Hanoi apartment market: Optimism has returned

With over 23,000 apartments completed in the second half of 2019, the real estate market is showing quite exciting developments. Jones Lang LaSalle (JLL) expects that this segment in Hanoi will continue to grow steadily from now until the end of 2019.

Small area apartments sell well

According to JLL's assessment, in the third quarter of 2019, the oversupply demand showed that the optimism of buyers has returned to the market. Sales of apartments in Hanoi increased by 67% q-o-q, driven by real demand.

JLL said that in the same quarter, about 6,400 apartments were offered for sale, an increase of 8.7% QoQ. However, of them only 850 units came from four new projects. The high-end segment recorded only one new project, located in Tay Ho district with 32 apartments. The luxury segment did not receive new supply in the primary market this quarter.

Meanwhile, apartments with small area, low value recorded the best sales speed in the market. In addition, real estate in areas with synchronous facilities and infrastructure projects has also attracted great attention from both investors and buyers thanks to the potential for added value in the future and the convenience.

The oversupply demand shows that the optimism of buyers has returned to the apartment market.

The western part of the city leads the market in the number of apartments sold, an increase of four times compared to the previous quarter.

Primary market price reached 1,473 USD (about 34 million VND)/m2, increasing 3.5% QoQ. However, the selling price per project only increased slightly by 0.8% compared to the previous quarter. The reason is partly because the investor focused on clearing apartments with large area or obscured view still in inventory.

Notably, luxury apartment products recorded the highest increase (3.1% QoQ) in the secondary market, for projects with strategic locations and high quality construction.

JLL said that a number of new projects with a scale of more than 1,000 units are expected to be launched by the end of this year, focusing mainly in non-CBD areas with the presence of major investors such as Vingroup and BRG Group.

In the second half of 2019, approximately 23,100 apartments are expected to be completed, 93% of which have been successfully traded. This shows that the real estate market is still moving quite actively. Apartment price is expected to continue growing steadily from now until the end of 2019.
Rents for retail space will go sideways

Contrary to the optimistic sentiment in the apartment segment, the retail space market in the third quarter recorded a decline in the occupancy rate and leveling off of the supply.

Accordingly, in Q3, there was no new supply of retail space in the Hanoi market. Thanh Xuan and Hai Ba Trung districts continue to maintain the first and second positions in terms of total retail space, thanks to two major shopping centers in Royal City and Times City.

The third quarter recorded a decline in the occupancy rate and the slowdown of the supply of retail space.

In contrast, Hoan Kiem district, the center of Hanoi, is far ahead of the total retail supply. This trend will not change in the near future, as new shopping centers will often have large areas while Hoan Kiem district is short of land.

The occupancy rate in the third quarter decreased to 90.3%, as some shopping malls began to upgrade and change the strategy of selecting rental products as well as the removal of some key tenants, such as Auchan was closed at Mipec Riverside shopping center.

Retail properties investing in image and brand as well as a good rental strategy continue to record high occupancy rates, while some other centers are starting to struggle to retain tenants. Typical shopping centers such as AEON Mall, Vincom Metropolis, and Vincom Tran Duy Hung all operate efficiently and all have a vacant space of less than 5%.

The average rent of the market stayed at 29.3 USD (about 680,000 VND)/m2/month, equivalent to an increase of 2.8% year on year. Compared to the same period last year, department stores recorded the highest growth in rents, mainly because Lotte Department Store achieved good rents after renovations and upgrades.

In addition, rents in retail premises outside Hoan Kiem district, due to the fact that there is a modern commercial model, also increased by 3.4% year on year, showing consumers' preference for these models.

JLL predicts that rents will move sideways or still will increase, but not much, in the near future, thanks to the positive impact of the current economic situation on demand and purchasing power of consumers.

Hanoi retail market will receive a large amount of supply in the fourth quarter of this year and 2020.

“In an increasingly competitive market, developers will be under greater pressure to attract tenants. While new centers are expected to introduce compelling models to build an image with consumers, existing ones need to be constantly trying to keep up with market trends if they want to stay on top performance”, JLL said.

According to Tam An