Savills H2/2023 Market Report and Outlook

Unlocking insights into Viet Nam's real estate landscape, Savills H2/2023 market report presents a nuanced view of the nation's property pulse. With a backdrop of slower GDP growth but sound FDI inflows, the Ho Chi Minh City and Ha Noi reports explore residential, commercial, hospitality, and industrial real estate. Read more on Viet Nam's H2/2023 property performance and the 2024 horizon.?

Macro Overview?

According to a recent announcement by the General Statistics Office of Viet Nam (GSO), GDP growth in 2023 in Viet Nam was 5.1%. While notably slower than last year, 2022 growth of 8% came off the back of growth of only 2.9% in 2020 and 2.6% in 2021. However, there were improvements in the second half of 2023, given that growth of 3.3% in Q1/2023 was the second lowest rate in 13 years. ?

Total registered FDI of US$37 billion increased by 32% YoY, and disbursed FDI increased by 4% YoY to US$23 billion, the highest in five years. ?

EuroCham’s Business Confidence Index (BCI) for Viet Nam increased to 46.3 in Q4/2023. Looking to Q1/2024, 29% of businesses perceive their prospects as "excellent" or "good" with extreme worries dropping from 9% to 5%.?

Savills says that it expects investment activity to spike in Q3/2024, with recovery driven by major markets like the US and UK.??

Residential Performance in Viet Nam?

Apartment??

In Ha Noi, primary apartment stock of 11,911 units dropped by 40% quarter-on-quarter (QoQ) and 41% year-on-year (YoY). Primary asking prices of VND 58 million/m2 net sellable area (NSA) increased by 7% QoQ and 12% YoY. Average primary prices have increased for 20 consecutive quarters.?

According to Do Thu Hang - MRICS , Senior Director, Advisory Services, Savills Ha Noi, there is a disconnect between demand and supply in Ha Noi, especially for affordable properties. The Metro and ring roads will accelerate decentralisation when complete.?

In Ho Chi Minh City, primary stock has trended downward since 2017. In Q4/2023, primary stock of 7,600 units was stable QoQ but dropped by 5% YoY. Primary apartment prices in Ho Chi Minh City in Q4/2023 returned to the 2020 level at VND 69 million/m2 NSA, decreasing by 36% QoQ and 45% YoY.?

Giang Huynh , Head of Research and S22M, said: “Residential stock in Ho Chi Minh City is in incredibly short supply, especially considering that the city’s population exceeds 10 million. According to Savills Q4/2024 apartment market report, in Ho Chi Minh City, apartment returns have softened for five years, however, they remain above deposit interest rates. As such, apartments continue to be a profitable investment channel.“?

Villa/Townhouse?

Stock in the villa/townhouse (VLTH) segment across Viet Nam remained chronically low.??

In Ha Noi, primary villa/townhouse stock of 710 dwellings came from 16 projects, decreasing by 2% QoQ and 23% YoY. Limited stock and expensive inventory limited absorption significantly. In Ha Noi, in Q4/2023, sales decreased by 37% QoQ and 67% YoY to 64 dwellings. Quarterly absorption of 9% decreased by 5 ppts QoQ and softened by 12 ppts YoY.??

Despite increasing by 1% QoQ and 10% YoY, in Q4/2023, primary villa/townhouse stock in Ho Chi Minh City remained low at 771 dwellings. Performance was also underwhelming; in Q4/2023 sales were equal to Q3/2023 at 64 but decreased by 24% YoY. Quarterly absorption of 8% was stable QoQ and dropped by 4 ppts YoY.?

Limited stock and diminishing affordability in Ha Noi and Ho Chi Minh City are driving the success of satellite provinces. Given new and upcoming ring roads in Ha Noi and Ho Chi Minh City, these areas are increasingly popular given sound connectivity, product diversity, and more affordable prices. From 2024 to 2026, suburban districts will have a 74% share of new landed property supply in Ha Noi and a 75% share in Ho Chi Minh City.

Commercial Real Estate Performance??

Office??

Office stock in Ha Noi reached 2.13 million m2 NLA in Q4/2023 and decreased by 1% QoQ and 1% YoY, and in Ho Chi Minh City, office stock rose by 3% QoQ and 6% YoY to 2.7 million m2 NLA. However, office stock in Viet Nam’s leading cities remains well below regional peers like Singapore, Jakarta, and Bangkok.?

Given healthy demand, performance in both cities is positive. In Ha Noi, office rent reached VND 513,000/m2/month with occupancy of 87%. In Ho Chi Minh City, rent reached VND 779,000/m2/month with high occupancy of 89%.?

ICT, FIRE, and manufacturing tenants are significant in both cities. Forecast employment for 2024 highlights that these sectors will remain key players in the Ha Noi and Ho Chi Minh City office markets.??

Retail?

In Ha Noi, retail rent of VND 1,169,000/m2/month rose by 3% QoQ and 15% YoY, and retail occupancy in Ha Noi was 88% in Q4/2023.??

In Ho Chi Minh City, rent of VND 1,300,000/m2/month improved by 3% QoQ and 5% YoY and retail occupancy reached 92%.??

Hospitality Performance??

In 2023, Viet Nam had 120.6 million visitors, increasing by 19% YoY. International visitors reached 12.6 million visitors, improving threefold compared to 2022 and exceeding the 2023 target of 8 million visitors. However, there is room for improvement as this performance was equal to 70% of the 2019 level.?

City markets are performing better than coastal cities. In Ha Noi, hotel occupancy in 2023 averaged 60% with an ARR of VND 2.7 million/room/night. In Ho Chi Minh City, in 2023, performance improved; occupancy reached 63%, and ARR grew by 19% YoY and reached the 2019 level at VND 2.0 million/room/night.??

Industrial Real Estate Performance??

Optimism exists in the logistics sector, and 92% of Savills researchers forecast rents will rise or remain stable against a backdrop of resilient consumer demand and an expanding post Covid-19 manufacturing base.??

Viet Nam has one of the fastest growing logistics sectors globally with growth of up to 16% in recent years. It has grown rapidly along with the economy, trade, high value added manufacturing, and a growing middle class driving the rise of e-commerce. The country’s Logistics Performance Index (LPI) score in 2023 increased to 3.3 points, up from 3.27 points in 2018 and the highest since the index started in 2007.??

Giang Huynh, Head of Research and S22M, said: “Residential stock in Ha Noi and Ho Chi Minh City remain chronically low and inventory prices are inaccessible to many. This is pushing demand to neighbouring provinces.”?

“The commercial outlook for both Ha Noi and Ho Chi Minh City remains sound, with demand forecast to support the pipeline. Office stock in Viet Nam is increasingly green, and most future projects by 2026 will launch with green certifications,” Giang added.??

Talking about the industrial outlook for Viet Nam, Giang said: “Industrial real estate, both land and ready-built products, are performing well and reflect Viet Nam’s continued appeal to foreign investors.”?

Savills H2/2023 real estate insights and 2024 outlook span residential, commercial, hospitality, and industrial sectors, and reflect Viet Nam’s trajectory, which is likely to show greater activity and improvements toward the end of 2024.?Get your copy today: https://sav.li/6v4?

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