The HCMC residential market ended 2019 with a decrease in supply leading to a strong price increase, especially in the high-end segment. According to experts, this momentum will continue into 2020 and the upcoming years because the legal framework related to licensing new projects cannot be resolved overnight.
Property Insight – a multi-dimensional and in-depth information channel on the real estate market, in collaboration with CBRE Vietnam, recently organized the seminar “Property Insight – Residential Market Outlook for 2020”. The program provided investors, real estate developers and home buyers an overview of the domestic market in 2019 and forecasts for 2020.
High-end apartments leading price hike momentum in 2019
According to CBRE, HCMC’s condominium segment in 2019 recorded a significant fall in new supply. The city had a cumulative number of over 286,000 apartments by the end of Q4/2019.
Although the supply tends to decrease, the number of transactions has continuously been higher than that of newly-launched units. This has helped reduce inventory steadily over the past years to 15% last year.
“This is a positive signal for the market when customers not only buy new products but also seek to buy products that have been launched before,” said Mr. Vo Huynh Tuan Kiet, Associate Director of CBRE Vietnam’s Housing Project Marketing. “The proportion of inventory in the market now is only 5%.”
2019 was also the year witnessing a new price level in all apartment segments, led by luxury products. The price of high-end apartments increased sharply in recent years, reaching an average of US$6,308 per sqm in Q4/2019, equivalent to a growth of 10% over the previous year.
“The first projects launched in the period of 2004-2009 cost only US$2,000-3,000 per sqm. But in 2018-2019, the market has many projects at up to US$10,000 per sqm,” said Ms. Duong Thuy Dung, Senior Director of the Valuation, Research, and Consulting Department at CBRE Vietnam. “This is an important milestone marking significant changes in the price of high-end apartments.”
Challenges vs. opportunities for the upcoming year
Experts say that 2020 will be a challenging year due to the ongoing slow licensing and the tightening of credit into real estate. However, it is also an opportunity for investors who have already had licenses.
Demand for condominium ownership continues to grow, driven by the hike in per-capita income as well as the rising interest from foreign investors. A recent report by ULI and PwC showed that HCMC ranked third in Asia in terms of investment prospects and leading the prospect of real estate development. In particular, the luxury segment continues to prove its attraction to investors.
“Vietnam’s super-rich class is growing fast and they want to put money into land and real estate to avoid inflation. Apartments often have risks of deteriorating in quality and accordingly declining profits. In contrast, the quality of high-end projects is guaranteed overtime thanks to the management and operation by professional international agencies. That is the reason why high-end products are in increasing demand,” economist Nguyen Xuan Thanh explained.
In fact, according to Mr. Andy Han, CEO of SonKim Land, luxury projects developed by SonKim Land at Thu Thiem area in HCMC’s District 2 are still very popular and favoured by the market. The demand is not only from domestic customers, but also a large number of buyers from Singapore, Hong Kong, or South Korea. He predicted this strong demand will continue for at least the next 5 years.
Limited supply against strong demand has continued pushing up apartment prices. In particular, projects located along the Ring Road 3 or easily accessible with Metro Line 1, and Long Thanh International Airport are particularly sought after.
Experts agree that HCMC real estate market in 2020 will see a both bright-side and dark-side picture, but there is still much potential for growth and development in the years to come. “When we feel a risk, we should buy. Today is the cheapest moment to buy an apartment because tomorrow will definitely see the price hike. My advice is buying as soon as possible,” Mr. Andy concluded.