management and transactional services to clients all over the world. This report is for general informative purposes only. It may not be published, reproduced or quoted in part or in whole, nor may it be used as a basis for any contract, prospectus, agreement or other document without prior consent. While every eff ort has been made to ensure its accuracy, Savills accepts no liability whatsoever for any direct or consequential loss arising from its use. The content is strictly copyright and reproduction of the whole or part of it in any form is prohibited without written permission from Savills Research.

Troy Griffi thsDeputy Managing DirectorVietnam+84 933 276 663tgriffi ths@savills.com.vn

Savills ResearchSimon SmithRegional Head of Research & Consultancy, Asia Pacifi c+852 2842 4573ssmith@savills.com.hk

Vo Thu Khanh TrangHead of ResearchHCMC+84 906 948 580vthikhanhtrang@savills.com.vn

as the approach delivers superior quality builds, proven luxury with brand recognition and 5-star service. Opportunities and potential growth in this high-end sub-segment are forecast.

OUTLOOKAsia Pacifi c is forecast as a branded residence hotspot, borne out by the increasing number of projects. The lower entry costs in the region present less development risk but have the appealing potential to reach new demand. The burgeoning middle- and upper-classes present

further potential for branded residences. Meanwhile hoteliers are bringing more brands

into play and a wave of new brands from art, fashion, design and celebrities is expected as geographic expansion continues.

Branded residences in major cities will also become more established over the next few years