HO CHI MINH PROPERTY MARKET REPORT

Q2 2019

Overview
The Vietnamese economy sees positive signals although the world economy
is under unfavorable conditions. Due to the ascending US-China tension, the
large foreign capital from Chinese investors flows into Vietnam. Although
Vietnam is predicted to be benefitted from US-China trade war, it is the fact
that the largest foreign capital comes from China while the capital from other
countries such as Japan, Korea and Singapore has downward trend.

The U.S. is refraining from labeling Vietnam a currency manipulator; however,

Vietnamese currency is still on the US watch list and this may constrain the
economic growth of Vietnam.

The real estate market in Ho Chi Minh city has optimistic signals in recovery
when the authorities start to make decisions on the delayed projects and fix
their internal problem.

The Ho Chi Minh apartment market mainly welcomes new release of the high-
end segment while the others are making no noise. The villas/ townhouse and
land plots market in this quarter are relatively quiet and the projects are
generally concentrated on the East region. In terms of commercial property,
the remaining vacant leasable area of office and retail is not much and the
new projects tend to move to the CBD fringe and Non-CBD region.

There is no significant change in the industrial sector between first and

second Quarter of 2019. This is because industrial parks are waiting for new
price regime approval; therefore, the leasing activities temporarily postpone.
HCMC Properety Report | Q2 2019

ECONOMIC HIGHLIGHTS
World Economic Performance
Global PMI Index
The world economy tends to slow down. Global PMI index
continues to decline in June 2019, which implies a diminishing
health of manufacturing around the world. The political tension
has signs of rising complexity. Recently, US slaps duties on
steel from Asia in Trade enforcement. They also propose $4
billion in tariffs on EU goods. Japan, South Korea and Turkey
are threatened to be face US sanctions if they continue
Source: Bloomberg importing Iranian oil.

Crude Oil Price (WTI Spot Price FOB)

Oil price will be a challenge to the world economy when US-
Iran tensions still escalates. It can be seen an upward trend in
crude oil price during the period of May 2016 – May 2019. This
trend is predicted to increase in the current context that US
prepares to impose new sanctions on the Islamic Republic.
Whereas, Iran will not ready to open discussion with US if they
do not leave all sanctions put against Iranian oil and other
areas
Source: Thomson Reuters

Vietnam 2Q2019 | Economic Updates Vietnam 1H2019 Y-O-Y

The economy in the first 6 months continued to grow GDP Growth 6.8%

positively despite of the increasing risks from the Services Growth 6.7%

political and economic instability in the world. The Industry - Construction Growth 8.9%

increasing number of foreign visitors to Vietnam is the Agriculture-Forestry-Fishery Growth 2.4%

positive sign for tourism sector. However, the newly CPI 2.6%
registered foreign investment capital decreases in Export (billions USD) 122.7 7.3%
comparison with the same period of 2018 Import (billions USD) 122.8 10.5%

Foreign investment capital (billions USD) 10.3 -36.3%

Total retail sales (billions USD) 102.6 11.5%

Vietnam foreign direct investment 2017-2019
Foreign visitors (thousand) 8,481 7.5%
The foreign capital into Vietnam sees an upward trend
Source: GSO
of Chinese investors. China, Korea, Japan and
Singapore are known as the major investors of Vietnam.
In 2017 and 2018, Japan was the largest investor of
Vietnam. However, since the US-China tension occurs,
the foreign capital from China has increasingly shifted
into Vietnam. As a result, it is noticeable that China is
the leading country in foreign direct investment into
Vietnam in the second quarter of 2019.

Source: GSO
 HCMC Properety Report | Q2 2019

Number Of Enterprises Registered For New Establishment

By Quarter

The rising establishment of new enterprises shows an

optimistic signal of the economy. During the first half of
the year, the number of newly established businesses
increases 3.8% (YoY). Both the number of enterprise
and registered capital has shown ascending trends
since 1Q2018
Source: GSO

Registered Business Establishment

Retail is still the leading sector to receive new

establishment registration during the period. In
particular, the retail sector accounts for the highest
proportion (29%), followed by the construction sector
and manufacturing sector (13% each).

Source: GSO

Visitors to Vietnam

The number of both domestic and international visitors

to Vietnam has increased from 2010 to 2018. In the first

half of 2019, total number of international visitors to
Vietnam reached 8.5 million, up by 7.5% compared to
the same period last year. Moreover, as the government
is preparing the new regulation on condotel, officetel
and resort villa, the sustainable development for the
tourism property market is expected to be promoted.
Source: GSO

The Vietnamese market attracts high attentions from foreign investors. This quarter is highlighted with the significant deal
of SK Corporation purchases 6,1% stake of Vingroup, Samsung SDS commits to buy 25% stake in CMC, Mitsui purchases
35,1% stake of Minh Phu Seafood company and Taisho Pharmaceutical Co., Ltd. buys by nearly 67% of DHG Pharmaceutical
Corporation.
HCMC Properety Report | Q2 2019

The table below presents some noticeable investment deals of foreign companies into Vietnamese market from 3Q2018 to
now.

Time Business transaction Amount of capital (USD) Aim

Furniture manufacturer “Man Wah Holding” has

Diversifying activities and avoiding commercial war
Jul-18 acquired a company producing and exporting the 68 million
risks.
sofa in Viet Nam

Building factory to manufacture electronic

Goertek (Hong Kong) Co., Ltd invests in Que Vo
Jan-19 260 million equipment, network equipment, media and
(Bac Ninh) Industrial Park (expansion part).
multimedia audio products.

Deli (China) Co., Ltd. Investment registered in Yen

Jan-19 25 million Building factory to manufacture stationery.
Phong Industrial park (expansion part).

Building factory to manufacture circuit boards,

TSE ( Korea) Co.,Ltd. invests in VSIP Bac Ninh
Jan-19 19 million electronic circuit boards and testing equipment
Industrial park.
circuit boards.

Cybertan (B.V.I) Investment Corp from the UK Producing module wireless networking, router,
Jan-19 9 million
invests in the Dai Dong - Hoan Son Industrial park. cable modems, set-top television signals.

Producing and processing products from the

Novatech Co., Ltd invests in Que Vo III Industrial
Jan-19 5 million magnet used in the tablets, coated tablet products
park.
manufacturing.

Beerco Co., Ltd contributes capital into Vietnam

Feb-19 3.85 million Brewing and malt fermentation in Hanoi.
Beverage Co., Ltd.

Royal Pagoda Private Co.,Ltd invests in Vinhtex

Mar-19 200 million Producing and dyeing knitted fabric in Nghe An
project

Building factory for producing and assembling

Universal Alloy Corporation Asia Pte., Ltd company
Mar-19 170 million aerospace components made of aluminum and
invests in Sunshine project
composite in Da Nang.

Golden Hill (British Virgin Islands) Investment Joint

Mar-19 147.5 million Building skyscraper for sale in HCMC.
Stock Company invests in Complex building

Guizhou Advance Type Investment co., Ltd (China) Producing and consuming tires, rubber and related
Apr-19 214.4 million
invests in Advance Tire Co., Ltd Vietnam products in Tien Giang.

Infrastructure development, mergers and

May-19 SK Corporation purchased 6,1% stake of Vingroup 1 billion
acquisitions.

Samsung SDS committed to buy 25% stake in

May-19 25% stake of CMC Developing intelligent factory and network security
CMC.

Invest digital technology, including AI in the ponds

Mitsui purchased 35,1% stake of Minh Phu 35.1% stake of Minh Phu and the processing plants, promoting efficiency of
May-19
Seafood company Seafood company the shrimp supply chains from farms markets in
Minh Phu company

Taisho Pharmaceutical Co., Ltd. has bought by

May-19 147.8 million Diversifying activities
nearly 67% of DHG Pharmaceutical Corporation.

RESIDENTIAL PROPERTY
Apartment
New Supply in 2Q2019
High-end and mid-end are two major segments
released to HCMC apartment market in this quarter. The
residential market in Ho Chi Minh city saw new release
of more than 13,800 units to High-end apartment and
3,200 units to Mid-end segments. In which, most of them
come from non-CBD region with total of 13,802 high-end
units and 2,796 mid-end units.
Source: Vietvalues Research
Villas/Townhouse and Land Plots
The new projects of villas/townhouse are quite limited
with the outstanding stocks mostly located in non-CBD
area, especially in East and South region. About 1,677
units are available in South region with asking price at
3,200 USD per sqm while 8,492 units are situated at
East region and released at around 2,865 USD per sqm.
Source: Vietvalues Research
HCMC Properety Report | Q2 2019
Apartment Inventory Performance
This quarter is fulfilled with the existence of high-end
apartment projects. About 20,352 units of high-end
segment are available for trading, which is nearly four
times as high as the outstanding stocks of mid-end
apartment
Source: Vietvalues Research
Land Plots Primary Market
Similarly, the market of land plots in this quarter is still
quiet. The land plots projects are mostly located in East
and West region with around 2,000 vacant plots.
Source: Vietvalues Research
HCMC Properety Report | Q2 2019

COMMERCIAL PROPERTY
Office
Office Net Leasable Area Breakdown by Grade
CBD region is known as the homeland of office with the total net
leasable of both three grades at about 1,158,000 sqm. However,
more than 97% of the current supply have been occupied. In
general, grade B occupies the highest proportion in CBD and CBD
fringe office market while grade C is more popular in Non-CBD
region with 202,760 sqm.
Source: Vietvalues Research
Office Net Absorption and Average Price
In 2Q19, the market welcomes the entering of 9,360 sqm of Five
Star Tower to Grade A segment while no new Grade B and Grade
C supply is recorded. The leasable area of grade A in the whole
HCM office market is about 11,250 sqm, while the figure of Grade
B is approximately 30,850 sqm, and Grade C is 11,400 sqm. The
average monthly asking rent of Grade A office buildings is estimated
at USD 53,2 per sqm, Grade B is about 29,5 per sqm and Grade C
is about USD 17 per sqm. Given the lack of upcoming supply, Co- Source: Vietvalues Research
working spaces and Business Centre are good choices for Cost-
conscious tenants
Retail Total Supply And Average Price Per Month Of HCMC Q2/2019

Retail
This quarter saw the new release of TNL plaza in district 4 with
11,179 sqm of net leasable area. No new supply in the shopping
centres and department store segment is recorded in this quarter.
Noticeably, the Parkson city Plaza in Tan Binh district is acquired
by Vietjet and named at Vietjet plaza.

Retail projects tend to be developed in CBD fringe and Non-CBD.

Particularly, in the next quarter, Central Premium Mall (district 8) and
The Mall (district 10) are expected to handover about 100,000 sqm
Source: Vietvalues Research
of net leasable area. Moreover, Outside D-Mall (district 6) is also
Retail property sees potential developments as most of
projected to complete in 2020 with net leasable area of 25,000 sqm.
At the present, the total retail area in CBD fringe accounts for the leasable are occupied. At first glance, the average
occupancy of the CBD is about 97,5% while the
highest and following by non-CBD. It can be seen from the figure
proportion of CBD-fringe and non-CBD reaches to 98%
that about 450,000 sqm of total retail supply are situated in CBD-
and 99%; respectively.
fringe and 420,000 sqm in non-CBD.
Occupancy Rates
In addition to, CBD-fringe and Non-CBD are promising destinations
for retail projects as the average rent prices at these regions are
still low. Specifically, the average asking rent price of retail podium
in CBD fringe and non-CBD is about 28 USD per sqm while it is
approximately 115 USD per sqm in CBD. Moreover, the average
asking rent prices of Shopping Centres and Department Store also
observes about 40 USD per sqm greater price in CBD region rather
than CBD fringe and Non-CBD by around 90 USD per sqm.

Source: Vietvalues Research

 HCMC Properety Report | Q2 2019

HO CHI MINH INDUSTRIAL

PROPERTY Industrial Market Performance by District

1. Current Performance
Some industrial parks are postponing the
leasing to wait for the approval of new price
regime. Therefore, the occupancy of the
vacant land was unchanged between first and
second quarter of 2019. There are only small
pieces of vacant land left, which are mainly
located in Nha Be, Cu Chi and Binh Chanh
districts. The average asking rent price in the
next quarter is expected to increase when the
new price regime is approved.

2. Opportunities and Challenges Source: HEPZA, Vietvalues Research

Opportunities
Escalating US-China trade tension is the
reason that many companies are moving into
Vietnam to avoid the war. This is the opportunity
for Vietnam to foster the manufacturing and
exporting, leading to the increasing demand for
industrial land.
Moreover, the infrastructure now is highly concentrated to develop and
hopefully to boost the industrial sector. Recently, Ho Chi Minh authority has
announced to the public that ringroad 2 will be completed in 2023. At present,
part 3 of the ringroad 2 is being constructed and is expected to finish in
2020. Moreover, the construction of Long Thanh international airport and the
ringroad 3 and 4 will promote the construction progress of factories and
companies in South region of Vietnam.

Source: Vietvalues Research

 HCMC Properety Report | Q2 2019

Challenges Moreover, infrastructure outside the IPs and EPZs is usually overloaded, leading
Infrastructure and administrative procedures to increasing production costs and decreasing competitiveness of enterprises.
of the industrial sector have not developed Flooding and traffic jam are the common issues that companies in the Industrial
in line with the growth yet. Zones face. Besides, the supporting infrastructure to improve the quality of

Most of the HCMc EPZs and IPs have been workers’ life such as schools, accommodation, and hospitals has not yet been

established since the 90s of the last properly thought about. Besides, the administrative procedures are still long-

century, hence the system for receiving lasting, lacking transparency and complicated that cause delays and uncertainty

and treating waste in general is quite for enterprises and investment projects

outdated. Furthermore, the land for rent at The formation year of industrial parks in Vietnam
these EPZs and IPs has been almost
occupied and rental rates are higher than
the EPZs and IPs of the other provinces. In
this quarter, the total vacant land of Ho Chi
Minh Industrial park is only about 294.06
ha at the average price of more than 142
USD/sqm/term. The price will likely be
higher in the next quarters when the new
price regime is approved

Source: HEPZA, Vietvalues Research

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