We may see a recovery in launches over the second half accompanied by a big push by developers to catch sales targets.
Pandemic performance
In Q1/2020, five new and the next phases of six existing projects, provided approx. 4,800 units, down -64% QoQ and -50% YoY. New launches were at their lowest for five years as developer plans rapidly changed in response to the pandemic. Primary supply decreased -17% QoQ and -19% YoY to 27,900 units. Grade B remains the largest supplier accounting for 73 percent.
There were approximately 4,900 sales, down -53% QoQ and -50% YoY. Low quarterly performance, first affected by national holidays in early Q1, was further damaged by social distancing. Local buyers are avoiding crowded sales events and travel bans have limited foreign purchases. First quarter absorption was 18%, decreasing -14 ppts QoQ and -11 ppts YoY. Intensified government measures since April 1st, have forced developers to shutter site operations and close sales offices.
Stable primary prices
Primary prices were stable QoQ and up 10% YoY to US$1,460/m2 . Unless it continues into 2H/2020, Savills anticipate the outbreak is unlikely to result in a sharp primary price correction.
For five years average primary prices have steadily increased 5% pa. Grade A at 10% YoY has been the highest with improving development standards in new supply. Cau Giay increased 15% pa fueled by lower than CBD prices and cutting-edge healthcare and educational facilities.
Grade B suffered
Grade B had the lowest absorption, down -16 ppts QoQ and -14 ppts YoY to 17 percent after sales fell -57% QoQ and -51% YoY. Grade B sales eased to 70% from 75% in Q4/2019. With abundant supply, developers face severe competition to maintain performance. Primary prices decreased -2% QoQ but increased 5% YoY. Grade C at 20% had the highest absorption, fueled by increasing demand for more affordable units.
Positive longer-term demand drivers
By 2019, city population reached 8.1 million, driven by steady 2.2% pa growth for ten years. Delivering approx. 120,000 babies pa and gaining up to 100,000 immigrants annually, Hanoi growth is higher than the national 1.1 percent. The urban population, up 8 ppts over 2009, represents 49% of the total.
The 2019 ‘Population and Housing Census’ reported approximately 2.2 million households in Ha Noi. Average household sizes are on a downward trend and currently at 3.5 people/household. People living in apartments were the highest nationwide at 12.9%, with 2.8% planning to buy new dwellings. NFA per capita was 26.1 m2 /person in 2019, up from 23.6 m2 /person in 2014.
There was increased foreign interest in high-end products, with 30% project quotas quickly taken up. This trend is expected to continue in well located, premium projects by reputable developers.
Technology on a high
Vingroup introduced ‘Online Trading Floor’ and Sunshine released their ‘Sunshine App’. These tech moves are supported as 66% of Vietnamese online for an average daily use of 6 hours and 42 minutes. Around 148% have mobile phones and 45% of mobile connections are 3G & 4G. However, technology will not completely replace the role of personal interaction in developing buyer confidence.
Outlook
The short-term economic impact of Covid will be significant.
In 2020, approximately 39,600 units from 28 existing and future projects will enter and Grade B will continue to lead. Of the 28 announced projects, 43% are under construction and 36% at foundation. Leading future suppliers are Tu Liem district with 37% of stock, Gia Lam with 24% and Hoang Mai with 23 percent.
When restrictions are lifted developers will be under pressure to ramp up sales, which is likely to see improved buyer incentives. These may include more flexible payment terms, smaller deposits, and extended payment schedules.
Reasons to be cheerful
- Online sales will accelerate in 2020.
- Property management will implement 4.0 technologies to remotely connect with residents.
- Decree 41/2020 / ND-CP: extending tax and land rents payments to ease the worst pandemic effects.
- New regulations will reshape supply. National technical regulations on apartment buildings state units must have a minimum 25 m2 NLA; and units less than 45 m2 must not exceed 25% of total project units.
- Wider capital sources: 2019 remittances reached a new high of US$16.7 billion, of which over 20% was invested in property. Real estate firms in 2019 issued bonds worth over US$4.6 billion representing a 38% share and second only after commercial banks.