VIETNAM ECONOMY Q ECONOMIC OVERVIEW. Presented by: Dung Duong (Ms.) July 8, 2013 Q2/2012 Q1/2013 Q2/2013

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1 HCMC MARKET INSIGHTS Q2/213 Presented by: Dung Duong (Ms.) July 8, 213 VIETNAM ECONOMY Q2 213 ECONOMIC OVERVIEW Q2/212 Q1/213 Y-o-Y Q-o-Q Q2/213 GDP (% y-o-y) 4.8% 4.8% 5.% CPI (% y-o-y, e-o-p) 6.9% 6.6% 6.7% Exchange rate (e-o-p) 2,828 2,828 21,36 Export (US$ Bn) Import (US$ Bn) FDI Implemented (US$ Bn) International Tourist Arrivals (million arrivals) Retail and Services Turnover (tril. dong) rbank nge rate Inter exchan 21,1 21, 2,9 Stable exchange rate 1% adjustment 2,8 2,7 Feb-12 Apr-12 Jun-12 Aug-12 Oct-12 Dec-12 Feb-13 Apr-13 Jun-13 Source: Vietnamese General Statistics office 2 CBRE MARKET INSIGHTS Q2/213

2 GOVERNMENT POLICIES Fiscal Policies - Tax Cut Expansion Monetary Policies For social housing: Devaluation of the dong 1% versus the dollar ( to VND21,36) Corporate tax rate: 1%; VAT: cut from 1% to 5%. The interest-rate ceilings on short-term dong-denominated bank deposits: Personal income tax: lowered to 7.% from 7.5% The level of deduction: increased to VND9 million/per month from VND4 million/ month; The ceiling on dollar deposits: For institutional depositors: fall to The level of deduction for each dependent:.25% from 1.% increased to VND3.6/ month from VND1.6 For individual depositors: fall to million per month for one. dependent. 1.25% from 2.%. Boost domestic consumption and production Improve trade balance Reduce banks' funding costs => Lend at lower rates Encourage to exchange USD for VND Bolster its foreign-exchange exchange reserves 3 CBRE MARKET INSIGHTS Q2/213 Q2 213 ECONOMIC OVERVIEW Gold Price And Bank Deposits Become Less Attractive sell price (VND million) Local gold 5 2, 46 1,8 42 1,6 38 1,4 34 1,2 3 1, 9/211 12/211 3/212 6/212 9/212 12/212 3/213 6/213 Source: SJC Glob al gold price (US$) Global gold price: decrease 24% YTD. Local gold price: reached its trough in June (22%) and currently downed 19% YTD Policy rates: 8bps reduction LOCAL GOLD GLOBAL GOLD over the last 18 months. CPI (y-o-y, Vietnam) Rediscounting Rate Refinancing Rate CPI (m-o-m, Vietnam) CPI (% y-o-y) / In nterest rates (%) 25 Inflation surged 4 2 Monetary expansion Monetary contraction Inflation controlled -1 Dec-1 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Source: State Bank of Vietnam CPI (% m-o-m) 4 CBRE MARKET INSIGHTS Q2/213

3 Q2 213 ECONOMIC OVERVIEW Stock Market Recovers, Real Estate Will Come Back To Focus ndex VNIn 55 3, 5 2,5 2, 45 1,5 4 1, Jun 11 Sep 11 Dec 11 Mar 12 Jun 12 Sep 12 Dec 12 Mar 13 Jun 13 Source: FPTS, gold.org Trading value VNIndex REAL ESTATE INDEX 2Y 1Y 6M 3M 1M Current Real Estate Holding & Development Listed Companies (Billions VND) Trading Value Regional stock markets, 1 year return as of July 5, 213: Thailand (SET) up 21.1%; Singapore (SGX) up 15.2%; Indonesia (JCI) up 15.8%; Vietnam (VNINDEX) peaked at 528 points in June, up 26%, currently up 21.1%. Source: Bloomberg Real Estate Services Listed Companies Source: Stockbiz CBRE MARKET INSIGHTS Q2/213 Unsold stock improved 18, 16, 14, 12, 1, 8, 6, 4, 2, thanks to flexible payment terms plus incentives due to some projects converted to Q2 212 Q1 213 Q2 213 social housings or New launch Unsold inventory Paused/On-hold/Distressed changed to other components Source: CBRE 6 CBRE MARKET INSIGHTS Q2/213

4 High-end segment saw more sales y-o-y Units Sold by Segment, Q2/212 Units Sold by Segment, Q2/213 Luxury High-end Mid-end Affordable 42% 3% 26% Units Sold by Quarter nits Sold U 7, 6, 5, 4, 3, 2, 1, 3% Luxury High-end Mid-end Affordable 43% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q % 17% $2,5 $2, $1,5 $1, $5 $ 4% (US$/m2) Average pprice ( High-end has become middle-class housing. Affordable is now truly affordable. Source: CBRE 7 CBRE MARKET INSIGHTS Q2/213 Prices Tropic Garden District units Current asking price: $1,1-$1,3/sm Good payment term No direct price cut BUT long payment schedules with % rate increase sales Xi Riverview Palace District units Current asking price: $2,2-$2,5/sm High discount: 18% if 98% payable The Estella District units Current asking price: $1,6-$1,8/sm Good payment terms Imperia An Phu District 2 Him Lam Riverside District units Current asking gp price: $1,357 - $1,457/sm Good payment term: 5% hand-over, the rest payable in 2 years with % 7 units Current asking price: $1,5-$1,8/sm Excellent payment terms Free parking Furniture package Gym free for 1 year Happy Valley District units Current asking price: $1,5 - $1,7 /sm Longest payment schedule in PMH NUA Free parking Sunrise City (North District 7) 554 units Current asking price: $1,119 - $1,428/sm Smaller unit size, lower price than P1, Good payment term (54 months) Source: CBRE Central towers 8 CBRE MARKET INSIGHTS Q2/213

5 Infrastructure development will ramp up property values The Vista Thao Dien Pearl Imperial An Phu Estella Cantavil Premier Source: CBRE Future projects Existing projects Metro line 1 Metro station 9 CBRE MARKET INSIGHTS Q2/213 Advertising activities increase Residential Projects Advertised by Month, HCMC, Project No of March April May June MTD July Newspapers tracked: Tuoi Tre; Mua & Ban; Tap chi Bat Dong San (Property Magazine);; Thanh Nien; Nhip Cau Dau Tu; Doanh nhan Sai Gon; Saigon Times Daily; Vietnam Investment Review; Vietnam News. 1 CBRE MARKET INSIGHTS Q2/213

6 New launches Up Units Launched by Year Number of Unit 2, 15, 1, 5, Annual launch Units Launched in Q2/213 (% by Segment) Q2 launch New launches increased by 51.% q-o-q q and 234.5% y-o-y yy. Some delayed projects were resumed and introduced to the market: New Pearl (D1), Central Plaza (Tan Binh). Others starting to prepare for construction or launch. Luxury High-end Mid-end Affordable 36% 14% % 51% High-end largest proportion in Q2/213 Some developers continued launching their second phase. Source: CBRE 11 CBRE MARKET INSIGHTS Q2/213 New Launches High-end Segment, Q2/213 Happy Valley (2 nd &3 rd launch) District 7 Sunrise City (North) District 7 Dragon Hill Residence & Suite Nha Be Location: Phu My Hung NUA Developer: Phu My Hung Corp. Launched Unit: 266 Launch: June Current asking price: $1,5-$1,7 psm Sale rate: 8% of launched units. Location: Nguyen Huu Tho Street t Developer: Novaland Launched Unit: 182 (total 554 units) Launch: Early April Current asking price: $1,119 - $1,428/sm Sale rate: 65% of launched unit. Location: Nguyen Huu Tho Street t Developer: Phu Long Real Estate Corp. Launched Unit: ~15 (~2 wholesale) Launch: late June, early July Current asking price: $1,19 - $1,286/sm Sale rate: N/A. 12 CBRE MARKET INSIGHTS Q2/213

7 New Launches Mid-end and Affordable, Q2/213 Homyland 2 District 2 Ehome 3 P2 Binh Tan District Dream Home Go Vap District Location: Nguyen Duy Trinh Street Location: Ho Ngoc Lam Street Location: o Street 59 Developer: Bao Son Co., Ltd Developer: Nam Long Launched Unit: 425 units Launched Unit: 161 (block A5) Launch: 29 June Launch: 22 June Current asking price: $761 - $881/sm Current asking price: $794/sm Sale rate: ~17% Sale rate: 4% of launched unit Segment: Mid-end. Segment: Affordable. Segment: Affordable. Developer: Dream Home Co., Ltd. Launched Unit: 518 Launch: introduce model house Current asking price: $567 Sale rate: to officially launch in July Segment: Affordable 13 CBRE MARKET INSIGHTS Q2/213 Outlook No further cut is expected BUT more flexible payment terms. More sales for projects with upfront payment of 3% - 5% to move in; Free of charge (management, parking) in the first one or two years to share buyers financial burdens; Unit size preferred: <65sm (affordable), and <1sm (high-end); Changes in personal income tax resulted in disposable income increase => more budget for housing; CBRE is cautiously optimistic about a limited high end recovery in Q % upfront -> hand over 14 CBRE MARKET INSIGHTS Q2/213

8 HCMC OFFICE New supply Saigon Airport Plaza Only one new office building for leased completed inq2/213 A sky blue office building emerging in the decentralised area, creating more availability for tenants, especially those work in logistics industry. Saigon Airport Plaza Developer SSG Group Address 1 Bach Dang, Tan Binh Total GFA 14,sm 15 CBRE MARKET INSIGHTS Q2/213 HCMC OFFICE Highlights 85 office leases signed in 6 months by CBRE Vietnam, up 2% on 212. Healthy absorption as market sentiment improves and Average Grade A office rents rise.5% q-o-q. Oversupply a misconception! HCMC Office market performance Grade A&B 1,, 8, 6, 4, 2, $25 $23 $21 $19 $17 Major occupiers FLIGHT TO QUALITY in 1H 213 and CONSOLIDATION taking advantage of available opportunities in new buildings. Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q Leased Area Vacant Area Asking Rent $15 Local banking sector emerging as the largest occupiers of prime District 1 office buildings. New office buildings showing strong commitment, while major delayed projects have seen no movement. CBRE Tenant breakdown 1H/213 (based on CBRE deals) Finance 8% 1% 24% Pharmaceutical Others 13% Technology 16% Manufacturing 13% 16% Retail Legal 16 CBRE MARKET INSIGHTS Q2/213

9 HCMC OFFICE Oversupply is beginning to disappear Number of successful deals during the first half of 213 done by CBRE Vietnam went up 2% on 212. CBRE Office Vacancy Spaces NLA (sm) Office supply (Grade A &B) NLA (sm) 12, 9, 6, 3, - Grade A Grade B Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q Gross Floor Area (sm) 1,, 8, 6, 4, 2, Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q Leased Area Vacant Area 17 CBRE MARKET INSIGHTS Q2/213 HCMC OFFICE - PRESIDENT PLACE LEED Office building achieved noticeable performance. President Place Developer Address Total GFA Sapphire Vietnam 93 Nguyen Du, D1 11,475 sm Key facts More than 75% of total spaces occupied after 3 months of official opening with the remaining 25% under offer. 1% of Tenants are international brands with 66% of committed occupiers technology based clients Key tenants: Canon Diageo Vietnam Limited Microsoft Vietnam LLC Hiring Boss Schindler Vietnam A pioneering office development becoming Ho Chi Minh City's first LEED Gold accredited office building. Note: Leadership in Energy and Environmental Design (LEED) consists of a suite of rating systems for the design, construction and operation of high performance green buildings, homes and neighborhoods. 18 CBRE MARKET INSIGHTS Q2/213

10 HCMC OFFICE Projects Showed Good Construction Progress in Review Quarter Q1/213 Q1/213 Q1/213 Q1/213 Q2/213 Q2/213 Q2/213 Q2/213 Vietcombank Tower Vietin Bank Tower MB Sunny Tower LimTower Location Melinh Square, D1, HCMC Floor 35 floors Total GFA 55, sm Status Under construction Location Floor Total GFA Status Ham Nghi, D1, HCMC 24 floors 24,315 sm Under construction Location Tran Hung Dao, D1, HCMC Floor 22 floors Total GFA 16,5 sm Status Under construction Location Ton Duc Thang, D1, HCMC Floor 34 floors Total GFA 34,3 sm Status Fitting out 19 CBRE MARKET INSIGHTS Q2/213 HCMC OFFICE New supply from developed projects TIMESSQUARE Nguyen Hue, D1 GFA: 14,76 sm Expected completion: Q3/213 LE MERIDIEN 3C Ton Duc Thang, D1 GFA: 13,56 sm Expected completion: CBRE MARKET INSIGHTS Q2/213

11 HCMC OFFICE Outlook Some project s are on its completion Providing 18,24 sm office space until 215 Constant demand come to the market Stable office market for whole year of 213 Market regain confidence to the market of 213 OFFICE MARKET WILL BE IN TEMPORARY STABLE SITUATION THROUGH 213 Rents keep stable Given tightening supply and existing demand, the market wide average asking rent is expected to be stable or increase marginally through 213, however the effective rent will be stable. Gradual source of demand coming to the market will result in the absorption of available space in the market. Tenants and landlord will become closer when more flexible leasing packages and higher quality services are offered in the market to satisfy the clients needs. Major half complete / unfinished projects unlikely to come online in 213 or even early 214 which is likely to create further upward pressure on rentals until the next wave of major new supply 21 CBRE MARKET INSIGHTS Q2/213 HCMC RETAIL Highlights Vacancy rate increased due to decrease in tenant turnover, i.e. withdrawal of big tenants at Vincom Center A like Home One (1,2 sm), Gloria Jean s (1 sm), Banana Leaf (1 sm) and Givral (1 sm). Unsustainable high rental rate and low foot traffic are two main observed obstacles. Rents of Shopping Centres in CBD: stable as developers will is either not to decrease rent nor accept weak tenant. Rents of Department Stores in CBD: slightly increased due to Diamond Plaza s annual renovation. In non-cbd, rents continued to decrease to attract new tenants. Performance of 5 selected shopping centres, HCMC erage Rent $/sm/month) Ave (US$ Source: CBRE 18 Vincom Center B Vincom Center A(Eden A) 15 Diamond Plaza Icon 68 Shopping Centre Crescent Mall 3 - % 5% 1% 15% 2% 25% 3% 35% 4% 45% Vacancy rate 22 CBRE MARKET INSIGHTS Q2/213

12 HCMC RETAIL Taxation and Infrastructure cost burden retail operator, creating deadweight loss for both retailers and consumers. Net absorption (NLA, sm) Net Absorption (sm) Vacancy Rate (%) 6, 23% 4, 17% 2, 11% -2, % -1% -4, Source: CBRE -7% 23 CBRE MARKET INSIGHTS Q2/213 HCMC RETAIL Retailer expansion: fewer easy wins but still a strategy Top Cities for New Retailer Entries, 212 Asia Pacific will continue to drive global retail growth in 213. Slower economic growth poses significant obstacles for retailers planning to expand th store opening Source: CBRE Global Research & Consulting 24 CBRE MARKET INSIGHTS Q2/213

13 HCMC RETAIL RENTAL CYCLE Rental Decline Rental decline Rental Growth Accelerating Slowing Accelerating Rental Growth Slowing Vietnam Definition 1. Rents are at their 3. The rate of rental 5. Rents are at their 7. The rate of rental growth is not peak and are expected to decline over the next 6-12 months. decline is at its peak. Rents are expected to continue declining but at a slower rate. trough. The next movement is expected to be upwards. 6. Rents have started to yet at its peak. Rents are expected to continue rising but at a slower rate. 8. The rate of rental growth has 2. Rents have started to 4. The rate of rental rise, and the rate of slowed. Rents are not yet at their fall, and the rate of decline is expected to accelerate over the next 6-12 months. decline has slowed. Rents are not yet at their trough, and are expected to decline further, but at a slower rate. increase is expected to accelerate over the next 6-12 months. peak, and are expected to increase further, but at a slower lower rate. 9. Rents are at their peak and are considered to have reached a plateau. Marginal further growth still possible, but a significant decline not yet expected. 25 CBRE MARKET INSIGHTS Q2/213 HCMC RETAIL Outlook Confidence remains in Vietnam retail market despite bridle in spending with expansion plan of Aeon (expand to 2 shopping malls in 22), Fairprice i (and Saigon Coop jointly open CoopXtraplus in May), Lotte Group (plan to expand further 6 supermarkets and shopping centres). Low consumer demand together with tighten spending budget will continue in the next two quarters. Future supply will be limited in the next four quarters. Large projects are facing difficulties in maintaining tenants. Decrease in rents or incentive terms including rent free period, turnover share, well-defined marketing strategy are two recommended solutions. Future supply in the next two quarters include: CantavilPremier 3, sm NLA Expected open year: 213 Times Square 4, sm GFA Expected open year: 213 Saigon Airport Plaza 6,98 sm GFA Expectedopenyear: 213 Thao Dien Pearl 2,4 sm GFA Expected open year: CBRE MARKET INSIGHTS Q2/213

14 HCMC SERVICED APARTMENTS Highlights New Supply DECENTRALISED D.2 D.7 Tan Binh Demand: Enquiries DECENTRALISED Towards D.2 villas Improved budget (US$2, - $3,) Long-term stay: 85% Rents DOWNWARDS New bottom At slower rate Vacancy DOWNWARDS Approaching Q3/211 low levels again New supply - SAIGON AIRPORT PLAZA Scale: 84 units 57-sm 1-bedroom Near Tan Son Nhat International Airport Developer: SSG Group Exclusively leased by CBRE Vietnam First Grade B serviced apartment in Tan Binh PRICING IS KEY FACTOR. After rents kept decreasing for EIGHT quarters, vacancy was improved and reached the lowest levels seen in Q3/211. CBRE CBRE 27 CBRE MARKET INSIGHTS Q2/213 HCMC SERVICED APARTMENTS Performance Supply (units) Decentralised to D.2, D.3, D.7, Tan Binh Rents (US$/sm/month) % 168 $ % 197 District 11 $4 Slower decrease % 33 District 77 $ % 41.6% ,827 District , District 2 2 $3 Binh Thanh $ % 652 Tan Tan Binh Binh $ % Others 672 $ Q1/212 Q2/213 Grade A Grade B Occupancy (%) Best performers Vacancy (%) sm/month) Rent (US$/s 3% 97% Norfolk Mansion 25% 96% Grade A 2% 95% CBD 15% 94% InterContinental Asiana Saigon 1% 93% Indochine Park Tower 5% 92% Diamond Plaza % 91% $ $1 $2 $3 $4 $5 Source: CBRE cancy (%) Vac Grade A Grade B strong take-up 28 CBRE MARKET INSIGHTS Q2/213

15 HCMC SERVICED APARTMENTS Outlook Rents are expecting to bottom out as they are Tenant s preference decreasing at a slower rate. 1 FURNITURE Vacancy will continue to decrease as there will be no significant completions through year-end end. 2 GYMNASIUM As pricing is key factor, landlords are increasingly 3 more flexible in benefits (parking, laundry, electricity and water allowance) for tenants and 4 commission scheme for agents. 5 LAUNDRY Laundry Opportunity continues to be at the CBD: 6 MINIMART best performers with highest occupancy are still those at the CBD. 7 CBRE SWIMMING POOL HOUSEKEEPING RESTAURANT 29 CBRE MARKET INSIGHTS Q2/213 INDUSTRIAL AND LOGISTICS Small and medium ready-built-factories draw more attention Demand for small and medium ready-to-move-in factory with rents about $3-$5 psm per month are recorded increasingly in the first two quarters. Amata high tech park in Quang Ninh / VSIP active promotion in Central Vietnam, Quang Ngai. LOCAL TENANTS Samsung / LGE as major magnets to draw FOREIGN investment from Korea / Japan vendors to North TENANTS Vietnam. Logistics continue to expand aggressively i.e. DHL. Enquiries i from US / Europe stabilizes / pick up, focusing on RBF for both North and South Vietnam. US IT / chip design seriously expands in HCMC and explore Danang as the 2 nd tier city presence. CBRE 3 CBRE MARKET INSIGHTS Q2/213

16 INVESTMENT Thawing of Investment Market Transferring realty projects has been much more transparent than before: Vincom Center A, developed by Vingroup, was reported to have been sold to VIPD Group at VND9.8 trillion in Q1/213 (US$46 mil) In May 213, Vingroup entered into an agreement to transfer 2% of Vincom Retail JSC, to Warburg Pincus, a global private equity firm focused on growth investing. The value of the transfer is expected of US$25 million. In a further sign of increased capital markets liquidity, VinGroup appear to be re-structuring the ownership of the office component of Vincom Centre B, HCMC, in preparation for a further asset sale. In Q1/213, Mapletree Investments, owned by Temasek Holdings of Singapore, successfully bought Centre Point, an office building of the total GFA of 38,61 sm in Phu Nhuan District. As the first project that is calling for sale publicly, Saigon Link marks a notable change in the behaviors as well as the mindset of developers. Transparent transactions and information will help to re-liquidate the market. SAIGON LINK 31 CBRE MARKET INSIGHTS Q2/213 For more information regarding this presentation please contact: DUNG DUONG (Ms.) Associate Director T Ext F dung.duong@cbre.com