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CBRE Releases Q1 2017 Quarterly Report Highlights Hanoi Market

HANOI – 27 March 2017 – GDP growth in Q1 2017 is estimated to be 6.4% (to be updated with more stats from General Statistics Office).

FDI continues to be a key catalyst of Vietnam’s economy. Total registered capital of newly & additionally financed projects and the investment in the form of capital contribution, share purchase in the first quarter of 2017 reached US$ 7.7 billion, an increase of 77.6% from the same period last year. Meanwhile, realized FDI capital in Q1 2017 was estimated at US$3.6 billion, an increase of 2.8% from the same period in 2016.

After the ministerial meeting of TPP members in Mar 2017, it seems that the prospect of TPP moving forward without the U.S. is not totally dead. However, to hedge itself against uncertainties in global trade, Vietnam is already in the process of seeking a one-on-one FTA with the U.S., and looking to implement FTA with the EU early next year.

By the end of Q1 2017, following FED’s interest raised in March and in an effort to rearrange their capital structure, many commercial banks in Vietnam increased their interest rate on long-term VND certificate of deposits, which can reach as high as 9.2% (1%-2% higher than before). This development is to be closely watched, given deposit rate in Vietnam has been kept at a consistently low level in recent years. It is expected that eventually there will be some upward pressure on interest rate on loans, which may adversely affect the real estate market.


Condominium market


Taking advantage of positive momentum in 2016, 2017 started with a busy quarter. 9,398 units were launched in 35 projects across the city indicating q-o-q increase in both volume and projects. By segment, mid-end still dominated the new launch with 62% of new stock, following by high-end and affordable segments. It is worth mentioning that the number of new launch from affordable segment significantly increased and nearly tripled that of Q4 2016.



A total of 6,143 units were recorded sold during this quarter, indicating active sales activity. Sales is significantly boosted by various promotional programs by developers, especially before Tet Holiday. Although there was a slight decrease of 7% q-o-q, sales volume recorded significantly increased in comparison with Q1’s of previous years. It is noted that mid-end and high-end segments accounted for 76% sold units this quarter. Sales of affordable segment showed improvement since more supply launched providing more options for home buyers.


In terms of pricing, some projects at good locations and accommodated with sufficient amenities and facilities have increased their prices. All segments experienced y-o-y increases in primary market. In particular, high-end and luxury experienced the highest increase of 8.4% y-o-y and 12.3% y-o-y, respectively. The high-end projects launched during Q1 2017 have higher price on average than those launched in the same period last year leading to this increase. On the resale front, average market prices slightly went down by 1.4% q-o-q but recorded y-o-y increase of 0.5%.


Moving forward, the West and South West will continue to gather the largest number of units to be launched. Other areas such as Tay Ho district and Midtown are also expected to welcome new quality supply. As anticipated, there is an increasing interest from local developers towards affordable segment, and it is expected that there will be new units launched from this segments in the upcoming quarters, mostly located in decentralized areas.



Landed Property

Hanoi landed property market experienced a vibrant first quarter of 2017 with a wide range of new launches and impressive sale progress. During the review quarter, a total of 715 villas, 318 townhouses and 204 shophouses were launched, coming from 6 projects, including: Ciputra Zone K, Dreamland, Vinhomes Green Bay, Vinhomes Riverside Phase 2, Eurowindow River Park and Marina Arc (the last zone of Ecopark Phase 3 – Aquabay). These made up a total of 1,238 units launched in Q1 2017, equivalent to 40% of total units of the previous year. It is notable that almost all newly launched projects are located in prime areas with completed infrastructure and available residents. Thus, primary prices of these projects are much higher than market average. Out of three housing types, shophouses are still the most preferred with the highest sale rate since they are used not only for accommodation but also for business and trading purposes, providing additional benefits to home owners.


Regarding secondary prices, a decline of 1.8% q-o-q and 5.3% y-o-y were recorded in the review quarter, bringing average secondary pricing to US$3,200 psm. This decrease was partly subjected to the appreciation of US$ exchange rate in the quarter. Core urban districts such as Cau Giay, Tay Ho and Tu Liem continued to witness increases in resale prices, ranging from 1.4% to 7% q-o-q, on the back of newly-recorded large-scale projects that were launched in previous quarters and offered at prices higher than average. Additionally, it is also observed that developers of landed homes are committed to stronger investment in facilities and amenities within the townships. For instance, clubhouses of international standard at Park City came into use during the quarter; or Dinosaur Park is to be introduced at Vinhomes Riverside Phase 2, together with several clubhouses catering for the different zones within the township.



Busy activity expected in the landed property market in the upcoming quarters, with a number of big-scale projects anticipated to launch, including: Ecopark CBD (Phase 4 of Ecopark Township), The Manor Central Park, Splendora Phase 2, Hanoi Garden City and the next launches of Starlake.



In the first quarter of 2017, one Grade B office entered the market, Horison Tower with 8,385 sqm NLA, bringing total office space in Hanoi to 1.2 million sqm, of which Grade A accounts for 34%; and Grade B 66%.


Regarding asking rents, in Q1 2017, rents increased in both grades, a movement not seen in quarters. In particular, rents of Grade A increased by 3.3% q-o-q while Grade B’s rents went up by 0.2% q-o-q. Grade A performed well across all major locations, with q-o-q increases of between 0.7% and 5.2%. At the end of Q1 2017, average asking rents of Grade A achieved US$29.4 per sqm per month, while Grade B reached US$17.8 per sqm per month.


In terms of vacancy rate, Grade A buildings saw an improvement, where vacancy went down by 2.2 ppts q-o-q, staying at 13.2% on average. It is noted that the vacancy of Grade A buildings in the West reached the lowest level on record while that of CBD also recorded a 5-year low. Meanwhile, vacancy of Grade B continued to increase by 0.2 ppt q-o-q to stay at 16.4% on average. Continuous new supply is still a major challenge for Grade B Buildings’s occupancy rates.


Demand-wise, net absorption was around 25,500 sqm in the first quarter of 2017, positive growth in comparison with previous quarter. The increase in net absorption is mostly contributed by buildings in non-CBD locations. As new supply in the CBD has been limited while vacancy is tight, this has led to occupiers looking to expand to decentralized area. This is expected to result in higher asking rents in CBD area and benefit certain office buildings in Midtown and West.




Looking forwards, with no new Grade A expected to come on stream in 2017, existing Grade A office buildings are expected to perform well. Grade B will continue to welcome new supply in decentralized area making this segment become even more competitive.




Compared to the last quarter of 2016, Q1 2017 was rather quiet in term of new launch. Total supply of Hanoi’s retail market stayed at 760,000 sqm, an increase of 7.3% y-o-y. Rental rate also remained stable, up 0.1% q-o-q. This slight increase was due to an increase of 0.3% in CBD’s rental rates, proving that this area is still highly desired by retailers. Meanwhile, remechandizing at certain shopping malls outside of the CBD caused an upsurge of 5.4 ppts q-o-q in vacancy rate which is now standing at 10.6% average. Yet, this is an improvement of 2.2 ppts compared to Q1 2016.




Despite having no new mall openings during the quarter, Hanoi’s retail market was quite active on investment activity. If 2016 was the year of Thai investors with a number of remarkable transactions, Korean and Japanese have recently stepped up the game. Lotte recently acquired a 7.3 ha land for one of its largest shopping mall in Vietnam so far which will be located in a high-end urban area, famous for expats community. Aeon also announced its second site in Hanoi located far west of the city highly populated by Vietnamese people. These two transactions promised a large number of future supply expected to open in 2019. In the meantime, the rest of 2017 still looks vibrant with more than 100,000 sqm in the pipeline.


In Q1 2017, CBRE Asia Pacific issued a report on the generation which holds the future, millennials, “Asia Pacific Millennials: Shaping the future of real estate”. One of the fascinating findings was that millennials in APAC showed much stronger preference on dining out, going to cinema, concert, theatre, their counterparts in other regions. This trend is also shown in Hanoi’s retail market where nearly 60% is under age 35. F&B has always been a hot spot with strong competition across all segments including restaurants, coffee shops, milk tea, etc. Meanwhile, cinema sector is dominated by foreign players such as CGV, Lotte, and Platinum battling for market shares with the rising local players of Galaxy, BHD, etc.  F&B and entertainment are also crucial factors in modern shopping mall operation and expected to continue being so in the future due to this consumer trend.



Serviced Apartments


After the launch of Dream Apart-Hotel at the end of 2016, the first quarter of 2017 was rather quiet with no new supply for Hanoi’s serviced apartment market. The total supply remained stable at 3,300 units, almost 60% of which are located in Ba Dinh and Tay Ho. Grade A apartments took up to 70% of total supply. Among these, almost half are located in Tay Ho District, showing a strong preference toward this area. 


Average asking rent of the market remained relatively stable with an increase of 0.7% q-o-q, yet a decrease of 0.3% y-o-y. Grade A achieved $31.84, increase 1% q-o-q and 1.3% y-o-y. Meanwhile, Grade B witnessed a slight drop, 0.2% compared to Q4 2016. With such vibrant favor, Tay Ho district is at the top of highest asking rent, followed by Cau Giay district, Ba Dinh and Tu Liem districts.  In this quarter, performance of serviced apartments was improved across all grades. The occupancy rate rose 3.1 ppts q-o-q for Grade A and 2.3 ppts q-o-q for Grade B.


Two new projects expected to open in the upcoming quarters in Tay Ho and Cau Giay districts. These are also the districts which will welcome new projects expected in 2018-2020. With such future supply, Tay Ho will take over Ba Dinh to be the largest stock of Hanoi’s serviced apartments.  


Despite having such positive signal, the market is under increasingly strong pressure from a not-so-new type of apartments for lease, the “buy-to-let” category. Due to limited options as well as lack of service and amenities, this format was not a real threat to serviced apartments. However, the recent high-end apartment projects have shed a new light on this competition. With high quality building and management, along with good location and sufficient amenities, conventional apartment owners can now market their properties with a very competitive rental rates of around US$10 per sqm per month. Meanwhile, the rates of serviced apartments in Hanoi range from US$24-$34 per sqm per month depending on grades. In addition, supply of serviced apartment market still concentrates on some particular areas as mentioned while conventional apartments for lease are widely spread across the city, giving more options to customers. Thus, buy-to-let format is becoming more attractive for both home owners and foreigners, the main target customers of serviced apartments. It is expected that buy-to-let will witness further development in the coming years.





© 2016, CBRE, Group Inc. CBRE Limited confirms that information contained herein, including projections, has been obtained from sources believed to be reliable. While we do not doubt their accuracy, we have not verified them and make no guarantee, warranty or representation about them. It is your responsibility to confirm independently their accuracy and completeness. This information is presented exclusively for use by CBRE clients and professionals and all rights to the material are reserved and cannot be reproduced without prior written permission of CBRE.