HCM City condo supply down in 2023

March 04, 2023 - 10:19
The condominium supply in HCM City will reach a record low in 2023 with only about 9,000 new units from 200 projects, experts said.


The condominium supply in HCM City in the last quarter of 2022. — Photo Courtesy CBRE Vietnam

HCM CITY — The condominium supply in HCM City will reach a record low in 2023 with only about 9,000 new units from 200 projects, experts said.

This volume, experts reported, is lower than that of Hà Nội and that of any quarter in HCM City in previous years.

A report from CBRE said that within this supply, the high-end segment will continue to dominate with 75 per cent. 

The luxury segment and mid-tier segment, the company reported, shared the same proportion of 12 per cent. 

Most future supply will come from subsequent phases of already launched projects, and only six out of 20 expected projects are first-time sales. 

According to CBRE, the eastern area is the main development direction of the city, with over 48 per cent of total supply, while the western part of the city is forecasted to be the new highlight, with more than 2,000 units to be launched, most of them in Bình Tân District. Hóc Môn Ward is also expected to welcome its first commercial condominium project with a supply of nearly 800 units.

"The first half of 2022 witnessed the recovery of the residential market, and this trend was expected to continue. However, turbulence in the latter half amidst the recovery has affected the recovery speed, as well as market sentiment. CBRE forecasts that difficulties will continue in 2023 with limited supply and low liquidity due to challenging credit accessibility for home buyers. There will be adjustments in the supply with fewer luxury products and the focus will be on high-end and upper mid-end segments. The average primary price will stabilise in 2023-2024,” Dương Thùy Dung, executive director of CBRE Vietnam, said.

“When the market can be back to normal will depend on the speed of the macro-economic policy approval, including credit policy, the revised land law and the legal issues resolving to break the deadlock for new supply," she said.

In the last quarter of 2022, only 1,312 new condominium units were launched in HCM City, the lowest new supply within a quarter over the last ten years except for the two pandemic years, bringing total launched units in 2022 to 18,440, equal to the number in 2020 but only 70 per cent of the pre-COVID-19 level in 2019.

The eastern part of the city continued to lead the market with three newly launched projects and the next phase of one existing project, providing over 1,000 units, making up nearly 81 per cent of the new supply. 

CBRE said that besides the licensing issue in recent years, many developers have intentionally delayed their sales plans due to concern that economic recession will affect demand.

The high-end segment remained the leading segment, with over 16,850 units, accounting for 90 per cent of total supply within the year. Remarkably, 93 per cent of total supply in 2022 was launched in the first three quarters and 60 per cent of it came from different phases of a Vinhomes township in District 9. 

All newly launched projects in 2022 were developed by major renowned developers with landbank from previous periods.

Q4 2022 recorded 1,155 sold units, down 85 per cent quarter on quarter. The number of units sold is also less than the newly launched units within a quarter for the first time since the pandemic. 

The average primary price in Q4 2022 was relatively stable compared to the previous quarter. The luxury segment is the only segment that experienced price growth at 1.4 per cent quarter on quarter, 7.8 per cent year on year, while other segments' primary prices stayed at the same level compared to the previous quarter. 

However, sales policy showed a major revision in the last quarter of the year when numerous developers offered more vigorous discount rates than usual. The discounts ranged from 20 per cent to 45 per cent, depending on payment schedules and other promotional schemes. The high discount rates only came from developers under substantial financial pressure, and the projects' legal status is still unclear.

CBRE said average secondary prices started to decrease in Q4, but mainly in projects with many units and a high level of speculation. The price reduction can be up to 20 per cent. 

“This price decrease reflects the investors' expected profit adjustment but not the "cut loss" of the whole market yet. Investors that did not use financial leverage or have no cash flow pressure are still waiting for a better time to sell their assets,” CBRE suggested. — VNS