Official launches reached more than 4,100 units, the lowest level since the market bound back in 2014, due to the continued prolonged construction approval process experienced recently.

The low supply has sent prices rising. The average price level stood at USD 2,009 per sqm, up 21.6% y-o-y. Meanwhile, the high-end price escalated 52.9% y-o-y, to USD 4,569 per sqm. The reason is mainly the entrance of some new luxury projects in the CBD with exceptionally high prices due to the limited land bank in this area.

Amid the supply slowdown, more than 4,300 units were sold in 2Q19, the same as the 1Q19 level. Consequently, good sales rates were recorded across all segments. Mid-end projects with a launching price of USD 1,200-USD 2,000 per sqm were the top performers. Investors started to shift their investment from high-end apartments to villas/townhouses to enjoy a better capital gain, given the same investment amount. Meanwhile, owner-occupiers tend to look for high-quality supply on the secondary market due to limited new supply on the primary market.

The government’s tight control of new developments has forced the supply trend towards a more sustainable model. Accordingly, only projects having approval regarding land use rights and construction permits are able to be sold off-plan.

Because of the government’s tight control relating to granting land use rights and construction licenses, pipeline supply is expected to decrease significantly. As the prevailing delay in the approval procedure is expected to continue, the projected supply pipeline in 2019 is subject to greater uncertainty and varies between 18,000 and 28,000 units, the actual number heavily depends on the launching process of the large-scale Vinhomes Grand Park project.

On Hanoi market, after a period of strong influx of stock, 2Q19 registered only 5,900 units newly added to the market, nearly half the 1Q19 figure. Of that, most came from the subsequent phases of existing projects. This was also the lowest level of new launches since the market rebounded in 2014. The majority of new launch projects are small scale with less than 500 units per project.

Unfavorable market sentiment owing to the tightening loan assessment process has prompted developers to introduce more sales incentives schemes to offload stocks while keeping the price unchanged. Most applied sales strategies that included extended payment periods and discount programs from 3 – 6% on unit price for early payment.  

Take-up in 2Q19 was more than 4,660 units, notably lower by 65.3% q-o-q, in tandem with the supply slump. In 2Q19, the slower investor demand became more evident after a period of strong growth. While the demand from owner-occupiers has remained healthy, the widespread trend of increasing interest rate and a stricter loan assessment process among commercial banks have prevented buyers in accessing the mortgages. 

Click here to download the JLL Vietnam Property Market Brief 2Q19 - HCMC and Hanoi 

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