The short-term challenges of the apartment segment in Ho Chi Minh City come from the scarcity of new supply and high prices. Limited supply is one of the reasons for the high housing prices.
Mr. Troy Griffiths, Deputy Managing Director of Savills Vietnam, commented that the short-term challenges of the apartment segment in Ho Chi Minh City still come from the scarcity of new supply and high prices. The housing market will recover when homebuyers’ sentiment improves and there are not many alternative investment options.
The Savills Ho Chi Minh City real estate market report for Q4/2023 showed that the apartment segment is facing many short-term challenges.
Specifically, the report shows that the primary supply in the whole year of 2023 only reached 10,700 units, the lowest in the past 10 years. In Q4/2023 alone, the primary supply was 7,600 units, unchanged quarterly but down 5% annually. New supply accounted for 37% of primary supply. Of which, the two outstanding projects are The Privia and The Glory Heights phase of Vincom Grand Park leading 88% of new supply. The report did not record any new Class A supply in the quarter.
The number of apartment transactions in the past 10 years has also decreased by 7% each year. In the context of the scarce supply and high prices of 2023, the market only recorded 6,200 transactions. In Q4 alone, the trading situation improved with 3,000 units, an increase of 52% quarterly and 120% year-on-year.
The absorption rate increased by 14 percentage points quarterly and 23 percentage points annually to 40%. New supply accounted for 78% of the transaction volume and was absorbed by 84%; These projects sold well because they had clear legal status before launching, long payment terms, bank loan support, and affordable prices from 2-5 billion VND/unit. Excluding new supply, market transactions remained weak with only 670 units sold, corresponding to an absorption rate of 14%.
A positive point in Savills’ data is that new supply in 2024 is expected to increase four times compared to 2023. Class B will account for 44% of the market share from projects such as Vinhome Grand Park – The Opus One, Eaton Park and The Aurora. Class A will have 37% from the high-rise project at The Global City. Class C will only have 19% market share. By 2026, 40,800 units from 116 projects are expected to be launched.
The primary selling price in the last quarter of 2023 returned to the level of 2020 at 69 million VND/m2 of net area, down 36% quarterly and 45% annually after many expensive projects had to temporarily close part of the basket. goods. Along with that, products under 2 billion VND have completely disappeared from the market in the past year. The supply priced from 2-5 billion VND led the market with nearly 90%.
In the period from 2024 to 2026, the supply of apartments priced from 2-5 billion VND will decrease significantly, while products in the range of 5-10 billion VND will emerge to dominate the market. Homebuyers in Ho Chi Minh City can choose to explore neighboring provinces to find more affordable housing options. In 2024, Binh Duong, Dong Nai and Long An are expected to account for 96% of the supply of apartments priced under 5 billion VND.
According to a survey by Savills in 2023 on 30 Class A and B projects, the rental yield remained stable at 4.8% per annum but the asset value growth rate decreased by 1.9 percentage points per annum to 2.9% per annum. Therefore, the total profit from investing in apartments in 2023 decreased by 1.7 percentage points compared to the same period last year to about 7.7%/year.
**Ms. Giang Huynh, Deputy Director, Head of Research and S22M Savills Ho Chi Minh City analyzed: “The investment profit from apartments in Ho Chi Minh City has tended to decrease slightly in the period of 2019-202.
