Experts on the local property market have said they expect to see prices fall during the final months of this year but demand is tipped to increasingly out-strip supply as 2012 unfolds.
Marc Townsend, managing director of CBRE’s Vietnamese operations, explained in an interview with Bloomberg that new office developments in the city are not currently being financed on the scale of recent years as demand and rental rates have declined.
“The decline in rents is very painful for people who borrowed large amounts of money to develop property over the last three years,” Townsend said. “But we don’t expect to see many new projects because very few banks will look at loans now for property.”
He suggested that Ho Chi Minh City, Vietnam’s largest city, should see a decline of roughly 5 per cent in its office space prices before their slump is over, which should help the city compete more effectively for investment with some of its main rivals in the region, including the likes of Bangkok and Jakarta.
There was a major rush to develop new office space in Ho Chi Minh City in the years prior to the 2008 financial crisis but the final few projects commissioned during that time are poised to come onto the market.
CBRE’s latest figures suggest that the typical asking price on offices in Ho Chi Minh City during the third quarter of 2011 was between 7 per cent and 9 per cent lower than those being proposed in the same period a year ago.
Ho Chi Minh City used to be known as Saigon and it is the driving force behind the Vietnamese economy, which the International Monetary Fund recently predicted will grow by 6.3 percent over the course of 2012.
Editor’s notes: In Q1 2023, amid economic uncertainty, it was found that office leasing activity in HCMC dropped yet rental rates remained relatively stable which was a pattern observed across many cities globally. This was due to the occupiers that were indeed active, seeking high-quality space that delivered ESG credentials.
The net effective rent in the city stood at USD 30.5 per square metre per month which represented a 0.1 per cent decrease q-o-q and a -0.5 per cent drop y-o-y.
333,387 square metres of new office stock was due to complete in the proceeding two years, representing a 23 per cent increase in total inventory with the first new projects expected to come online in Q2 of 2023.
It was expected that this would make the market more favourable for tenants. However, as seen in many locations worldwide, this could have meant that headline rents would remain stable whilst tenant incentives increased.
Vietnam’s Gross Domestic Product (GDP) in 2023 increased by 3.32 per cent y-o-y and, in the first quarter of 2023, the IMF projected that Vietnam’s GDP would grow by 5.8 per cent over the year.