In a general assessment of the housing market in Ho Chi Minh City, Mr. Troy Griffiths, Deputy General Director of Savills, said that the first half of 2023 has not shown many signs of improvement due to limited supply mixed with buyers' concerns in the context of a difficult economy.
Performance of apartment segment in HCMC - Source: Savills
Savills data shows that in the apartment segment, new supply decreased by 86% year-on-year to 1,980 units; of which Q2 supply accounted for only 19%. There was no new Grade A supply, while Grade C accounted for 77% of the market share. Primary supply was 6,700 units (down 59% year-on-year); Grade C accounted for 45%, Grade B for 35% and Grade A for 20%.
The average selling price of this real estate segment is VND125 million/m2, up 44% year-on-year due to high-priced Class A and B inventory.
Ms. Giang Huynh, Deputy Director, Research Department & S22M Savills HCMC commented that the current apartment price difference is about 30 times compared to the average income of city residents.
“The average income of a household in Ho Chi Minh City is only about 15 million VND/month. Meanwhile, the average price of an apartment in a new project is currently 5.5-6 billion VND. The difference is up to more than 30 times,” said the Savills expert.
Ms. Giang Huynh, Deputy Director, Research & S22M Savills HCMC
Ms. Giang Huynh analyzed that with that income level, if people are able to save 40-50%/month, it will take several decades to be able to buy a house, in case they do not use credit or do not have any support from relatives.
“It will be very difficult for a household to buy a house in Ho Chi Minh City based on pure income, average income at this time. Thus, to buy a house, one must have a fairly high income, as well as financial leverage support to be able to buy an average apartment,” said Ms. Giang.
According to Savills research, apartment sales in the first half of the year reached 1,170 units, down 90% year-on-year; in the second quarter, there were more than 300 transactions. The absorption rate in the first 6 months of the year reached 17%, down 56 percentage points year-on-year. Of which, class C attracted more buyers and accounted for 62% of sales. The product line of apartments under 5 billion VND met the needs of many buyers.
Villa and townhouse absorption rate lowest in 10 years
In particular, no new villa and townhouse projects were recorded by Savills in the first half of 2023, due to investors facing difficulties in raising capital, scarce vacant land funds and complicated legal procedures.
During that period, only 3 existing projects opened for sale 414 new units. Units priced above VND30 billion accounted for 78% of the supply and were mainly in Thu Duc City. Only 13% of the primary supply in Ho Chi Minh City was priced below VND10 billion/unit.
However, the absorption rate in the first half of 2023 reached a 10-year low of 15%. The transaction volume in the first half of 2023 reached only 158 units, down 74% year-on-year.
Savills Research assessed that expensive inventory and new launches challenged liquidity as primary prices increased 48% year-on-year to over VND300 million/m2 of land in the first 6 months of the year.
This year, some developers have offered rental commitment programs with fixed returns, extended preferential interest rates and extended payment schedules.
“Buyer caution continues to weigh on market liquidity. However, the outlook will improve thanks to specific mechanisms on real estate, monetary policy and infrastructure investment,” Mr. Troy Griffiths predicted.
In the second half of 2023, Savills Vietnam forecasts that 8,450 apartments will be launched on the market. Grade B will account for 54%, Grade C will account for 39% and Grade A will account for 7% of the market share. Notable projects include Vinhomes Grand Park – The Glory Heights, Thu Thiem Zeit – Block T2 and La Partenza; these projects are accepting reservations and are expected to launch in the third quarter of 2023. Particularly for the villa and townhouse product line, it is expected that 500 units will be launched for sale from now until the end of the year.
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