In the first quarter of 2021, there were approximately 4,400 condominium units launched in Hanoi. Although this level of new launch showed a q-o-q decline of 39% due to disruption of Tet holiday and a new wave of Covid-19 in Vietnam, the figure calculated into a y-o-y growth of 270% showing a strong recovery from Q1 2020 when the first wave of Covid-19 pandemic started in Vietnam. Most of the new supply during the quarter came from follow-on launches (14 projects) and there were only three new projects introduced to the market for the first time. In terms of segment, Mid-end continued to be the most popular products covering 80% of total new launch. In terms of location, the East and the West are major sources of new projects, contributing to 77% of new launch.
Moderate new supply during the quarter helped to close the gap between new launch and sold units. A total of 4,200 units were recorded sold during the quarter, of which, affordable segment recorded more units sold than launched.
In Q1 2021, the average primary price of Hanoi market was recorded at US$1,461 psm (net of VAT and maintenance fee), up by 7% y-o-y and 3% q-o-q. Mid-end segment continued to dominate the Hanoi condominium market, while stock of other segments is not abundantly available. Accordingly, due to the launches of new projects at better/convenient locations than previously launched projects, average primary prices of high-end and affordable segments increased by 9% q-o-q and 5% q-o-q, respectively.
In the secondary market, some of recently completed high-end projects in developed residential area such as Ba Dinh, Cau Giay, Nam Tu Liem districts recorded an annual pricing growth of 3-7%. Meanwhile, the average secondary pricing of those districts (including long-time completed projects) only adjusted by 1 – 3% y-o-y. In addition, projects that are close to near completion infrastructure projects such as along the ongoing constructed elevated Ring Road No.2 and area under recently approved or upcoming approved master plan such as Long Bien area experienced a pricing growth of 5-9% y-o-y.
Moving forwards, the level of the new launch and sold units are expected to hover around 24,000 – 26,000 units in 2021. In upcoming quarters, it is expected that there will be new residential projects and townships launched in different areas in Hanoi in both urban and rural districts making the market more vibrant. In terms of selling prices, average primary pricing is expected to increase at around 4-6% y-o-y in 2021. Ms. An Nguyen – Director of Hanoi Branch, CBRE Vietnam noted “The active construction across sectors and locations of Hanoi signals a strong bounce back of the City real estate market. We expect not only residential sector, but also commercial sector will welcome additional projects involving international players and local players coming from Southern Vietnam”.
Total supply of Hanoi office space in both grades remained at 1,526,000 sqm NLA during the first quarter of 2021, with 35% of them coming from Grade A projects.
Although there was another Covid-19 outbreak in Q1 2021, Vietnam’s economy continued to recover. Consequently, the office market performance in both Hanoi and Ho Chi Minh City was positive this quarter. The total net absorption of the Hanoi office market in Q1 2021 is 24,000 sqm while that of the Ho Chi Minh City market is 19,600 sqm.
Due to the absence of new projects in Q1 2021 and the increase in absorption rates of the office market, the vacancy rate in Hanoi has shrunken. Grade A vacancy rate fell to 22.4%, down by 0.7 ppts q-o-q and up 15.3 ppts y-o-y. Similarly, Grade B vacancy rate also decreased to 13.3%, down 2.1 ppts q-o-q and 4.0 ppts y-o-y.
In 2021, Hanoi market is expected to welcome a significant amount of new supply, with nearly 200,000 sqm of office space, the highest amount in a year we have recorded since 2011. Among new projects in 2021, in addition to projects in traditional office clusters, Hanoi market is expected to receive several of projects in new areas such as the Techno Park Tower project in Gia Lam district and the Intracom Riverside project in Dong Anh district.
Regarding of demand, according to rental inquiries CBRE received in Q1 2021, the Banking/ Finance/ Insurance and Manufacturing sectors continued to be the main driver of demand for the market. In terms of leased area, inquiries are mainly directed towards offices with an area of less than 300 sqm. Furthermore, some tenants are also looking for a flexible working space.
After 2020 with negative absorption rate due to the impact of COVID-19 pandemic, Hanoi office market showed some signs of recovery, with expected absorption rate to reach between 70,000 m2 and 80,000 m2 in 2021. In terms of rents, in comparison to other cities in the Asia-Pacific region, the potential of rental growth of Hanoi office market is limited, but Hanoi is still one of the least affected cities by the ongoing pandemic. Excluding the impact of new projects in 2021, Grade A asking rents are expected to increase by 0.5 to 1% this year.
In Q1 2021, the retail sector witnessed some positive signs of recovery. Total sales of retail and consumption in Hanoi grew by 6.8% y-o-y (while in Q1 2020 decreased by 0.01% y-o-y), indicating that consumption demand has risen again. Besides, according to statistics from Google, the number of visitors to shopping malls or retail spaces started to increase and showed great potentials to recover.
The Hanoi office market recorded a slight increase in asking rents for both grades in Q1 2021. Grade A asking rent reached US$26.9/sqm/month, up 0.4% q-o-q and 2.7% y-o-y. Meanwhile, Grade B asking rent still remained at US$13.9/sqm/month as in the previous quarter.
Asking rents on the ground floor and the first floor (excluding VAT and service charges) in non-CBD locations still slightly decreased by 1.8% y-o-y and 0.4% q-o-q, averaging US$24.4/sqm/month, due to a number of projects with high vacancy rates proposing discounts to attract tenants. Vacancy rates remained at a high level, reaching 14.5%, up 2.2 ppts q-o-q and 6.4 ppts y-o-y.
Average asking rents in the CBD area recorded an increase of 0.4% q-o-q and 10.2% y-o-y, reaching US$108.1/sqm/month. Vacancy rates in the CBD reached an average of 10.8% as certain lots on higher floors remained vacant. However, this rate had dropped by 3.5 ppts q-o-q.
During the review quarter, the Hanoi retail market witnessed the expansion and new entry of brands such as Pandora, Haidilao, Weekend Max Mara. It is expected that in the coming quarters, fashion brands, F&B brands and supermarkets will continue to launch in Hanoi, making the retail market more vibrant.
In the next three quarters of 2021, Hanoi retail market is set to welcome 73,000 sqm NLA of retail space, including the most significant project Vincom Mega Mall Smart City. In addition, after 2021, an additional of 200,000 m2 NLA is expected to enter the market. These new projects will be located in non-CBD area. Residents in the North and South of the city and the surrounding area will have more options to shop and use the service when two large-scale projects, Lotte Mall Hanoi and Aeon Mall Giap Bat, officially go into operation.