HCMC Market Presentation Q3 2010 - en

HCMC Real Estate Market Q3 2010
2010
Presented by Savills Vietnam Co., Ltd.

Savills won The Asia Pacific Property Awards
PRESENTATION STRUCTURE
I) Vietnam economy overview

II) HCMC market Q3 2010
1. Office for lease market
2. Retail market
3. Apartment for sale market
4. Hotel market
5. Villa and townhouse
6. Serviced apartment market
III) Strategic review October 2010
Savills 3
I. VIET NAM ECONOMIC OVERVIEW
Savills
October 2010
Economic Indicators
GDP – Q3 2010: 7.16% y-o-y CPI – Q3 2010: 8.64% y-o-y
US$ million
100 10% 50%
45%
80 8% 40%
35%
60 6% 30%
25%
40 4% 20%
15%
10%
20 2%
5%
0%
0 0%
01/08
03/08
05/08
07/08
09/08
11/08
01/09
03/09
05/09
09/09
11/09
03/10
05/10
09/10
07/09
01/10
07/10
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Q1 Q2 Q3
2010 2010 2010
CPI CPI - Food & Foodstuf f CPI - Construction materials

GDP at current price GDP growth rate
HCMC market 5 Source: GSO

Economic Indicators
Foreign Trade – 3Q 2010: FDI – 3Q 2010: US$8bn

~ US$8.6bn deficit up 4.8% y-o-y
US$ million US$ billions
100,000 70
60
80,000
50
60,000
40
40,000 30
20
20,000
10
0
0
2003 2004 2005 2006 2007 2008 2009 Q1 Q2 Q3
-20,000 2010 2010 2010
Exports Imports Trade Balance Registered FDI

Series1 Series2
Disbursed FDI

Key property influences
Steel production
3Q 2010: up only 1.0% y-o-y
•Good for the economy generally 25%
20%
•But not good for real estate

15%
development as construction 10%
output increased only moderately 5%
0%
2005 2006 2007 2008 2009 3Q 2010
-5%
-10%
-15%

Limited credit to control inflation mainly because:

• VND depreciated 2.09% in 8/2010 and 5.5% y-t-d
• Foreign exchange risk due to huge trade deficit US$8.6bn y-t-d
• World‟s material and food prices are expected to increase
Credit for real estate has suffered accordingly
Circular No. 13 and No. 19 limit credit for real estate, effective from 10/2010:
• Increasing Capital Adequacy Ratio from 8% to 9%
• Setting the risk for real estate loan at the highest among asset classes of 250%
• Commercial Banks have less regard for real estate development
HCMC market 8 Source: GSO, SBV

CEO Tower
•Decree No. 71 limits funding source via “capital contribution contract”

for residential real estate projects.
•Interest rates have been kept at a high level of 14-16% per year.
Limited potential for a decrease in the near future.
•The attraction of gold and money markets have been superior to that
of real estate market in recent months, potentially lowering investment
demand for real estate
HCMC market 9 Source: Savills Research & Consultancy, Q3 2010

•Good economic support for office Production growth – 3Q 2010 y-o-y

sector.
35%
•Higher demand for hotel as the 30%

26.8%
economy has recovered 25%
25.2%
20.2% 19.9%
20%
•High demand for villa/ townhouse 15%

and affordable apartment
10%
5%
•The production of consumer goods
has been strong, supporting retail 0%
Apparel Ref rigerator Sport shoes Powder milk
sales and demand.

HCMC Real Estate Market Q3 2010
October 2010
II. 1. HCMC OFFICE Q3 2010
Supply
• Total supply: 154 buildings (988,000 sq m): 6 Grade A,
36 Grade B and 112 Grade C
• New supply: one Grade B and six Grade C buildings of
about 35,000 sq m, increased by 4% q-o-q
Market performance
• Avg. occupancy: 85%, remain stable q-o-q
• Grade A asking rents: US$57 (down 3% q-o-q)
• Grade B asking rents: US$33 (down 2% q-o-q)
• Grade C asking rents: US$22 (down 2% q-o-q)
• Both local and foreign banks expanding business
Outlook
• Around 100,000 sq m to come online by end 2010,
(Bitexco Financial Tower 37,000 sq m, HMTC Building
15,500 sq m)
Existing supply by district and grade
• Dist. 1: maintain the leading position (60% total supply, providing 24,000 sq m
new supply in Q3 2010 )
• Grade B still the main supply, accounting 50 % total supply
Grade A Grade B Grade C
Sq m
1,200,000
Sq m Q4 2009 Q1 2010 Q2 2010 Q3 2010
600,000
1,000,000
500,000
400,000 800,000 39% 40%

42%
37% 40%
300,000
600,000
200,000
400,000 50% 50% 50%
100,000 47% 46%
0 200,000
D1 Tan Binh D3 D7 Phu Nhuan D4 Others 13% 12% 11% 10%
0
Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010

Occupancy
Market performance by grade
% Grade A Grade B Grade C
100%
• A strong economy in 2007 90%
shows a high occupancy 80%
70%
• Office market declines in
60%
term of occupancy and rent
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
from the end of 2008
2006 2007 2008 2009 2010
• In Q3 2010, Grade A and
Rent
Grade C continue to show US$/ sq m Grade A Grade B Grade C
100
sound performance
80
60
40
20
0
2006 2007 2008 2009 2010

Grade A
Market performance by 30,000
25,000
Sq m Take up New supply
grade – take up and 20,000

15,000
new supply 10,000

5,000
0
• Take up of Grade A: slightly -5,000 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
recovering in Q3 2010, expected to 2006 2007 2008
Grade B
2009 2010
Take up New supply

see a stronger recovery in next two 100,000 Sq m
80,000
quarters 60,000
• Take up of Grade B: reducing in Q3 40,000

20,000
2010 after the peak in Q2 2010; 0
expected to have a level of 2009 in -20,000 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
the next quarter 2006 2007 2008

Grade C
2009 2010
Sq m Take up New supply

• Take up of Grade C: strong 60,000
40,000
absorption of new supply and will
20,000
remain strong in Q4 2010
0
Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
-20,000
-40,000 2006 2007 2008 2009 2010

Future supply by year and by district
• Future supply focuses in Dist. 1 and Dist. 7
• Total of 1,200,000 sq m future supply in the mid term
Sq m gross area Sq m gross area

600,000 600,000
500,000 500,000
400,000 400,000
300,000 300,000
200,000 200,000
100,000
100,000
0
0
End 2010 2011E 2012E 2013
onwards

II. 2. HCMC RETAIL Q3 2010
Supply
• No new supply, 602,000 sq m for all categories;
• 6 department stores (92,060 sq m), 19 shopping centres
(250,700 sq m), six retail podiums (5,970 sq m), 61
supermarkets, and 3 wholesale markets
Market performance
• Avg. occupancy: 94%, -2% q-o-q
• Avg. asking rent: US$75/ sq m/ month, -9% q-o-q
Outlook
• Approx. 700,000 sq m of new retail area are expected to
enter the market in the next few years.
• New projects next quarter: The Crescent Retail Phase 1
(approx 20,000 sq m) ; Bitexco Financial Tower (approx
11,000 sq m)

Existing supply by type and by district

• Dist.1: Approx. 25% total supply
• Q3 2010 saw strong supply in shopping centre segment
Wholesale markets Supermarkets
Approx. Area (sq m) No. of retail centres Shopping Centres Department Stores
Retail Podiums
sq m No. of retail centres Sq m
160,000 30
140,000 600,000
25
120,000
20 500,000
100,000
80,000 15 400,000
60,000
10 300,000
40,000
5
20,000 200,000
0 0
100,000
0
Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010

Rent range of Retail podiums, Shopping Centres & Department stores:
Lower rent Upper rent

US$/ sq m/ month
300
250
200
150
100
50
0
Dist. 1 Binh Dist. 1 Dist. 5 Dist. 7 Tan Dist. 1 Dist. 5 Tan Dist. 11
Thanh Binh Binh
Retail podiums Shopping centres Department stores

Retail growth rate Future supply
• Increased by more than 31.9% y-o-y • Mainly located in District 1 (16%)
and District 7 (38%)
Future supply
45
% VND Billion
300,000
sq m
500,000
40 450,000
250,000
35 400,000
30 200,000 350,000
25 300,000
150,000
20 250,000
15 100,000 200,000
10 150,000
50,000
5 100,000
0 0 50,000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 First 8 0
months
2010E 2011E Potential
Retail sales value Retail growth rate (%) GDP growth rate (%)
Source: HCMC Statistics Office, 2010

II. 3. HCMC APARTMENT FOR SALE Q3 2010
Supply
• Primary market: 83 selling projects, appox.16,400
units
• Secondary market: 51,400 units
• New supply: 20 projects (7,200 units), Grade C (67%)
and are mainly located in suburban districts.
Market performance
• Average primary prices:
• Grade A: US$2,041 per sq m
• Grade B: US$1,550 per sq m
• Grade C: US$773 per sq m
• Secondary price fluctuated differently among the
districts
Outlook
• Approx. 10,300 units launching in the next two quarters
• Approx. 104,000 units of additional supply to be
completed in the next few years
Primary supply by district up to Q3 2010

• Suburban districts like Tan Phu, Binh Tan, Dist. 7 account for the majority of
supply in Q3 2010
• Adding greater supply of grade C apartments to the market
Units Grade A Grade B Grade C
12,000
14,000 Units
10,000 12,000
8,000 10,000
6,000 8,000
4,000 6,000
4,000
2,000
2,000
-
0
Q1 2009
Q2 2009
Q3 2009
Q4 2009
Q1 2010
Q2 2010
Q3 2010
Q1 2009
Q2 2009
Q3 2009
Q4 2009
Q1 2010
Q2 2010
Q3 2010
Q1 2009
Q2 2009
Q3 2009
Q4 2009
Q1 2010
Q2 2010
Q3 2010
Q2 2009Q3 2009Q4 2009Q1 2010Q2 2010Q3 2010
CBD Secondary Districts Suburban Districts

Primary market performance
• Total sold units nearly doubled compared to Q2 2010
Primary supply # of units sold
18,000 Units
16,000
14,000
12,000
10,000
8,000
6,000
4,000
2,000
0
Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010

Secondary market performance up to Q3 2010
Q4 2009 Q3 2010
US$/ sq m
3,000
2,500
2,000
1,500
1,000
500
0

Possible new supply by district in next two quarters, all districts: 10,300
units
Units
2,500
2,000
1,500
1,000
500

Future supply by expected year of completion

Units Projects
90,000 70
80,000 60
70,000
50
60,000
50,000 40
40,000 30
30,000
20
20,000
10,000 10
- 0
2011E 2012E Potential

II. 4. HCMC HOTEL Q3 2010
Supply
• There are 8,775 rooms from 3, 4 & 5-star hotels:
 5-star: 13 hotels, 4,094 rooms;
• Q3 2010: No new supply for 4 & 5-star hotels; one new 3-star hotel
named Family Inn Saigon (72 rooms);
Market performance
• 5-star: US$125/ room/ night (stable);
• 4-star: US$80/ room/ night (decreased 4% q-o-q);
• 3-star: US$44/ room/ night (decreased 4% q-o-q);
• Top rate: US$254/ room/ night (Park Hyatt);
• Avg. occupancy achieved at 59% compared to 65% q-o-q and 55% in
y-o-y;
Outlook
• Approx. 2,000 new rooms to be provided in the medium term;
• Expecting a continuing strong rebound in the number of international
visitors. In first 8 months of 2010, inter. visitors increased 35% y-o-y.
Occupancy
Performance of 3 to 5-star hotels % 5-star 4-star 3-star
100%
• Occupancy: 80%
60%
• Low seasons: Q2 , Q3 40%
20%
• High seasons: Q1, Q4
0%
• Expected strong recover in Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
2010 2006 2007 2008 2009 2010
• Room rate: Room rate

US$/ night/ room 5-star 4-star 3-star
180
• Strong decrease after the 160
140
economic crisis in 2008 120
100
• Stable in the first nine months in 80
60
2010 40
20
0
• Expected slightly increase in Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
2010 due to high season
2006 2007 2008 2009 2010

Future supply of 3 to 5-star hotels

• Approx. 700 rooms expect to enter the market in 2010 - 2011
• Future supply is mainly located in District 1 (83%).
• At the beginning of Sep 2010, Ibis Saigon South Hotel (3-star) has just broken
ground in D.7.

II. 5. HCMC VILLAS & TOWNHOUSES Q3 2010
Supply
• Primary supply: 8 projects, 800 units
• Secondary supply: 34 projects (2,200 units)
• Primary supply concentrated in suburban
districts: D7, D9, Thu Duc, Nha Be, Binh Tan.
• Phu My Hung occupies 70% supply in secondary
market.
Market performance
• Asking primary price for villa:
US$245,000 - US$1,160,000 per unit
• Asking primary price for townhouse: US$68,000-
US$952,000 per unit
• Average secondary price in Phu My Hung:
US$600,000 – US$2,800,000 per unit
Outlook
• Nearly 200 hectare planned to develop villas &
townhouses in the next few years.
II. 5. HCMC VILLAS & TOWNHOUSES Q3 2010
Known potential future supply by district

ha
120
110
100
90
80
70
60
50
40
30
20
10
0
Binh
District 9 District 2 Nha Be Hoc Mon
Chanh
Total area (ha) 113 48 19 10 6

II. 6. HCMC SERVICED APARTMENT Q3 2010
Supply
• 53 serviced apartment buildings; all grades (2,950
units).
• New supply: Two new Grade B buildings (54 units)
and one new Grade C building (18 units)
Market performance
• Avg. occupancy: 88%, -3% q-o-q
• Average rent went down
• Grade A: US$29.5/ sq m/ month (-2% q-o-q)
• Grade B: US$24/ sq m/ month (stable q-o-q)
• Grade C: US$15 / sq m/ month (-8% q-o-q)
Outlook
• Approx. 1,400 units in the next few years.
• End of 2010, 2 new projects: Grade B Crescent
Residence 2 (111 units) and Grade C Mai Har Lan
(38 units).
Supply by grade
Units Grade C Grade B Grade A
3,000
2,500
2,000
1,500
1,000
500
0
2006 2007 2008 2009 2010

Occupancy
Grade AGrade B Grade C
Performance 120% %
100%
• Occupancy:
80%
• Slight fluctuation 60%
40%
• Large supply in Q3 2009 of 20%
Grade A caused sharp Q1Q2 Q3 Q4 Q1Q2 Q3 Q4 Q1Q2 Q3 Q4 Q1Q2 Q3 Q4 Q1Q2 Q3
decrease
2006 2007 2008 2009 2010
• Grade B and C: downward
trend, record low Rent rate
US$/ sq m Grade A Grade B Grade C
35
• Rent: 30
25
• Generally stable over the 20
15
longer term, 2006 - 2010
10
5
0
2006 2007 2008 2009 2010

Future supply of serviced apartment
Future supply
units
800
700
600
500
400
300
200
100
0
2010E 2011E 2012E Potential

III. STRATEGIC REVIEW
Office
• Over supply and competition pressured rents and occupancy across 3 grades.
• Competitive rental market will create high tenant mobility and a „flight to quality‟.
• 10% of current supply coming in Q4 2010. With weak economic indicators locally and globally
the office market will remain „soft‟ in the near term.
• Over the mid term HCMC‟s economy is expected to continue its strong growth path, demand
for office space will firm.
• Grade A buildings are aligned with FDI inflow; while Grade B and C buildings are much more
dependent on the health of the domestic economy.
• High land cost in the CBD will contrast economic rents v. market rents.
• State owned enterprises decreasing share of GDP (43% in 2000; 27% in 2009) and increasing
of private enterprises (36% in 2000; 49% in 2009) will create a large white collar work force.

Retail
• Generally rentals are pressured due to strong supply and competition.
• However retail podiums performance was stable due to good locations mainly in the CBD,
small supply and its stable visitor sources.
• Total retail space (including super markets) per capita is low at 0.1 sq m compared to regional
competitors (Singapore: 0.93sqm, Bangkok: 0.60sqm, Manila: 0.50sqm).
• In the longer term the retail market has strong potential due to good economic performance,
young demographic, changing consumer behaviour, and rising affluence.
• Alternative natured developments (underground car parks, metro stations) will reconfigure
traditional retail space in the CBD.
• Large scale retail centre developments where people can come to shop, relax and play in
suburban areas with a sufficient car parking space will be have more interested from
international developers.

Apartment for sale
• Rising demand: it is estimated approximately 50,000 – 80,000 dwellings required per year.
• 2 and 3-bedroom apartments are more preferred.
• Affordable price is less than US$1,300 per sq m.
• In the next few years, buyers in the market is mainly young population with limited saving.
• The market will be partially warmer along new recent completed infrastructure.
• Buyers of the market in 2011 will be mainly end-users and long term investors who want to
preserve their money and to make some profit by release their apartments.
• In HCMC market, interest rate seems to be a main market driver which directly affects the
purchasing power; when mortgage rate goes down, the market is expected to be more excited.
• New policies are expected to make the market more transparent.

Hotel
• Currently, the 4 & 5-star hotels are located mainly in CBD.
• Growing number of international hotel operators and developers joining the high-end segment.
• Increasing interested of international investment in 3-star and boutique hotel market in the
CBD.
• The performance of this market is strongly influenced by the number of international visitors
that has increased significantly in the first 9 months. This has lead to a strong recovery in rent
and occupancy compared to the same period last year.
• Increasing share of business visitors in total number of internationals arrivals (14% in 2005
and 21% in 2009) will create high demand for 4 & 5-star hotel rooms.
• The main source of demand for high-end hotels in HCMC will come from South Korea, US,
Japan and Taiwan.
• Improving infrastructure (such as international airports) in other tourism destinations in
Vietnam is a positive for the HCMC Hotel market.
Villas and Townhouses
• This type of dwelling is still the most preferable for Vietnamese house buyers; however, the
number of people choosing to live in apartments are increasing.
• This market attracts long term investors, speculators who bet on new projects or infrastructure
developments, and high income and high saving buyers. All these types of buyers are usually
have a strong cash flow.
• Due to land limited, new projects will be developed mainly in suburban districts.
• Eco-friendly will become a new trend of the market.
• According to one of Savills‟ survey, detached villas with land plot less than 300sqm are the
most preferred. Buyers also interest in the projects on the development directions of HCMC
and close to major roads with convenient transportation.

Serviced Apartment
• The target market is mostly expatriates.
• Expected rising demand: FDI in the first 9 months has shown recovery sign.
• Based on FDI sources, demand will mainly come from Korean, Taiwanese, Japanese,
Malaysian, Singaporean and American.
• The competitive advantage of HCMC: economic centre and wide range of living facilities such
as international schools, hospitals, and entertainment services.
• In term of rent, serviced apartments still have high competitive advantage v. hotel rooms (avg.
US$1,200 for a 50sqm Grade B serviced apartment v. avg. US$2,400 for a 4-star hotel room
per month).
• Serviced apartment v. apartment for sale: blurring.
• The high cost of land could prohibit new entry and increase economic rent.

Ha Noi Office
CONTACT 6th Floor, Sentinel Place
41A Ly Thai To, Hanoi
Tel: (04) 3946 1300
Fax: (04) 3946 1302
Hanoi-info@savills.com.vn
HCMC Office
18th Floor, Fideco Tower
81 - 85 Ham Nghi street, District 1, HCMC
Tel: (08) 3823 9205
Fax: (08) 3823 4571
Hcmc-info@savills.com.vn
Saigon South Office

2nd Floor, The Laurence S.Ting Building
801 Nguyen Van Linh Parkway
Tan Phu Ward, District 7, HCMC
Tel: (08) 3412 0100
Fax: (08) 3412 0199
www.savills.com.vn
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HCMC Market Presentation Q3 2010 - en

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Verfügbare Formate

HCMC Real Estate Market Q3 2010

Presented by Savills Vietnam Co., Ltd.

I) Vietnam economy overview

CPI CPI - Food & Foodstuf f CPI - Construction materials

HCMC market 5 Source: GSO

Foreign Trade – 3Q 2010: FDI – 3Q 2010: US$8bn

Exports Imports Trade Balance Registered FDI

HCMC market 6 Source: GSO

•But not good for real estate

development as construction 10%

output increased only moderately 5%

HCMC market 7 Source: GSO

Limited credit to control inflation mainly because:

HCMC market 8 Source: GSO, SBV

•Decree No. 71 limits funding source via “capital contribution contract”

HCMC market 9 Source: Savills Research & Consultancy, Q3 2010

•Good economic support for office Production growth – 3Q 2010 y-o-y

•Higher demand for hotel as the 30%

•High demand for villa/ townhouse 15%

HCMC market 10 Source: GSO

400,000 800,000 39% 40%

HCMC market 13 Source: Savills Research & Consultancy, Q3 2010

2006 2007 2008 2009 2010

grade – take up and 20,000

new supply 10,000

recovering in Q3 2010, expected to 2006 2007 2008

Take up New supply

• Take up of Grade B: reducing in Q3 40,000

the next quarter 2006 2007 2008

Sq m Take up New supply

-40,000 2006 2007 2008 2009 2010

HCMC market 15 Source: Savills Research & Consultancy, Q3 2010

Sq m gross area Sq m gross area

HCMC market 16 Source: Savills Research & Consultancy, Q3 2010

HCMC market 17 Source: Savills Research & Consultancy, Q3 2010

Existing supply by type and by district

HCMC market 18 Source: Savills Research & Consultancy, Q3 2010

Rent range of Retail podiums, Shopping Centres & Department stores:

Lower rent Upper rent

Retail podiums Shopping centres Department stores

HCMC market 19 Source: Savills Research & Consultancy, Q3 2010

Source: HCMC Statistics Office, 2010

Primary supply by district up to Q3 2010

Q2 2009Q3 2009Q4 2009Q1 2010Q2 2010Q3 2010

CBD Secondary Districts Suburban Districts

HCMC market 22 Source: Savills Research & Consultancy, Q3 2010

HCMC market 23 Source: Savills Research & Consultancy, Q3 2010

HCMC market 24 Source: Savills Research & Consultancy, Q3 2010

HCMC market 25 Source: Savills Research & Consultancy, Q3 2010

Future supply by expected year of completion

HCMC market 26 Source: Savills Research & Consultancy, Q3 2010

2010 2006 2007 2008 2009 2010

• Room rate: Room rate

HCMC market 28 Source: Savills Research & Consultancy, Q3 2010

Future supply of 3 to 5-star hotels

HCMC market 29 Source: Savills Research & Consultancy, Q3 2010

Known potential future supply by district

HCMC market 31 Source: Savills Research & Consultancy, Q3 2010

2006 2007 2008 2009 2010

HCMC market 33 Source: Savills Research & Consultancy, Q3 2010

2006 2007 2008 2009 2010

HCMC market 34 Source: Savills Research & Consultancy, Q3 2010