VIETNAM REPORT CONSTRUCTION MARKET UPDATE DECEMBER 2015

Transcription

1 REPORT CONSTRUCTION MARKET UPDATE

2 REPORT MARKET TRENDS VIETNAM ECONOMY While geo-political tensions between China and Vietnam have seemingly eased in 2H 2015 over the maritime territorial disputes, Vietnam s economic growth spurred during this period, on the back of increased foreign investments, industrial production and export growth that surpassed the performance of many of its neighbors within Southeast Asia (SEA) region. The country s gross domestic product (GDP) rose 6.81% yearon-year (y-o-y) in 3Q Preliminary results released by the government showed GDP in 4Q 2015 expanded to 7.0%, rising at its fastest pace in five years as compared to the 6.9% growth over the same period a year ago. The overall expansion achieved a preliminary result of 6.7% for The consumer price index (CPI) rose 0.6% in December Overall, it rose 0.58% through 2015, marking its lowest increase since 2001 due to weak global oil prices. On a month-on-month (m-o-m) basis, headline CPI inflation inched up a meagre 0.02% in December The Markit Manufacturing Purchasing Managers Index (PMI) increased to points in December 2015 from points in the previous month. Manufacturing PMI in the country had been averaging from 2012 until 2015 and reached an all time high of points in May of 2015 and a record low of points in July The construction and manufacturing sectors grew a total of 9.6% in 3Q 2015 y-o-y while the services sector expanded 6.2% y-o-y. Foreign Direct Investment (FDI) peaked at US$7.2 billion in 3Q 2015, according to the General Statistics Office of Vietnam. According to the World Bank, Vietnam s monetary policy remains accommodative against the backdrop of low inflation. The State Bank of Vietnam (SBV) had weakened the Vietnamese dong a total of three times in 2015 in order to maintain competitiveness after economic growth fell below official targets during 1H The third devaluation during 3Q 2015 helped to accelerate exports after China depreciated its yuan. Market analysts say such currency exchange management policy helped to reduce the US dollar speculation in the domestic market. The Asian Development Bank (ADB) raised its GDP growth expectations for Vietnam from 6.1% to 6.5%, according to its latest forecast released in September 2015 amid rising consumption and export-oriented production. The growth is also projected to be the highest of all ASEAN countries and well above the 4.4% average projected for the SEA region. The World Bank also anticipates more positive developments in the manufacturing, export and foreign investment sectors in the country and forecasts the economy growth rate to be on the upward trend over the next two years ( ). 1

3 REPORT MARKET TRENDS CONSTRUCTION INDUSTRY According to the General Statistics Office of Vietnam, the GDP from the construction sector increased from 142,603 billion VND (US$6.425 billion) in 3Q 2015 to 228,102 billion VND (US$10.28 billion USD) in 4Q In real terms, the construction industry s output value recorded a compound annual growth rate (CAGR) of 5.27% for the review period of 2010 to The construction industry is expected to be supported by the government s investments in infrastructure and housing construction projects over the current review period ( ). It is projected to register a CAGR of 6.53%. Ho Chi Minh City (HCMC) will be expecting six new metro lines by Construction of the first railway route connecting the city s District 1 s Ben Thanh Market and District 9 s Suoi Tien Theme Park had already started in December Work on the second link between District 12 s An Suong and District 2 s Thu Thiem new urban area had commenced in early Both railway lines are expected to have fully operational trains by The new railway is part a number of infrastructure construction projects aimed at relieving congestion and pollution in the capital. Independent market data reported the number of apartment buildings has increased in those areas close to the planned stations in the past three years. The plans by the Ministry of Construction (MoC) to build 2.7 million m 2 worth of social housing in HCMC by 2015 is not expected to be completed on time. Under the strategy, the city had aimed to replace dilapitated apartments by disassembling 455,000m 2 worth of outdated and unsafe premises during but had only completed 60% of the plan as at October For building works, the 81 story mixed-used Landmark tower project along Saigon River is expected to surpass Hanoi s Keangnam tower as the country s tallest building upon its completion. Slated for completion by the end of 2017, the skyscraper will stand at 460m high and will consist of a five-star, 260- room hotel, a shopping mall, 250 apartments and other facilities. Barring any unforeseen market conditions, building tender prices in Ho Chi Minh City are anticipated to increase by 3.0% - 6.0% for

4 REPORT MARKET TRENDS PROPERTY MARKET The amendments to the Law on Housing and the Law on Real Estate Business took effect on 1 July The revised legislation allows foreigners with valid visas and international organizations operating in Vietnam to buy up to 30.0% of an apartment building or 250 houses in a ward (i.e. a subdistrict-level administrative area that can contain thousands of properties). Amid concerns of a speculative market, the Ministry of Construction (MoC) reassured the property market that a property bubble is unlikely to occur since the economy is moving in an upward recovery mode. Foreign direct investment (FDI) in real estate rose sharply in 2H According to the Department of Housing and Real Estate Management, new FDI pledges in the property market during the January-November period rose 83.0% from a year ago to US$2.32 billion (VND trillion). These FDI commitments accounted for 11.5% of the total US$20.22 billion (VND 448,782 trillion) attracted by the country in this period. For 2016, the MoC expects the real estate sector to demand between 30.0% and 40.0% of the country s total FDI pledges. Improving economic conditions and lower lending rates spurred sales transactions for residential properties in Ho Chi Minh City (HCMC) and Hanoi. HCMC s sales rose 90.0% to 17,050 units and in Hanoi, sales jumped 80.0% in the first 11 months of 2015 to 17,750 units compared with a year earlier, based on data released by MoC. Residential prices of HCMC apartments rose 12.0% in 3Q 2015 y-oy while Hanoi rose 3.0% y-o-y. In addition, preliminary statistics released by MoC reported a reduction of VND 1.75 trillion (US$78.2 million) in inventory for January 2016 from December 2015 to an estimated value of VND 49.1 trillion (US$2.2 billion). Amid limited supply and stable demand, sales and vacancy rates for Grade A ( Prestige ) and Grade B ( Good Quality ) office buildings remained sustainable in 3Q Rental rates are however expected to increase in 2016 along with the revised Law on Real Estate Business which is expected to attract more bigger foreign companies. Industry analysts expect the future supply of office stock in HCMC will mainly focus on mixed-use developments and Grade A in the CBD area and will likely consist of a much higher quality with larger floor plates (varying from 1,500m 2 to 2,500m 2 ). This new supply is projected to arrive between 2017 and

5 REPORT METAL PRICES USD/Tonne 7,000 USD/Tonne 2,500 6,500 Aluminium (RHS) 2,000 6,000 5,500 1,500 5,000 4,500 Copper (LHS) Steel (RHS) 1,000 4, ,500 Dec 14 Jan 15 Feb 15 Mar 15 Apr 15 May 15 Jun 15 Jul 15 Aug 15 Sep 15 Oct 15 Nov 15 Dec 15 Copper Aluminum Steel Data Source: London Metal Exchange (LME) 0 CONSTRUCTION MATERIAL PRICES AVERAGE SUPPLY RATE (VND) MATERIAL UNIT 1Q2015 2Q2015 3Q2015 4Q2015 p Concreting Sand m 3 237, , , ,727 Stone Aggregate (20mm) m 3 175, , , ,091 Ordinary Portland Cement (PCB40) kg 1,409 1,522 1,550 1,550 Reinforced Concrete (Grade 30 MPA) m 3 1,163,636 1,090,000 1,090,000 1,090,000 Reinforced Concrete (Grade 40 MPA) m 3 1,320,000 1,200,000 1,200,000 1,200,000 High Tensile Steel Bars (10-40mm) kg 14,500 14,560 13,655 12,281 Mild Steel round bars (6-20mm) kg 14,590 14,410 13,800 12,281 Structural Steelwork (U-beam, stanchions) tonne 16,050,000 16,050,000 14,870,000 14,280,000 Timber Sawn Formwork m 2 120, , , ,000 Clay Bricks (100mm thick wall) m 2 186, , , ,400 Data Source: Ho Chi Minh City Construction Department p: preliminary Exclusions: Plant and Equipment Transport Wastage Overheads and Profit Tax Expenses (VAT) Notes: All supply prices stated above are only applicable for building construction projects in Ho Chi Minh City. Specific cost consultancy should be sought for your particular factual situation prior to utilising this information. CURRENCY EXCHANGE CURRENCY UNITS PER USD 1Q2015 2Q2015 3Q2015 4Q2015 p Vietnamese Dong (VND) 21,667 21,543 22,195 22,430 Data Source: Oanda p: preliminary 4

6 REPORT HO CHI MINH CITY CONSTRUCTION PRICES OFFICE Development Type Cost PER CFA VND ( 000) / m 2 Cost PER CFA USD / m 2 Good Quality, 10 to 25 storeys 22,030-24, ,120 Notes: Construction Floor Area (CFA) - The area of all building enclosed covered spaces measured to the outside face of external walls including covered basement and above ground car park areas. All Ho Chi Minh City construction prices stated herein are as at 3rd Quarter 2015, and include a general allowance for preliminaries, foundation and external works. The price ranges herein are indicative and due consideration should be given to the different specification, size, location and nature of each project when utilising this information. The prices here may not fully reflect the extent of current market forces and tendering conditions. Exchange Rate Used: USD 1.00 = 22,195 Good Quality, 26 to 40 storeys 23,120-24,910 1,040-1,120 Prestige, 10 to 25 storeys 23,330-28,890 1,050-1,300 Prestige, 26 to 40 storeys 24,470-30,150 1,100-1,360 HOTEL (Excluding FF&E) Three Star 22,810-29,510 1,030-1,330 Four Star 26,750-32,690 1,210-1,470 Five Star 30,340-37,150 1,370-1,670 COMMERCIAL Retail 18,830-25, ,130 RESIDENTIAL Good Quality Condominium 14,950-17, Luxury Condominium 16,200-22, ,020 INDUSTRIAL Warehouse 5,830-8, Factory 6,060-9, CAR PARK Multi Storey 8,530-12, Basement, outside CBD 15,820-21, ,010 Basement, CBD 17,540-23, ,110 Exclusions: Land cost Legal and professional fees Development charges Authority fees Finance costs Loose furniture, fittings and works of art Tenancy work Site infrastructure work Diversion of existing services Resident site staff cost Models and prototypes Future cost escalation Value-added tax Disclaimer: While Rider Levett Bucknall Co. Ltd ( RLB ) has endeavoured to ensure the accuracy of the information and materials in this report (the Materials ), it does not warrant its accuracy, adequacy, completeness or reasonableness and expressly disclaims liability for any errors in, or omissions therefrom. RLB shall not be liable for any damage, loss or expense whatsoever arising out of or in connection with the use or reliance on the Materials. The Materials are provided for general information only. Professional advice should be obtained for your particular factual situation before making any decision. The Materials may not, in any medium, be reproduced, published, adapted, altered or otherwise used in whole or in part in any manner without the prior written consent of RLB. For enquiries, please contact: Rider Levett Bucknall Co. Ltd Centec Tower, 16th Floor Unit 1603, Nguyen Thi Minh Khai Street Ward 6, District 3, Ho Chi Minh City, Vietnam Tel: Fax: rlb@vn.rlb.com Web: Cover: Skyline of Ho Chi Minh City and Saigon riverside in the evening 5

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