Market Insights from CBRE’s · Market Insights from CBRE’s Hanoi Q1/2013 Quarterly Report ......

Presented by:

CB Richard Ellis (Vietnam) Co., Ltd.

Wednesday, April 10, 2013

Market Insights from CBRE’s

Hanoi Q1/2013 Quarterly Report

Research & Consulting

2 CBRE RESEARCH & CONSULTING MARKET INSIGHTS FROM CBRE’S HANOI QUARTERLY REPORT | APRIL 2013

ECONOMIC OVERVIEW

Q 1 / 2 0 1 3 H I G H L I G H T S

Viet Nam Ha Noi Ho Chi Minh City

GDP (% y-o-y) 4.9 (↑) 7.5 (↑) 7.6 (↑)

CPI (% y-o-y, average) 6.6 (↓) 6.03 (↓) 3.24 (↓)

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

Export (US$ Bil.) 29.7 (↑) 2.44 (↑) 9.9 (↑)

Import (US$ Bil.) 29.2 (↑) 5.36 (↑) 5.26 (↑)

FDI Registered (US$ Bil.) 6.03 (↑) 0.15 (↑) 0.13 (↑)

FDI Implemented (US$ Bil.) 2.70 (↑) - -

FDI Real Estate (US$ Bil.) 0.25 (↓) - -

International arrivals (mil.) 1.8 (↓) 0.43 (↑) 1 (↑)

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

0

5

10

15

20

25

Nov-10 Jan-11 Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13 Mar-13

CPI (%

m-o-m

)

CPI

(% y

-o-y

) /

Inte

rest

rate

s (%

)

Monetary contraction

Inflation surged

Monetary expansion

Inflation controlled

CPI, VN (% y-o-y)

CPI, VN (% m-o-m)

Refinancing rate (%)

Rediscounting rate (%)


ECONOMIC OVERVIEW

D R I V E R S F O R G R O W T H

0%

5%

10%

15%

20%

Mar Jun Sep Dec Mar Jun Sep Dec Mar

2011 2012 2013

Short-term Long-term

Lending rate (% per annum) Monetary easing

• Re-financing rate to 8% from 9%

• Re-discounting rate to 6% from 7%

• VND deposit rate cap to 7.5% from 8%

interest rate finally at levels that encourage

people to divert cash away from deposits

Lending rate to 11 – 12% (short-term loan)

• However, many businesses still cannot afford

loans real effect remains to be seen

Gradual improvement in domestic demand

• Better credit conditions

• Robust inflow FDI (doubled y-o-y)

• Improved retail sales (11.7% y-o-y)

• Better income nationally from rising exports

(19.7% y-o-y)

BOTTOM LINE:

Growth is stunted, BUT monetary easing by

itself will be a driver for growth

Current y-o-y

VN-Index 505.9 12.5%

Real Estate Holding &

Development - listed

stocks

46.2 4.3%

Real Estate Services -

listed stocks 24.1 -5.1%

Gold price (VND mil per

tael) 43.6 -0.5%

Major indicators


ECONOMIC OVERVIEW

P O L I C Y

Decree 02 – SBV provides VND30 tril loan for home-

buyers at 6% int. rate:

• Beneficiaries: low-income earners, government officials

and employees, people of the armed forces

• Purpose: to buy or rent social houses or commercial

houses smaller than 70 sm, selling price under VND15 mil

per sm

Establishment of VAMC:

• NPL account for 6% of total outstanding loans (Feb ‘13) -

from 8.6% end of 2012

• The Govt. will establish VAMC in April 2013:

- Initial capital: USD4.78 bil

-Target to resolve NPL (less than 3%) by VAMC bond

N P L ’ s h a ve f i n a l l y b e e n a c k n o w l e d g e d w i t h t h e

c r e a t i o n o f a G o v t . A M C – s t i l l a l o n g w a y f r o m

b e i n g r e s o l ve d b u t b e t t e r t h a n h i d i n g u n d e r a

r o c k l i k e a s p e r 2 0 1 2 .


Overpasses

• Construction started on 2 overpasses, expected completion in

Q3/2013:

- Kim Ma – Nguyen Chi Thanh @ 278 m

- Dai Co Viet – Tran Khat Chan @ 352.4 m

Elevated Highway

• Vinh Tuy – Nga Tu So (Ring Road No. 2), developed by

Vingroup, to be completed by 2016

Urban railway

• Cat Linh – Ha Dong: 9.2/13.05 km of main route and 100%

Depot area handed over

Roads in the pipeline

• Extended Tran Dang Ninh @ 256 m – VND322 bil, approved in

Jan '13

• Cat Linh – La Thanh – Thai Ha – Thai Thinh – Lang circulated

after 10 years' construction

Parking

• 11 parking sites to be constructed during 2013

National roads:

• Improvement work on National Road No. 5 , Jan '13, with

investment capital of VND793.5 bill - debt financed by VDB

HANOI INFRASTRUCTURE

Q 1 / 2 0 1 3 H I G H L I G H T S Kim Ma – Nguyen Chi Thanh Overpass

Cat Linh – Ha Dong Urban railway

Extended Tran Dang Ninh, Cau Giay District


CONDOMINIUM FOR SALE

L A U N C H V S . C O M P L E T I O N S U P P L Y

New Launch Supply (Units) New Completion Supply (Units)

0

5,000

10,000

15,000

20,000

25,000

2007 2008 2009 2010 2011 2012 2013

Q1 Q2 Q3 Q4 Whole year

0

2,000

4,000

6,000

8,000

10,000

2007 2008 2009 2010 2011 2012 2013YTD

Q1 Q2 Q3 Q4 Whole year

New launch supply 9.6% y-o-y • 2 Mid-end + 7 Low-end projects

• Developers more realistic – project

launches more in line with demand

Re-launches with price adjustments

– primary price by up to 50% of

original price

Completion supply 29% y-o-y,

from 3 High-end and 4 Mid-end

3%

34%

38%

25%

Cau Giay

Tu Liem

Hoang Mai

Others

Launch Supply by District



P R I M A R Y V S . S E C O N D A R Y M A R K E T

Primary asking price distribution (no. of units)

Secondary price change q-o-q

Primary market: 95% new

launches <US$1,000 per sm

Notable new launches after

Lunar New Year – Feb ’13 sees

almost a doubling y-o-y

Secondary market:

• More offers below initial cost

• Average asking prices 2.8% q-o-q

• Luxury segment incurs largest price

falls

Secondary price by Segments

0

4,000

8,000

12,000

16,000

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1

2008 2009 2010 2011 2012 2013

Below $1,000 psm $1,000-$1,250 psm $1,250-$1,500 psm Above $1,500 psm

-5%

0%

5%

10%

15%

2009 2010 2011 2012 2013YTD$0

$1,000

$2,000

$3,000

$4,000

2006 2007 2008 2009 2010 2011 2012 13YTD

Luxury High-end Mid-end Low-end


DEMAND


What concerns or prevents buyers in making decisions?

Macroeconomic factors:

• Economic prospect - biggest concern (Nielsen’s survey)

Incompatibility between income and house prices

• Vietnam: House prices ~ 25x annual income

• European countries – 7x; Thailand – 6.3x; Singapore – 5.2x

Developers’ reputation and commitment

Construction progress

Availability of facilities and amenities

What motivates buyers?

Deposit rate to 7.5% savings less attractive

Falling gold prices + stabilizing exchange rate gold trading

and foreign exchange less profitable

Buyers now have much greater bargaining power

VND30 tril fund from SBV to finance low cost home purchases

• 6% int. rate per year

• Limited eligibility

Source: Nielsen

VN Consumer Major Concerns

Q1 '12 Q4 '12

Job security 17% Economy 27%

Economy 15%Increasing utility

bills 18%

Increasing food

prices 14%Job security 17%

Source: Nielsen

9785

109101

119

88

10398 97 96 99

94 9587 88

Q3 2008 Q1 2010 Q4 2010 Q3 2011 Q2 2012

VN Consumer Confidence Index



T R E N D - O U T L O O K Trend

End-users continue to dominate demand

Low-end segment more active

Stronger interest in projects with:

• Asking price under VND15 mil

• Small unit sizes (60–100 sm)

• Good construction progress, facilities, and good infrastructure

Buy-to-let now a popular trend

Buyers now demand greater degree of transparency than before

Unsold stock

(units) %q-o-q %y-o-y

2013YTD sales

volume (units)

21,600 5% 21% 600

Outlook

Sales rate

highest in

Low-end

segment

Gradual improvements in enquiries in the future

Successful transactions will occur in:

• Projects with good construction progress

• Projects with good facilities and located in areas with good infrastructure

• Projects with attractive price points

Secondary prices will continue to drop in the next quarter, albeit at a slower pace (~1.5-2% q-o-q)

Rising interest in acquisitions from financially strong developers, esp. overseas developers


LANDED PROPERTY

S U P P L Y

New supply

• New completion / handover of 250 units in 2 projects in Hoai Duc and Ha Dong

• New launch: The Manor Park City township (~90 ha, Hoang Mai district) by Bitexco Group

• Adding to supply in the south of the city

Supply issues

• Lack of amenities continued to discourage buyers / residents from moving in into newly

completed townships

• Of about 9,000 units in townships completed within the last 3 years, its estimated 60% are not occupied.

• Capital value of such units will continue to fall unless amenities are added in a timely manner.

The Manor – Park City Perspective Starlake Groundbreaking


LANDED PROPERTY

S E C O N D A R Y A S K I N G P R I C E S Prices started stabilizing in several districts – after 7 quarters of decline

• Observed in Cau Giay, Tu Liem, Hoang Mai, Thanh Tri, and certain projects in Ha Dong

• Prices either unchanged or increased by 5%-7%

Other districts, prices decreased slightly by 5%-7% q-o-q (Hoai Duc and Long Bien)

Y-o-y prices lower by 15%-20% across all projects

Average Secondary Price per sm of Villa in New Urban Area

-20%

-10%

0%

10%

20%

30%

40%

50%

0

50

100

150

200

250

Q410 Q111 Q211 Q311 Q411 Q112 Q212 Q312 Q412 Q113

Millions

Market Average Price Average Price Change


LANDED PROPERTY

D E M A N D

Investment now mostly long-term, as opposed to short term speculation

• Rental potential a stronger factor in investment decisions

• Speculation is significantly reduced but market is still vulnerable to speculation, especially as

other investment channels fall short

• Speculation will not be completely ruled out and will be present in less transparent projects

End-buyers still not in a hurry to make a purchase

• Many current options

• More options as more projects are completed

Recent interest rate cuts should encourage both investors and end buyers to make a move

Demand for houses for rent continues to grow especially among young people (students, young

professionals, and young couples)

• Lack of houses for rent, especially those aiming at middle class, young people


LANDED PROPERTY

O U T L O O K Policies

• Social housing is a specialist subject.

• Small % of the market

• Restricted to a target market , although criteria is

proposed to be widened

• Its impact on the overall market is likely to be minimal

• Some condo for sale projects to be converted to

apartments for rent

• Its feasibility will determine whether there will be a new

trend where developers build and operate apartments

for rent

Outlook

• Amenities MUST be added to new townships or

houses will never fill

• Electricity and water

• Schools

• Markets/Supermarkets

• Sports / entertainment facilities etc

• Prices are generally still under pressure

• More acquisitions by financially capable

developers

*Savings are assumed at 20%-30% of total income, depending on each income band.

Historical & Expected Completion (Units)

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

2006 2007 2008 2009 2010 2011 2012 2013f

Gamuda Yen So Park Construction


NEW SUPPLY in Q1/2013:

Cornerstone Office Building

• Prime CBD location (16 Phan Chu

Trinh, Hoan Kiem Dist)

• Grade A

• 26,500 sm NLA

• Positive pre-leasing activities

• Only new CBD supply this quarter –

VIB bank’s new Head Office

OFFICE

N E W S U P P L Y


MARKET PERFORMANCE: varies between Grade A and

Grade B

• Asking Rents:

• Grade A rents increased by 2.2% q-o-q

• Grade B rents continued a downward trend, decreasing 5.5% q-o-q

• Vacancy

• Grade A: 30%, up from 23% in Q4/2012

• Grade B: 19%, down from 22% in Q4/2012

• New take-up primarily in Grade B as a result of lower

rents

• Cost cutting is a key driver for companies, both local and

international

• Tenants are open to relocation but will not pay more than current

rents

OFFICE

M A R K E T P E R F O R M A N C E

Office Asking Rents

Office Vacancy

0%

10%

20%

30%

40%

50%

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

2009 2010 2011 2012 2013

Grade A Grade B

$0

$10

$20

$30

$40

$50

$60

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

2009 2010 2011 2012 2013

Grade A Grade B


dfs

Large supply expected in Q2/2013 of approximately 400,000 sm (GFA)

• ~40% are fitting out

• 42% are in the west

Rents in the West are still under pressure, especially Grade B

• Asking rents may appear stable but actual rents are lower

Tenants:

• Banks are still active , not in expanding space but rather they negotiate on current rents

• Cost continues to be number one concern, followed by building quality and services

• Tenants have the incentive to move out of old buildings in the CBD for better and cheaper options

Landlords: competing by rents will not be enough going forward; landlords will have to compete by

service in order to keep tenants

Office acquisitions will increase developers restructuring their investment portfolios

• SOEs are expected to sell their office buildings & stop developing new office towers

OFFICE

O U T L O O K

It will take up to

10 years to

absorb the

current vacancy

+ additional

supply


RETAIL

R E S T R U C T U R I N G

Hang Da Galleria Restructuring expected soon

Mipec Shopping Centre

(Restructured)

Grand Plaza Closed for renovation: Dec 2012


RETAIL

C h a l l e n g e s d u r i n g

t o u g h e c o n o m i c t i m e s ?

• The failure of existing high-end projects, such as Grand Plaza, Hang Da Galleria

• Stagnant sales in some luxury projects

• Necessary goods vs. high-priced luxury goods

• Tax and intermediary fee ~50% original prices

Trang Tien Plaza Closed for renovation April 2011

Officially reopened in April 2013

GFA 14,000 sm


Market Performance

• Average rents increased due to high price offered by

Trang Tien Plaza.

• Rents in existing projects remained stable

• Rents in restructured project lower

• Vacancies increased compared to last year

• CBD: Vacancy is significantly higher due to the soft performance

of Hang Da Galleria (current stock)

• Non-CBD: Vacancy increased slightly

Demand

• More stores closed in shopping centres (172) than

opened (121) in Q1

• Opened: textiles, household & furniture, F&B

• Closed: textiles, shoes, household & furniture

• Low demand resulted from a slowing down economy

• Nielsen report indicates low consumer and

manufacturing confidence expected in the short-term

RETAIL

M A R K E T P E R F O R M A N C E

Retail Ground Floor Rents

Retail Vacancy

$0

$20

$40

$60

$80

$100

$120

2008 2009 2010 2011 2012 Q1/2013

CBD non-CBD

-10%

0%

10%

20%

30%

40%

2008 2009 2010 2011 2012 Q1/2013

CBD non-CBD


Large supply anticipated:

• Ocean Group expanded investment in retail real

estate

• Oceanmart was opened in Jan '13 in Ha Dong district

• Ocean Mall (GFA 10,000 sm) to open in Thang Long

International Village in Q2; 75% leased out

• Ocean Mall (GFA 18,000 sm) to open in Trung Hoa Nhan

Chinh in Q2

• Ho Guom Plaza – opening Q2/Q3 (GFA 23,380 sm)

• Vincom Mega Mall – Royal City opening July (GFA

230,000 sm)

• Vincom Mega Mall – Times City:

• Phase 1 by end of 2013 (GFA 115,000 sm)

• Phase 2 in 2015 (GFA 109,000 sm)

AeonMall Vietnam has obtained an investment

certificate to build a US$200 million retail complex in

Hanoi.

RETAIL

O U T L O O K

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

2013f +2014f

Fitting-Out Under Construction Under Planning

Expected Supply (sm)

Vincom MegaMall Royal City

Vincom MegaMall Times City


0

500

1,000

1,500

2,000

2,500

3,000

0%

5%

10%

15%

20%

25%

30%

2007 2008 2009 2010 2011 2012 2013

Supply Vacancy Rate (%)

0%

5%

10%

15%

20%

25%

30%

35%

Q4/2011 Q1/2012 Q2/2012 Q3/2012 Q4/2012 Q1/2013

International Operator Self-managed Average

Supply

• One boutique project opened (16 units)

• Projects expected to open in late 2012 continue to reschedule-

market challenges

Improved occupancy both international and self-

managed operators

• International operator groups: 90%, up from 87%

• Self-managed group: 79%, up from 77%

Asking rents

• Unchanged in international operators.

• Decrease of 2.5% q-o-q in self-managed projects

SERVICED APARTMENT

Q 1 / 2 0 1 3 R E V I E W

Historical Vacancy & Supply Vacancy Rate (%)

IDC White House


Demand

• Volume of enquiries is stable but budgets are lower by

approximately 10% q-o-q

• Will continue to be affected by cost cutting

Outlook

• ~200 new serviced apartments to open in Q2

• Candeo Hotels Hanoi, 70 units

• Elegant Tay Ho, 140 units

• Competition and lower budgets will continue to affect

performance of most projects

• Management and quality of facilities will continue to be a

key driver in this sector

• Lack of Grade B serviced apartments in the West

• Strong interest from overseas operators and developers

SERVICED APARTMENT

D E M A N D & O U T L O O K

Oriental Palace

Calidas Landmark 72


SUPPLY

• Current: 8,673 rooms, mostly in Hoan Kiem & Ba Dinh

• Change in supply 3.7% y-o-y

• 5-star sector accounts for 43% market share

MARKET PERFORMANCE

• 5-star hotel sector recorded the highest increase in occupancy Y-o-Y

and the largest drop in ADR and RevPar.

DEMAND

• Visitors to Hanoi

• Int’l: 425,000 ( 18.9% y-o-y)

• Key markets

• Largest visitor source: Asia region (>50% of total visitors)

• Arrivals from key markets, incl. Japan (11%), Australia (9%),

France (8%) and Korea (8%)

HOTEL

Q 1 / 2 0 1 3 R E V I E W

Y-o-Y Changes by Grade (Q1/2013)

Visitor Arrivals to Hanoi (Millions)

-8%

-6%

-4%

-2%

0%

2%

5-star 4-star 3-star

Occupancy ADR RevPAR

0.00

0.10

0.20

0.30

0.40

0.50

2009 2010 2011 2012 2013 YTD


FUTURE SUPPLY

• Opening in Q2/2013:

• Hilton Garden Inn (2nd Hilton Hotel in Hanoi)

• InterContinental Hanoi Landmark

• Candeo Hotel

• 2013 (1,000 rooms; 13.4% y-o-y) sees the

openings of InterContinental Hanoi Landmark,

JW Marriott, and Hilton Garden Inn

HOTEL

O U T L O O K Historical Supply by Grade

DEMAND & PERFORMANCE

• Hanoi's market may be less volatile compared with other domestic tourist destinations

because of stronger MICE activities

• According to IATA (The International Air Transport Association), by 2014, Vietnam is

projected to be the world’s 3rd fastest growing market for international passengers and

freight, and the 2nd fastest for domestic passengers.

INVESTMENT CHANNEL

• Accor announces management of 3 new hotels in Sapa, Phu Quoc, Vung Tau under

Mercure brand name

0

2,000

4,000

6,000

8,000

10,000

12,000

1995 2000 2005 2010 2011 2012 2013

YTD

2013f

5-star 4-star 3-star


To subscribe, p lease contact…

Q 1 / 2 0 1 3 r e l e a s e d

F r i d a y , A p r i l 1 9 , 2 0 1 3

© 2013 CBRE (Vietnam) Co., Ltd. This report has been prepared in good faith & 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 & 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, & they may not represent current or future performance of the market. This information is designed exclusively for use by CB Richard Ellis clients, & cannot be reproduced without prior written permission of CB Richard Ellis.

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Market Insights from CBRE’s · Market Insights from CBRE’s Hanoi Q1/2013 Quarterly Report ......

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