Condo sales plunge in Vietnam’s two largest cities in Q2

Sales of apartments have declined both in Hanoi and Ho Chi Minh City, the two largest metropolises in Vietnam, even though the real estate business has accelerated across the country.
Up to 6,947 condos were sold in Ho Chi Minh City in the second quarter (Q2) this year, representing a decrease of 25% quarter-on-quarter  and decrease of 29% year-on-year, real estate service company CBRE has said it its latest report. Sales momentum continued to be positive in Q2 2018 with more than 80% of new launch units having been absorbed, it added.
The HCMC market welcomed an additional 6,109 condominium units in the quarter, a decrease of 36% y-o-y. The high-end segment accounts for the highest proportion of new launch units in Q2 at 54%, followed by mid-end at 42%.
However, new launch supply for 1H 2018 still increased 5% compared to 1H 2017. Mid-end segment witnessed the biggest decrease in new launch in Q2, down 62% q-o-q and 52% y-o-y, probably because the fire incident at the end of March has put a stronger focus on safety measures in condominium projects and made the process of obtaining the relevant safety certificates more stringent, CBRE noted.
With regards to the breakdown by segment, the high-end segment accounts for the highest proportion of new launch units in Q2 at 54%, followed by mid-end at 42%. Q2 2018 recorded one new luxury launch which is Cove Residence tower of Empire City project with 40 units.
Average price on the primary market was recorded at US$1,580 per square meter (psm) in the quarter, an increase of 3% q-o-q due to increase in prices of the luxury segment. Meanwhile, in Hanoi, 5,900 units were sold during Q2 2018, down by 22% y-o-y. This time of the year is when developer typically review current products and prepare for new products launched at the end of the year.  The slower launching speed also allows market to absorb unsold units.
In terms of pricing, the average selling price from developers in the city in Q2 2018 was recorded at US$1,332 psm, down by 0.4% q-o-q but up by 0.4% y-o-y.
In 2018, CBRE forecasts there will be 32,000 units launched in Hanoi – a decrease of 10% y-o-y. The decrease in launched supply allows inventories to absorb, which is a positive signal for the market. This shows that developers are more experienced in developing residential projects and analyzing market conditions.
Upbeat sentiment
Even with a slow start, the mid-end segment is expected to maintain a high proportion in the new launch units of 2018 in Ho Chi Minh City, thanks to some large-scale projects that are expected to launch in the second half of the year. On the other hand, busy pre-sale activities in some luxury projects in the past six months show that the market still has considerable interest in this segment.
Sales momentum will continue to be upbeat, CBRE said, recommending developers should focus more on handover quality, facilities and management quality in order to gain customers’ trust and differentiate themselves from the competition.
Vietnam’s second quarter GDP growth was recorded at 6.79% y-o-y, which adds to the first half growth of 7.08%, the highest growth rate in eight years.
Total value of foreign direct investment in Vietnam, including newly registered capital, increased capital, and capital contribution & share purchase reached US$20.33 billion, an increase of 5.7% y-o-y. Real estate sector attracts the second most FDI injection with USD 5.54 billion, accounting for 27.3% of the total, in the period. This figure is noteworthy as real estate typically only accounts for 6-9% of total FDI.
According to the General Statistics Office, the real estate industry went up 4.12% in Vietnam, the highest rate for the same period in the last four years. The activity rose 5.32% in Ho Chi Minh City.