Q1 2020 was quiet with supply shortages and low sales. Whilst currently in limbo we expect the sector to pick up quickly as landed properties remain one of the most favoured alternate investments.
Supply drop
Following a rebound in Q4/2019, Tet and Covid-19 effects brought supply down -76% QoQ. The two first quarter launches, Green Center Villas in Tay Ho and Him Lam New Star in Long Bien, provided a total 130 dwellings. Ha Dong with over 50% share continued to lead primary supply.
For three years the East, notably Long Bien and Gia Lam districts have led the primary market with regular launches by major players. A shift in focus over the last two quarters to Ha Dong district, has the area now leading primary supply and expected to until year end.
Performance brake
Performance fell -54% QoQ and -75% YoY with just 281 sales. Quarterly absorption of 21% was the lowest in three years, down -27 ppts QoQ and -16 ppts YoY. Ha Dong with high primary supply, performed best with 46% of first quarter sales.
The first quarter typically records the lowest absorption of the year, with the highest in the second or fourth quarters. For five years, Q1 has accounted for around 18% of total sales.
Stability amidst chaos
By end Q1/2020, most developers had yet to reduce asking prices, which led to general price stability and even increases in some projects.
With fluctuating stock and commodity markets, real estate, specifically landed property remains a favored investment. Should the pandemic continue, developers may have to consider price reductions or more flexible payment schedules.
Social distancing has limited almost all activities, including work on construction sites.
Putting more pressure on developers’ construction schedules to stay on time, is Article 57 of the ‘Law of Real Estate Trading’ and buyer scheduled payments aligning more with construction scheduled progress. Delays will see buyers legally able to hold their scheduled payments until development gets back on track.
The overall primary price decline resulted from primary supply increases in the lower priced outer urban districts. However, overall average segment secondary prices have increased. Villa by 1.2% QoQ and 7.3% YoY, Townhouse 2.8% QoQ, and 4% YoY and Shophouse by 3.1% QoQ and 3.8% YoY.
Uncertain Outlook
New supply dropped -42% YoY from 2019 and will remain steady in 2020. In the next nine months, approximately 13 villa/townhouse projects, providing 2,000 dwellings will enter, mostly in Hoang Mai, Ha Dong, and Tu Liem districts. The pandemic has forced a minimum year delay on many launches planned for 2020.
A government stimulus package will help spur investment and support recovery. Business continuity initiatives may mitigate any initial damage but in the longer term more property restrictions may need lifting to stimulate the market post COVID-19.