Apartment market at the end of 2017

Day post: 16-12-2017
According to CBRE Vietnam, the price of apartments in mid-2017 has started to decline. In general, in the same location, the asking rent of high-end apartments is only half, or one-third of the same service apartment.
 
Although apartment prices are on the downward trend, the supply of apartments is still massively inflated to the market. According to CBRE, the rapid increase in supply will create strong competition in the real estate market, causing developers to launch more preferential and discount programs to attract customers at the end of the year. This will have a strong impact on the secondary market, especially investors.
 
CBRE expects to add approximately 1,000 units in 2017 and 829 units in 2018-2019.
 
In the first half of 2017, the hospitality market increased by 6% and nearly 5,000 units, mostly in District 1, Ho Chi Minh City. However, the rental price at the end of the year tends to decrease.
 
Serviced apartments are mainly for foreigners and fully self-contained professional services such as cleaning, laundry, catering, personal service ... if guests have needs. This type of property is managed according to hotel standards.
 
48,000 apartments will enter the market
 
In the second quarter of 2017, CBRE said there was not much new supply. At the same time, a number of major projects have transformed serviced apartments into commercial apartments, such as the Mapletree project.
 
CBRE said that this reflected the current difficulties of the serviced apartment market, when faced with increasing competition from the rental market.
 
Ho Chi Minh City has 4 new projects and the next phase of 7 projects are open for sale, offering more than 4,700 new apartments. The total primary stock of apartments reached over 37,000 units.
 
 
Apartment sales recorded a sharp increase, up 67% over the same period last year. With nearly 11,600 units sold, Q2 / 2017 trade reached its peak since 2011. From Q3 / 2017 to 2018, nearly 48,000 units are expected to enter the apartment market.
 
Greatest hits in 2019
 
This huge supply will create competitive rental rates and impact not significantly on the rental rates of serviced apartments.
 
Duong Thuy Dung, Director of Research and Development Consultancy, CBRE Vietnam, said that the price of apartments in mid-2017 has started to decline. In general, in the same location, the asking rent of high-end apartments is only half, or one-third of the same service apartment.
 
The increase in the number of serviced apartments also contributed to lower prices. Savills Vietnam said that from Q3 / 2017 to 2019, the serviced apartment market will add 1,900 units in the CBD. Half year after 2017 will receive a major race with new supply mainly Grade A and Grade B.
 
According to Sai Gon Vien Thong Company (Savista), the unit is managing (exploiting and filling) for nearly 500 serviced apartment projects in Ho Chi Minh City, the rent is reduced by the projects are filtering strongly.
 
Mr. Vo Duy Khanh, Head of Real Estate Sales of Savista, said that HCM City has more than 500 serviced apartment projects, with an average of 20 to 200 apartments for rent.
 
"Only branded projects keep prices stable, small projects are offering discounts or offering promotions to survive," said Khanh. Major projects in Ho Chi Minh City such as serviced apartment chains of Somerset, Oakwood, Sila ... These projects are well-built brand, large-scale professional management units.
 
Trends in discounted rental apartments
 
Over the last 2-3 years, many developers have developed small and medium sized serviced apartment projects, such as City House chain scattered all over Ho Chi Minh City, with 15-30 units per project.
 
In addition, individual investors are also involved in renovating their own apartments into serviced apartments, to optimize the idle cash flow. However, according to Khanh, the weaknesses of these projects are limited utility and self-employment without hiring professional managers. This makes the occupancy rate of the project is not high, the rental price also decreased.
 
Although the leasing price of this segment is down slightly, Khanh said that the market still has bustling deals at the end of the year. This is a time when overseas Vietnamese visit relative as well as multinational corporations, large companies often choose this occasion to invite experts to Vietnam to study and work. Some branded and stable projects will attract the most customers.
 
In the long run, according to CBRE, the serviced apartment market in District 1 of Ho Chi Minh City will still retain the old price. As this is the downtown area and always have a special customer demand.
 
This includes management staff from multinational corporations, contracted consultants in Vietnam, staff from foreign aid projects and NGOs.
 
Over the next three years, CBRE expects to add approximately 1,000 units in 2017 and 829 units in 2018-2019.
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