Real estate market recuperates if mid-end housing dominate the new supply

Event: We attended an analyst briefing with property firm DKRA in Ho Chi Minh City on July 4. The firm presented their views on the property market trends in 2Q19 and outlined their expectations for 2H2019.  In this note, we present a brief summary what was new and/or interesting to us from the briefing.

Company profile: DKRA is a major property brokerage based in southern Vietnam. The firm also offers services including research, project development consulting, real estate valuation, and sales services.

Land market in 2Q19

• Supply increased 12% QoQ and absorption rate remained stable.
• Supply is concentrated in suburban area such as Thu Duc, Cu Chi, Hoc Mon Districts.
• Secondary transactions increased by 2-5% QoQ

Condo market in 2Q19

• Supply is now the lowest it has been since 2016.
• Supply in high-end housing dominates the market, accounting for 53% of total supply.
• Supply in HCMC’s east and south areas account for 31% of total supply.
• Secondary selling prices increased 5-7% QoQ and liquidity improved, largely in mid-end and affordable housing (i.e., home price levels of under VND2.0 bn).

Townhouse and villa segments in 2Q19

• Supply increased 109% QoQ and absorption rate increased 138% QoQ.
• Supply in Districts 9 and 2 dominate the market.
• Secondary market activity increased slightly compared to 1Q19, with transactions mainly comprising houses priced at less than VND10 bn.

 DKRA’s overall outlook for 2H2019

• Condo supply might reach c. 6,500 units (excluding Vinhomes Grand Park) per quarter.
• Absorption rate should remain stable or increase slightly, but will be lower than FY18.

Our view: Since 2018, inspections and investigations of real estate deals have caused delayed licensing for property developments, leading to a sharp fall in new supply in HCMC’s central districts (luxury/high-end housing). We believe this has led developers to shift to suburban areas (and mid-end/affordable housing). In the long term, we expect the authorities to ensure that the supply shortage is not prolonged. Based on our discussions with industry players, projects that do NOT involve landbank sourced from state-owned enterprises and BOT agreements (which exchange infrastructure for land) seem to more easily obtain licenses. Therefore, we expect HCMC’s real estate market to stabilize gradually going forward.

Please see the link for the full report:Real estate market recuperates if mid-end housing dominate the new supply

Analyst: Tam Nguyen, tam.nguyen@yuanta.com.vn