It’s All About Confidence, Grab your Chance!

July 2014

SUMMARY: It has been a long, seven year slog with disappointments and broken promises on house delivery. However, recent positive sales results and busy launching events suggest that we have now arrived at a point where the worst of the market is behind us. CBRE monitored activity at recent launch events for residential projects in Ho Chi Minh City, our findings break down as follows.

Efforts to lure buyers are showing result

Capitaland’s Vista Verde project in Thanh My Loi Ward, District 2 (previously known as Beau Rivage) held a soft launch last week, offering 200 units for sale at prices ranging from US$1,400 to US$1,600 per sq.m. According to the developer, the event attracted approximately 300 attendees and generated more than 100 unit sales within two days. Of the completed sales, most were done for buy-to-let purposes and 90% of purchases were made by local Vietnamese buyers and 10% were made by foreign buyers. Phu My Hung Corporation’s launch of Block B at its Green Valley project also saw strong sale transactions, around 60% of the 108 units were sold on a bare shell basis last weekend at a price of US$1,470-1,600 per sqm.

Developers are adapting their products to suit the market

Developers have adapted their project designs since the market downturn in 2011 by reducing unit areas by 10-20% in order to meet buyer’s tighter budgets. In-house amenities i.e. swimming pools, retail areas, unit sizes and unit types are considered carefully.

In addition, most bedrooms now feature a window, or even a floor-to-ceiling window, to maximise natural light, wind and fresh air. The unit size at Vista Verde is approximately 18% smaller than that at The Vista, launched by the same group in 2007.

Some developers have tightened payment terms and pushed up prices

Prices showed a slight increase for the first time since 2011. The price of Novaland Investment’s Lexington Residence project, increased by 2.5% against the first quarter of 2014 and payment terms are now tighter than they were in March. Buyers now need to pay 25% as opposed to 20% (including down payment) when signing Sale and Purchase Agreements. Elsewhere, the most noticeable price rise occurred at Tower 5 of The Vista project developed by Capitaland where the price of US$1,700 per sq.m. was 10% higher than Tower 4, a neighbouring tower of the same development which was re-launched a few months earlier.

Capitaland’s Vista Verde project which, despite being at both an early development stage and a less premium location than The Vista, is priced quite keenly at US$1,400-$1,600 per sq.m. on a bare shell basis, without offering a lease-to-buy scheme (moving in the house when 50% of the house value is paid and the remaining payable within one or two years). The project’s strong sales performance, despite shorter payment terms and higher prices, tentatively indicates that the residential market has started to shift to a new phase where there is no longer any need for developers to provide large sales incentives.

While it is too early to say that the market has fully recovered, sales trends appear to be picking up and we expect this trend to continue in the coming quarters on the back of growing buyer confidence.

Global Research and Consulting
This report was prepared by CBRE Vietnam Research Team, which forms part of CBRE Global Research and Consulting – a network of preeminent researchers and consultants who collaborate to provide real estate market research, econometric forecasting and consulting solutions to real estate investors and occupiers around the globe.

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