Fourth quarter’s positive property signals

Residential segment

According to CB Richard Ellis’s quarter report, the events of the third quarter of 2010 said a lot about Hanoi’s residential market.

The market was quieter with fewer new projects launched, supplying 1,950 units to the

market in the third quarter. The number of units launched was modest compared to last quarter with 4,600.

This decline, according to CBRE was partly attributed to the implementation of Decree 71 which caps the proportion of units sold via capital contribution contracts at 20 per cent.

Traditionally, the seventh lunar month is a slow time for business. Prices in the secondary market remained quite stable with price adjustments ranging between -1 per cent to 2.5 per cent quarter-on-quarter.  

The market expects to see the launch of 3,000 units in the fourth quarter, bringing total new supply in 2010 to nearly 16,000 units.

CBRE has a positive market outlook for the residential market.

Office segment

Two office projects in centre of the city, BIDV Tower (Grade A) and Capital Tower (Grade B) held their official openings in the third quarter. While rents remained stable in the CBD, vacancy rates dropped to 6.5 and 5.39 per cent in Grade A and Grade B submarkets, respectively.

Grade A office rents in centre Hanoi stabilised during the third quarter of 2010, rising to $40.27 per square metre per month, while rents in centre city Grade B buildings grew by 4 per cent quarter on quarter $32.72 per square metre, per month.

Absorption in the third quarter was 21,355sqm in Grade A and B buildings, nearly double the amount of space absorbed in the second quarter  (11,267sqm) and triple that of the first quarter (7,981sqm ).

Retail segment

The retail market was busy last quarter with a number of projects launching and began leasing activities.

The retail market continued its strong performance this quarter as retail space in the city centre districts remained fully occupied and rental rates in modern retail space saw virtually no change, rentals remaining stable at $54 per square metre with no vacancies. Outside the city centre, rental rates in shopping centres and retail lobbies rose over the last quarter, posting increases of 13 per cent and 5.5 per cent respectively.

Serviced Apartment

No new supply was added in the third quarter. Average market vacancy rates rose to 9.2 per cent, increasing by approximately 4 percentage points  in comparison to the previous quarter.

Higher vacancy rates recorded in internationally managed projects influenced the rise of the market-wide vacancy rate.

The average market-wide asking rent remained stable at $30.31 per square metre per month, virtually unchanged from last quarter.

While rents in internationally managed buildings remained unchanged, rents in self-managed projects have slightly decreased.

The market expects to welcome three new serviced apartment projects that will be completed and come into operation in the last quarter of 2010.

Looking ahead to 2011, the market expects two additional projects, Keangnam Hanoi

Landmark Tower and Elegant Tay Ho, to be completed, bringing 478 units to the market by the end of 2011. 

Hotel

Hanoi received 6.6 million visitor arrivals in the first nine months of the year, a 14.5 per cent year-on-year improvement.

The city’s stock of hotel rooms rose to 6,512 rooms this quarter, recording increases of 7.42 per cent compared to last year and 10.64 per cent compared to the second quarter.

Revenue averages in five-star hotels decreased by nearly 10 per cent year-on-year, while this figure in four-star hotels increased significantly by 31 per cent year-on-year.

Average occupancy rates increased across the board, which was likely enabled by the year-on-year decrease of average room rates experienced in all submarkets.

The most significant reduction in average room rates was seen in the five-star submarket with room rates declining by approximately 13 per cent year-on-year on average.

It is expected that the success of many five-star hotels will depend on their ability to attract MICE and business travelers with conference facilities, corporate rates, and access to businesses.