First half GDP growth was 5.7%, a 1 ppt increase over 1H/2016.

Registered FDI had 55% annual growth. Japan with US$4.6 billion was the highest contributor. FDI disbursement was up 7% YoY.

Inbound tourist growth momentum continues and was up 30% YoY. Total international visitors numbered 6.2 million, of which Asian visitors accounted for 74 percent.

1H/2017 credit growth at 7.5% is a 6-year high.

RETAIL: Quantity Changes Quality

Total retail stock was approximately 1.2 million m2 with 26,000 m2 added from the entries of a shopping centre, a new department store and a supermarket.

Average gross rent decreased -2% quarter-on-quarter (QoQ) and occupancy was stable. Shopping centre and department store performance trended down due to newly opened projects offering competitive rents.

The middle class demographic is the key market for fashion brands. F&B and upscale food services and convenience stores are flourishing due to increasingly modern and hectic lifestyles.

Online shopping in its early stages and yet to have any significant impact to classic retail. A few key e-commerce players such as Lazada, Lotte, Aeon and Vingroup online show segment growth but others report mixed fortunes.
OFFICE: Demand Driving Rent Growth

One new Grade A project and three new Grade C projects entered the market. One Grade C building closed after being sold. Total office stock was approximately 1.64 million m2, up 3% QoQ and 4% YoY.

Average gross rent surged 4% QoQ and 5% YoY with occupancy slightly down -1ppt QoQ and YoY, mainly influenced by the new Grade A building. Strong office development and good demand for upgraded, more efficient space are driving prime rents.

Given very low vacancy rates, Grade A and B office rents are expecting rental increases over the near term.

SERVICED APARTMENT: Grade A and C Occupancy Slump

Two new district 3 Grade C projects and one Grade C Tan Binh project introduced 121 units to the market. Total serviced apartment stock was up 3% QoQ and 4% YoY at approximately 4,800 units.

Average occupancy was up 5 ppts YoY but down -2 ppts QoQ to 85 percent. The decrease was attributed to newly launched Grade A and C project vacancies. Average rent was stable QoQ but up 2% YoY.

From Q3/2017 to 2019, 12 projects providing 1,900 units are expected to be launched with the CBD taking 52% of the total. As all 2H/2017 future supply is expected to be Grade A and B, increasingly strong competition is anticipated.
HOTEL: Positive Signs In Low Season

One 4-star and one 3-star hotel providing 347 rooms entered the market. Room supply is up 2% QoQ and 7% YoY from over 16,500 rooms in 133 hotels.

The low season saw -3% QoQ and -7% YoY ARR decreases across all three grades to US$78/room/night. However, overall occupancy gained 1ppt YoY, a significant improvement in the context of continuous supply increase.

HCMC international visitors increased 14% YoY to approximately 2.8 million inbounds, representing 46% of the official year target.

From Q3/2017 to 2020, approximately 3,200 rooms from 14 projects will be added to Ho Chi Minh City supply

APARTMENT: Bolstered Grade C Demand

In Q2/2017, 4 new projects and the next phase of 7 active projects were launched, providing over 4,700 units. Apartments available across all grades were down -12% QoQ and -7% YoY to more than 37,200 units.

Sales growth rates increased 33% QoQ and 67% YoY. With approximately 11,600 transactions it was the highest since 2011. Impressive Grade B and C performance increased 10 ppts QoQ and 13 ppts YoY with 31% absorption. Grade C had the highest absorption at 37% and accounted for 64% of sales.

From Q3/2017 to 2018, approximately 48,000 units are expected to be launched. Grade C is expected to see the highest proportion of these with an approximate 46% share.

VILLA & TOWNHOUSE: Limited New Supply

In Q2/2017, one new project and new phases of seven existing projects provided approximately 390 dwellings. Primary stock was down 20% QoQ and 35% YoY to around 2,060 dwellings.

Total villa/townhouse transactions decreased 14% QoQ and 6% YoY. The absorption rate, due to limited new supply was 37%, up 3 ppts QoQ and 11 ppts YoY. Townhouses continue to dominate the market with 85% of sales.

In the land plot segment, district 9 continued to lead, accounting for 43% of total sales. Land plots of 50-80m2 were the most popular.

Stock from 2H/2017 to 2019 will be approximately 11,500 dwellings/plots from 33 projects. The eastern districts with more than 50% of future supply is expected to lead the market.


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