Prime residential demand in HCMC to pick up in H2

Around 6,000 high-end apartments are expected to come onstream this year.

Prime residential supply in Ho Chi Minh City is constrained by weak sentiment amid economic uncertainty and legal issues. According to a JLL report, High-end Apartment and Villa/Townhouse markets are expected to welcome around 6,000 units and 1,000 units, respectively, in 2023. 

“Demand is likely to be modest in 1H23, before picking up in 2H23 with more projects set to enter the market and lingering legal and macroeconomic issues expected to improve by year-end,” the report said.

Here’s more from JLL:

Future completion of higher-priced projects will raise capital value growth in both segments in 2023, in the context of limited new supply and cautious demand. The capital value is expected to reach approximately USD 3,458 (+5.2% y-o-y) and USD 3,704 per sqm (+6.0% y-o-y) for High-end Apartments and Villas/Townhouses**, **respectively, by the end of 2023. 

Subdued demand with transactions coming from one project

New sales for High-end Apartments totalled 2,785 units in the first quarter of 2023. While this figure was up remarkably q-o-q and y-o-y, nearly 90% of sales came from The Beverly, Vinhomes Grand Park. The project’s high sales are due to its soft launch activities since 4Q21 and the fact that it officially launched in the quarter. Apart from this exception, market demand was generally sluggish due to weak market sentiment.

Villa/Townhouse transactions recorded an immense drop of 91.7% q-o-q (down 98.3% y-o-y), with just 19 units sold, as most buyers and investors applied a “wait-and-see” approach amid the legal uncertainty and market slowdown. All transactions came from later phases of existing projects, namely The Global City, The Classia and Vinhomes Grand Park.

Limited new supply owing to legal issues and economic headwinds

Economic headwinds and lingering legal issues still challenge soft-launch projects as they proceed to the signing of SPA contracts. The market welcomed 2,989 units in the High-end Apartment** **segment during 1Q23, coming solely from the subsequent phase of Vinhomes Grand Park township. This is the only project that received an official sale permit from the authorities in the quarter.

Following the previous trend, the Villa/Townhouse market experienced no introductions of first-time projects in 1Q23. Newly-launched units dropped significantly by 67.9% q-o-q (down 93.6% y-o-y), with around 60 units coming from the existing high-priced projects of Khang Dien, Masterise and Vinhomes. 

Selling prices adjust slightly amid the weak market sentiment

Growth in net effective rent of High-end Apartments accelerated for the fifth straight quarter, recording +2.0% q-o-q and +9.4% y-o-y at USD 9.5 per sqm, per month. This was driven by strong leasing demand, as renting presented as a more feasible option than waiting for economic indicators and prices to further stabilise.

High-end Apartment capital values registered steady growth with an increase of 0.4% q-o-q, reaching USD 3,299 per sqm. However, the expansion is weaker compared to previous quarters due to slower market activity and prolonged legal issues, which tempered price growth. For the Secondary market, the price continued to experience a slight decline of 0.4% q-o-q amid softening demand.

Note: Ho Chi Minh City Residential refers to Ho Chi Minh City's high-end apartment market.