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Hanoi Real Estate Market Briefing Year 2010

Hanoi Real Estate Market Briefing Year 2010. Accelerating success. Vietnam Economic Overview. Economic crisis and 2009 ended with 5.3% GDP growth Drastic reduction in GDP and revised government targets

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Hanoi Real Estate Market Briefing Year 2010

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  1. Hanoi Real Estate Market BriefingYear 2010 Accelerating success.

  2. Vietnam Economic Overview • Economic crisis and 2009 ended with 5.3% GDP growth • Drastic reduction in GDP and revised government targets • During the first nine months of 2010 GDP increased by 6.25% compared to the previous nine months of 2009. • GDP growth rate in Q3-2010 recorded at 7.16% q-o-q. • GDP growth rate predicted to continue rising by the end of 2010

  3. Vietnam Economic Overview • Dong has weakened against USD attracting more foreign visitors • New airlines and international airports, improved infrastructure • More sophisticated conferencing facilities • Increasing numbers of cars on the road & more visible wealth • An increasing middle class and better standards of living as Vietnam heads towards becoming a middle income country Dong Vs Dollar

  4. Inflation Rate & Stimulus Package • 2008 - Dramatic spike in inflation • 2009 - recorded inflation of 6.8% • 2010 – forecast inflation reach app. 8.5%-9% • Stimulus package has been effective • Government policies have clearly shifted to a focus on macro stability. • Inflation in Q3 and the last few months of this year remains high • Government introduced a number of measures designed to reduce inflation • introducing capital flow controls to reduce the amount of speculation in the real estate sector and the stock exchange • the compulsory purchase of Government Bonds by trading banks. • The borrowing rate increased to avoid leveraging assets to purchase additional assets and enhancing production. Inflation

  5. FDI Inflow Into Vietnam • Total committed capital increased dramatically in 2008 • In 2009, registered FDI : $US 21.48 billion and implemented FDI : $US 10 billion • For the first eleven months of 2010, Registered FDI $US 13.3 billion equating to 60% of that recorded in the same period in 2009. • 833 new projects were reported to the Ministry of Planning & Investment (MPI) with the major projects coming from Netherlands, Korea, America... • 20 on-going projects in real estate registering 21.5% of total FDI capital

  6. Retail Sector • In the first 11 months of 2010 total retail sales on goods and services increased 25% over the same period of last year • New supply expand to suburban, meanwhile tenants are interesting in CBD where is almost full and occupied by relatively stable tenants. • A large amount of Supply is being taken up slowly particularly on high end prime retail developments such as Hanoi Grand Plaza (16,000 sqm) and Hang Da Market (7,000 sqm), is opening at the end of this year, and Mo Market, Pico Mall, Ciputra Mall, Usilk City will open by next 2 years • Trend of subleasing the retail spaces to individual retailers become more popular such as , Grand Plaza, Hang Da market, Usilk City, etc. • A combination between traditional and modern market • More and more foreign retailers land in Vietnam market through franchising and expansion. • Rental rate in CBD is about $40 - $150 with high occupancy which has increased slightly on 2009. Outside the CBD rentals have remained stable

  7. Retail Sector • In 2013 total retail space is forecasted to reach app.1,200,000 sqm from projects such as Savico Plaza, Mo Market Plaza, Lotte, Pico Mall, Keangnam Landmark Tower, Royal City and Ciputra Mall… • This supply will be mostly in non-CBD areas which is becoming the key destination for both domestic and foreign investor • There is predicted to be strong growth in next few year; however, care must be taken so there is not an oversupply

  8. Retail Sector • Prime Grade A space – over $100-150 /sq m + + depending on location • Secondary space $50-80 /sq m depending on location, spec etc • Supermarket space within malls - $5-7 /sq m + + • Rental reduces the higher in property and further from escalators / lifts etc

  9. Snapshot of Retail Supply in Hanoi

  10. Office Market • In 2010, average rental rates for grade A offices continued to fall by approx 4.5% y-o-y. • Grade B offices were up 2.5% with the occupancy rate decreases 2.5% to 84.5% compared with 2009 • Charmvit Tower has come online offering 45,000sqm, Capital Tower offered 23,000sqm • Recovery anticipated in early 2011

  11. Future Supply - Office Market • By 2011-2012 total Hanoi office space is expected to double and there is a danger of oversupply • Trend to sell floors & sections of buildings (on long term 50 yr lease, rather than 100% or JV)

  12. Residential market overview • 30,000 unitsto come on line in Ha Dong and Thanh Xuan in next 3 – 5 years • Sales of apartments performing well in Q4, 2009 (i.e. selling pre completion and usually on selling several times before completion) but market slower in early 2010 • Land Prices increased 15%-30% in Q3, 2010 • Mid range condo/apartment projects performing well • Population increase of approximately 1mil per annum • Increasing disposable incomes • Emerging Mortgage market

  13. Residential Market Supply • This year we have seen approximately 3,500 mid to high end apartments enter the market. This is to add to the existing 13,000 luxury apartments already developed. • There is still, a healthy supply pipeline of high end products with many more developments planned. These however, are small in quantity and mass (sqm) to the relative size of the low to mid end market planned. This can be seen by the rapid development of Ha Dong.  • The highest new supply will come from the new urban areas, which have large land areas over 100 hectares and a sustained development pipeline of up to 10 years. These typically have a large low-mid range element and a lower high end element.

  14. Hotel Sector • Tourist arrivals to Vietnam reached about 4.17 million in 10 months of 2010, witnessed an increase of 39.5% compared with the same period in 2009 thanks to The millennium anniversary of Thang Long – Hanoi will be the key event in Hanoi. • Global economic crisis caused a decline in room rates and occupancy levels in the majority of hotels. • Average occupancy rate was 55% in Q3 2010, a decrease of 1.5% quarter on quarter • The average room rate dropped 5% to $86/night compared to last year. Room rate predicted to have fallen 5% for 3 star hotel while 4&5 star hotel only decreased slightly.

  15. Hotel Sector • In 2010 year, the market witnessed the opening of 620 rooms from 5 star hotel – Hanoi Grand Plaza and 386 rooms from Crown Plaza • In the next three years, the market recorded a large amount supply of Hotel from Keangnam Hanoi Landmark Tower, Habico Tower, Hanoi Times Square

  16. Article 126 of the Housing Law and Article 121 of the Land Law • Amendments to the housing law under article 126 and the land law under article 121 • 1st September 2009 - gives the right for overseas Vietnamese (Viet Kieu) to own a house in Vietnam. • Many mid to high end residential projects currently have approximately 60-70% of their clients buying as investment to benefit from the strong capital value increases offered in Vietnam. • Viet Kieu will see this as an opportunity to invest in a growing real estate market, offsetting the challenges and negativity in their own domestic markets.

  17. The new regulation on residential house • Decree No. 71/2010/ND-CP replace Decree No.90/2006/ND-CP. • Primary developers can transfer parts of their projects to secondary developers in site-clearance projects. Developers can also raise upfront capital from individuals or groups, but for only 20% of housing units without transactions via a trading floor. • Overseas Vietnamese can buy houses in Vietnam without any limit in number and receive the land use rights as a donation, inheritance or received . • Circular No.16/2010/TT-BXD implement Decree No.71 • Article 8: Investors can raise capital from 6 major sources. Each individual or household within a city or province may contribute capital in-kind only once to only a single residence. • Article 20: enterprises licensed to conduct real estate transactions must meet conditions on business registration, legal capital, and publication of transactions on real estate exchanges, before entering into any transactions.

  18. Services Market Research Real Estate Valuations Feasibility Studies Real Estate Marketing Real Estate Management Investment Consultancy Hanoi Office: Vinaplast & Tai Tam Building 10th Floor 39A Ngo Quyen Street Hoan Kiem District Hanoi Tel: 84 4 2220 5888 Fax 84 4 2220 1133 dane.moodie@colliers-hanoi.com Colliers International - Vietnam

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