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City property market sees revival

Updated: 14/10/2013 | 10:10:43 AM
City property market sees revival

In a report released on Thursday, it said around 1,700 units were launched in the apartment-for-sale sector during the third quarter, a 45.8 per cent rise quarter-on-quarter and 11.6 per cent up from the period last year.

The affordable segment accounted for 72.4 per cent of the supply, and the high-end segment for 21.1 per cent.

The rise in the number of new launches, the sharp increase in the number of projects being advertised, and the amount of advertisement reflect developers' reviving confidence in the market, Ngoc Le, CBRE's senior manager for research and consulting, said.

The new price range for the high-end segment is getting closer to buyers' expectations after falling to US$1,300-1,600 per square metre after incentives.

Marc Townsend, managing director of CBRE, said both the affordable and high-end segments were witnessing sales because of "encouragingly longer payment terms."

Developers who had been cautious about extending payment terms have been offering flexible payments in the third quarter, allowing the last payment of 50-70 per cent of the cost within one or two years after handover.

Districts 2 and 7 have been bright spots in the apartment market due to the fact that pricing has become more affordable and infrastructure is set to significantly improve with the opening of Sai Gon Bridge 2 next month.

"Sales were triggered again, projects are handing over actual units, people, especially wealthy Vietnamese and expatriates, are moving in, giving the areas more energy," Townsend said.

"These two districts are always at the top of the inquiry list and in the top five of the most sought-after rental markets."

The report said the two districts would continue to attract high-income people, while Binh Tan and Thu Duc will be the choice of middle – and low-income people.

Office market

In the office space market, vacancy levels in grade A and B buildings fell by 3.5 per cent and 0.3 per cent quarter-on-quarter since there was limited new supply and continued demand from companies centralising operations and consolidating occupational requirements.

Net absorption in the A and B segments was 27,720sq.m, 31.1 per cent up quarter-on-quarter and almost three times the rate a year earlier.

The segments also saw rentals climb respectively 3 per cent and 3.2 per cent quarter-on-quarter to $32.47 and $18.73 per square metre per month.

"There are identifiable sub-sectors within the market and it appears that the top seven or eight properties in District 1 are now detaching themselves from the rest of the market," Townsend said.

They are already raising rents while those in the next tier, A – or B+, are acting in a more stable manner.

Retail and serviced apartments

The retail sector saw tenants moving out and rentals softening in the third quarter.

With no new supply coming into the market for two consecutive quarters, the negative absorption was 4,133sq.m, reflecting tenants' dissatisfaction with rentals at major shopping centres and the number of visitors they are able to generate.

While malls in the central business district (CBD) maintained their high rentals and waited for the best contracts, non-CBD retail rent was adjusted downwards to attract retailers.

"Retailers do not actually shut down their business, they simply relocate, moving out of the overpriced CBD retail centres to high-street shop houses in the centre or on the periphery, which offer more affordable rates and attract larger footfalls," Ngoc said.

But the report named several malls – Diamond Plaza, Parkson Saigontourist, Bitxco Financial Tower, and Parkson Hung Vuong – that have succeeded in keeping both their rentals and tenants.

Besides, in the context of consumers reducing spending amid worries about recession, unemployment, and high prices, food and beverage and convenience stores that supply basic needs remain active.

In response to this, Zen Plaza has announced conversion of retail space on its first three floors into a food court by early November, Townsend said.

The report said any pick-up in the retail market would have to wait for an economic recovery.

The serviced apartment segment has been increasingly fragile, with both rents and occupancy falling.

Grade A rentals saw a fall of 4.4 per cent quarter-on-quarter while occupancy decreased by 5.1 percentage points.

"This steep rise in the serviced-apartment vacancy rate amid largely softened rents is the result of fierce competition from buy-to-let landlords," Ngoc said.