Housing supply improves amid upward pricing trend: Avison Young

Avison Young Vietnam analysts offer an insight into key developments across real estate segments in the third quarter of this year, saying that all types maintain a positive outlook.

In the first nine months of 2024, foreign direct investment (FDI) in Vietnam's real estate sector reached nearly $4.4 billion, a 2.2-fold increase year-on-year.

Foreign investors are capitalizing on every real estate opportunity through capital partnerships with developers, project share purchases, or mergers and acquisitions (M&A).

This accelerates recovery momentum, aiming for a new growth cycle expected to begin mid-next year. Meanwhile, the entry of new players will impact project development processes, promising a more diverse supply in the future.

The Asia-Pacific region remains a growth driver and a safe investment destination globally, with sectors of investors’ top interest include industrial & logistics, residential, office, hotel & resort, and retail. Therefore, Vietnam and its real estate market will continue benefiting from the FDI influx," said David Jackson, Principal and CEO, Avison Young Vietnam.

"Besides, notable changes in the past two years, such as the ratification of three new real estate laws, the new framework for land price and corrective actions of fraud cases, are strengthening investors’ confidence," he added.

New condominium supply improves, prices continue to rise

Q3 saw the condominium segment begin to be more active. New supply in Hanoi and Ho Chi Minh City increased, reflecting developers’ responsiveness to the unsatisfied housing demand and renewed market confidence.

From approximately 2,500 units launched mid-year, Hanoi’s market saw additional new launches in Q3, including 1,424 units from Lumi Hanoi (Phase 2) and The Miami GS5.

Previously pending projects like QMS Top Tower and Hanoi Signature also reentered the market with 730 units. Average selling prices ranged from $2,500-3,500/sqm, and higher in the city center, reaching $2,900-3,800/sqm.

The supply of new condominium is expected to increase steadily from year-end, with upcoming launches such as Lumi Hanoi (Phase 3), The Victoria, and The Senique Hanoi, alongside a 2-4% price growth.

In HCMC, four projects namely D-Homme, Fiato Uptown, Lavida Plus, and Eaton Park (Phase 2) announced upcoming launches, while the new Opus One (in Vinhomes Grand Park urban area) introduced 2,000 units onto the market.

Across HCMC, primary prices ranged from $3,000-5,000/sqm. A total of 3,000 units from the above-mentioned projects will soon be available in Q4, with prices starting from $2,250/sqm (Fiato Uptown) to $2,700/sqm (D-Homme), and $3,300/sqm (The Opus One).

With the current apartment prices, housing affordability remains a challenge for homebuyers in Hanoi and HCMC. Buyers are now more selective, especially about projects' legal status. This led to uneven absorption rates: 80-85% in Hanoi and 70-75% in HCMC.

High and rising prices are driving demand toward smaller markets, such as suburbs and satellite cities with good transportation connectivity and reasonable pricing.

For example, Binh Duong experienced active market activity in Q3 from projects like TT Avio, Sycamore, and BenHill Thuan An. Eastern areas of Hanoi, including Dong Anh and Gia Lam district, as well as HCMC’s neighboring provinces of Binh Duong, Dong Nai, and Long An, are expected to lead the future housing supply.

Stable performance in office sector, new supply continues expanding to non-CBD

The office segment has remained stable since the beginning of the year, with rental and occupancy rates largely unchanged in Q3. New supply is expected to increase over the next two years, mainly in non-central business districts (non-CBD).

In Q3, a new Grade A building – ThaiSquare The Merit (District 1) – was launched in HCMC, offering 11,000 sqm of leasable space. Additionally, e.town 6 (Tan Binh district) achieved LEED Platinum v4 Core & Shell certification.

Office rents remained steady at $55/sqm/month for Grade A and $26/sqm/month for Grade B. Future office spaces will be concentrated in Thu Duc city (Vinhomes Grand Park) and District 7 (UOA Tower 2, V-Plaza Towers) with competitive rents compared to the CBD.

Recently, it was reported that Google would open an office in HCMC, setting the stage for other firms in tech, finance, and energy to increase their presence in key economic hub of the country.

In Hanoi, no new office supply arrived in Q3. Grade A and B rents and occupancy remained stable, with Hoan Kiem and Ba Dinh districts leading at $32-41/sqm/month.

Meanwhile, the western areas (Cau Giay, Nam Tu Liem, Bac Tu Liem district) are growing rapidly with new projects. This past quarter, Hanoi recorded the largest commercial real estate transaction in five years – a 17,000-sqm lease at The West by a healthcare service provider. Upcoming supply over the next year includes Tien Bo Plaza, Galex Tower Tran Nguyen Han, Maslight Tower, and Oriental Square.

Energy efficiency, sustainability continue to drive the growth of industrial real estate

In Q3, industrial land rents in HCMC rose by 5% quarter-on-quarter, reaching $240/sqm/term. Limited land availability and outdated planning in many long-established industrial parks (IPs) have reduced HCMC’s competitive edge.

The city is proceeding with plans to transform five existing IPs and export processing zones, expected to complete by 2025. Notable developments in Q3 were mainly in other key markets: Binh Duong with the 700-ha Cay Truong IP, Dong Nai with the 1,000-ha Bau Can-Tan Hiep IP (Phase 1), and Ba Ria-Vung Tau with the 110-ha My Xuan B1-Conac IP.

Adjacent to HCMC, Long An draw FDI interest efficiently with South Korea’s CW Wind investing in a wind equipment manufacturing facility in Dong Nam A Long An IP.

In Hanoi, super typhoon Yagi in early September caused localized flooding and affected production and logistics in some IPs. While HCMC focuses on transformation to optimize land use, Hanoi is expanding its industrial land with new industrial clusters commenced in Nam Phuc Tho and Long Xuyen in Q3. Secondary and tertiary markets, such as Hung Yen, Thai Nguyen, Hai Duong, Thai Binh, Hoa Binh, and Thanh Hoa, accelerated IP approvals in Q3, boosting northern Vietnam’s long-term industrial land supply.

The growth of new IP projects needs to align with energy-efficient, sustainable practices.

Chi Vu, a senior manager, industrial services of Avison Young Vietnam, commented: "Vietnam is working to attract high-quality FDI, and energy efficiency and environmental responsibility are key factors for high-tech investors in considering industrial land leases. Therefore, industrial real estate developers should enhance facilities and diversify services to keep Vietnam’s industrial real estate attractive and competitive in the region."

Steady performance for HCMC’s serviced apartments, increased supply in Hanoi

In Q3, HCMC’s 5-star InterContinental hotel – a complex of hotel and 260 Grade A serviced apartments – was rebranded as the JW Marriott Hotel & Suites Saigon under Marriott International's operation and management.

On average, serviced apartment rents remained stable quarter-on-quarter, respectively at $39.1/sqm/month (or $1,490-7,400/unit/month) for Grade A and $21.3/smq/month (or $1,000-4,000/unit/month) for Grade B.

Despite being 30% higher than apartment rentals, serviced apartments in HCMC maintain over 80% occupancy due to prime locations, amenities, flexible leases, and promotional offers.

Hanoi has 3,400 serviced apartment units across both Grade A and B, almost 2,000 more than HCMC. This number is set to expand over the next two years, with key projects including PARKROYAL Hanoi Serviced Suites (126 units, Tay Ho district) and Somerset Metropolitan West Hanoi (364 units, Cau Giay district).

Q3 rental rates in Hanoi remained stable at $31.9/sqm/month for Grade A and $15.9/sqm/month for Grade B. The lowest rent was recorded at Oriental Palace (Tay Ho district) at $653/unit/month, and the highest at Lotte Center (Ba Dinh district) at $7,550/unit/month.

Morgan Ulaganathan, director, head of asset services & hospitality advisory at Avison Young Vietnam said: "The serviced apartment sector is operating positively with growing occupancy and rates, benefiting from the recovery in tourism and the influx of foreign professionals. I expect that demand for serviced apartments, as well as other hospitality real estate types such as hotels and resorts, will continue to rise as Vietnam increasingly becomes an economic hub with Q3/2024 GDP growth at 7.4% making it an attractive destination for international investors."

Retail space supply on the rise; luxury brands target central areas

In Q3, both Hanoi and HCMC saw new shopping centers enter the market to kick-off the year-end shopping season. In HCMC, Vincom Mega Mall Grand Park (Thu Duc city) and Parc Mall (District 8) opened in late July and August, respectively.

The 55,000-sqm Parc Mall achieved 100% occupancy upon launch, including Aeon Ta Quang Buu supermarket. Thanks to Parc Mall’s positive entry, non-CBD occupancy rates increased by 5% to 81%, with stable rents between $20-117/sqm/month. The city’s CBD remains a prime destination for luxury brands like Longchamp, Lush, and Popmart, all opening new stores in Saigon Centre.

Hanoi’s retail real estate market has been equally vibrant, with the launch of Diamond Plaza Le Van Luong (Thanh Xuan district), a 14,800-sqm shopping center opened in early September. With rental rates of $35/sqm/month, it achieved 60% occupancy and includes a new branch of FujiMart supermarket. Lotte Center Hanoi also reopened after a year of renovations.

Across the market, both rental and occupancy rates remained unchanged quarter-on-quarter, with total retail space exceeding 1 million sqm, largely in shopping malls. Additionally, new projects such as Vincom Plaza Bac Giang, Go! Ha Nam, and Aeon Mall Hue also came into operation in the past quarter.

Retail space supply is set to rise through year-end, with upcoming projects including Central Premium Mall (District 8, HCMC) and Aeon Xuan Thuy (Cau Giay district) and Han Jardin (Bac Tu Liem district) in Hanoi. Future supply in other markets includes Aeon Malls in Hai Duong, Bien Hoa (Dong Nai), Tan An (Long An), and MM Mega Market Da Nang.

Vietnam’s retail real estate sector is fueled not only by competition among developers to gain market share but also by the diversity of retail formats, including convenience stores, department stores, and supermarkets. In-store shopping therefore remains irreplaceable to the long-term growth of Vietnam’s retail real estate and retail sector.