Fearless Forecasts. Presented by: Marc Townsend Managing Director CB Richard Ellis (Vietnam) Co., Ltd.

Transcription

1 Fearless Forecasts January 2011 Presented by: Marc Townsend Managing Director CB Richard Ellis (Vietnam) Co., Ltd. A Review of our 2010 Fearless Forecast Office take up will double but rents not to recover until 2011 Hotel occupancies to recover by the second half of 2010 Retail ENT problems persist, local retail demand will be insatiable Local developers continue to lead the way tallest, biggest and most expensive Traffic congestion will restrict daily life and limit spending The super-deluxe condo/villa market will attract some serious attention The number of real estate funds will shrink and characteristics will change Serviced apartment demand will recover by the end of the first half of 2010 CBRE to move head office to Hanoi CB Richard Ellis Page 2 CB Richard Ellis Fearless Forecasts 2011

2 Hanoi 2011 Changes VietinBank Complex Keangnam Hanoi Mipec Tower Landmark Tower EVN Tower Indochina Plaza Hanoi Crown Complex CB Richard Ellis Page 3 CB Richard Ellis Fearless Forecasts 2011 GDP Growth Rate (y-o-y) Lending Rate Inflation (Average, y-o-y) Vietnam Economic Overview Est. 2011f 8.5% 6.2% 5.3% 6.8% % 12.75% Down from 21% in Q3 Down from 21% in Q3 16% % (Late 2010) 8.3% 22.9% 6.9% % 1 (Dec 10: 11.8%) 15% % 2 Exports US$48.6 bil US$62.7 bil US$57.1 bil US$71.6 bil US$78 bil Imports US$62.8 bil US$80.7 bil US$ bil US$84.0 bil US$92 bil Gold Price (per Tael) VND16.16 mil VND17.8 mil VND26.7 mil VND36.1 mil (Dec. 31, 2008, up (Dec. 31, 2009, up (Dec. 31, 2010, up 7.2% y-o-y) y) (50% y-o-y)) y)) 35.2% y-o-y) y) N/A US$/VND (Commercial banks) 16,030 (Dec. 31, 2007) 17,400 (Dec. 31, 2008) 18,497 (Dec. 31, 2009) 19,500 (Dec. 31, 2010) Devalued by 5.4% vs. Dec ,500 2 US$/VND (Unofficial market) 16,070 (Dec. 31, 2007) 17,510 (Dec. 31, 2008) 19,470 (Dec. 31, 2009) 21,010 (Dec. 31, 2010) N/A Committed FDI US$21.3 bil US$71.7 bil US$22.6 bil 1 US$18.6 bil 1 (US$6.8 bil real estate) US$20 bil 1 US$ Implemented FDI US$8.0 bil US$11.7 bil US$10 bil US$11 bil bil 1 Source: Historical data by GSO, 1 GSO 2 BMI Q1/2011 Report CB Richard Ellis Page 4 CB Richard Ellis Fearless Forecasts 2011

3 2010 Regional Economic Comparison Hong Kong Thailand Singapore China Malaysia Vietnam GDP Growth Rate 6.5% 7.6% 14.0% 10.1% 5.5% 6.8% Consumer Price Index 2.4% 3.3% 2.9% 3.2% 1.7% 11.75% Gold Price ( per gram in US$ equivalent) US$45.23 US$44.07 US$45.12 US$45.16 US$45.18 US$51.40 Trade Balance -US$41.5 bil US$13.4 bil US$38.8 bil US$189.9 bil US$34.2 bil -US$12.4 bil FDI (net inflow in current US$, 2009) US$48.45 bil US$4.98 bil US$16.8 bil US$78.19 bil US$1.39 bil US$7.6 bil Source: EIU, World Bank, Goldprice.org, goldpricethai.com, pecunix.com, General Statistics Office CB Richard Ellis Page 5 CB Richard Ellis Fearless Forecasts Economic Overview - Currencies US$ appreciates in Vietnam, while regional and other foreign currencies grow stronger against US$ Source: Google Finance CB Richard Ellis Page 6 CB Richard Ellis Fearless Forecasts 2011

4 2010 Economic Overview Vietnamese economy has recovered from global financial crisis but to a lesser extent than Asian compatriots Vietnam GDP rose, inflation and lending rates increased Continued concern over Vinashin fallout Gold remained strong competition for stock & property markets US$/VND adjusted Good buy to some int l investors! Source: CB Richard Ellis Page 7 CB Richard Ellis Fearless Forecasts Vietnam Stock Market Limited movement in Vietnam market in 2010 as investors found gold more attractive Stock market to rise in 2011 owing to perceived good value, GDP growth and continued market reform Source: vinabull.com CB Richard Ellis Page 8 CB Richard Ellis Fearless Forecasts 2011

5 2011 Regional Stock Market Comparison Stock markets in Vietnam were very flat considering regional growth, rise expected in 2011 SINGAPORE, CHINESE AND VIETNAMESE STOCK MARKETS of 31 Dec 2009 Indexe ed to 100 as Dec 09 Jan 10 Feb 10 Mar 10 Apr 10 May 10 Jun 10 Jul 10 Aug 10 Sep 10 Oct 10 Nov 10 Dec 10 Singapore Straits Times Index STI China Shanghai Composite Index HCMC VN Index Source: Yahoo Finance, HCM Stock Exchange CB Richard Ellis Page 9 CB Richard Ellis Fearless Forecasts Economic Forecast - Interest Interest rates likely to increase from current base rate of 9% Bad debt becomes a growing problem Large outstanding loan amounts for the property sector Source: State Bank of Vietnam CB Richard Ellis Page 10 CB Richard Ellis Fearless Forecasts 2011

6 2011 Economic Forecast - Inflation Inflation on the rise, double digits expected (approx. 11.5%) Price of rebar in HN: Dec ,075 VND/Kg Dec ,364 VND/Kg Price of cement in HN: Dec VND/Kg Dec VND/Kg 50% 45% 40% 35% Y-O-Y CHANGE IN CONSUMER PRICE INDEX (CPI) IN VIETNAM Price of food and foodstuffs: Dec. 2009: 5.8% y-o-y Dec. 2010: 16.2% y-o-y CPI figure Dec. 2009: 6.5% y-o-y Dec. 2010: 11.8% y-o-y 2010: 9.2% y-o-y -O-Y CPI (%) Y- 30% 25% 20% 15% 10% 5% 0% Jan-07 Feb-07 Mar-07 Apr-07 May-07 Jun-07 Jul-07 Aug-07 Sep-07 Oct-07 Nov-07 Dec-07 Jan-08 Feb-08 Mar-08 Apr-08 May-08 Jun-08 Jul-08 Aug-08 Sep-08 Oct-08 Nov-08 Dec-08 Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09 Jul-09 Aug-09 Sep-09 Oct-09 Nov-09 Dec-09 Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 CPI Food & Food Stuffs Housing & Construction Materials Source: General Statistics Office, Ministry of Construction CB Richard Ellis Page 11 CB Richard Ellis Fearless Forecasts Government Decrees Before 2010 Decree 69/2009/ND-CP Addressed development, land use, land expropriation and compensation among other things Circular No. 14 (a guideline for Decree 69) Equalises land use fees between one time rental payments and land grants Gives local authorities leeway to determine the unit land price payable to the State, previously the rate was fixed Removes VND 5 million cap on compensation for relocation support and changes the duration landowners can receive support New in 2010 Energy Efficiency & Conservation Bill Broad based bill which includes measures to ensure energy security and balance Provides for developing models for efficient energy use in buildings Decree 71/2010/ND-CP & Circular No. 16 (a guideline for Decree 71) 20% of units within a project can be sold via Capital Contribution Agreements (CCA) prior to the foundation being completed, but after infrastructure works have started; With the 80% remaining being sold only after foundation has been completed, under S&P contracts through a Real Estate Trading Floor (and trading floor conditions) Enforcing the law that all prices be in VND (not USD w/ VND equivalent) CB Richard Ellis Page 12 CB Richard Ellis Fearless Forecasts 2011

7 2011 Government Decrees New in 2011 Expect final approval of Hanoi s Proposed Master Plan Expect revisions in Decree 108 Regional trends (China/HK/Korea) with anti- speculative measures Change is expected after National Party Conference (mid-january) CB Richard Ellis Page 13 CB Richard Ellis Fearless Forecasts 2011 Roadways Le Van Luong and Thang Long Boulevard 2010 Infrastructure Milestones completed, providing access to the West and stimulating economic development in the surrounding provinces west of Hanoi Hanoi Lao Cai and Hanoi Hai Phong highways have started construction Thang Long Boulevard Metro lines The Nhon Hanoi Central Railway Station began construction ti while obstacles of Cat Linh Ha Dong railway project were removed Expected completion in 2015 Extended Le Van Luong Cat Linh Ha Dong Railway CB Richard Ellis Page 14 CB Richard Ellis Fearless Forecasts 2011

8 2011 Infrastructure Roadways National Road 32: Clearing ground to be completed Ring Roads: RR1: Construction on Dong Mac Nguyen Khoai National Road 32 RR2: Master Plan of Elevated Highway Vinh Tuy Nga Tu So to be approved RR3: Pham Hung Road to be widened to 8 lanes RR4: Master plan to be approved South Ha Dong axis will be finished and will connect NUAs in Ha Dong The South Ha Dong Axis Bridges More road connections to Vinh Tuy & Thanh Tri Bridges Nhat Tan Bridge will complete ground clearing on both sides of the bridge Airport Ground clearing will be completed Construction started on T2 Station Nhat Tan Bridge CB Richard Ellis Page 15 CB Richard Ellis Fearless Forecasts The Changing Profile of Developers Funds moving from just being traders to being traders / developers / project managers / project marketers VinaCapital to VinaLiving & VinaProjects SSG to SSG M&E, SSG trading floors Funds focus on developing their core, scalable, mixed-use projects divesting of projects outside this focus Local developers continue to dominate the market Expand the use of technology and international ti & local l consultants t Financing issues grow as interest rates expected to increase Continue to search for investors / alternative financing Increased cooperation between developers for know-how/expertise Limited foreign developments due to better opportunities in home markets Vietnam market dominated by 3 or 4 international investors CB Richard Ellis Page 16 CB Richard Ellis Fearless Forecasts 2011

9 Hanoi Key Projects Under Development CB Richard Ellis Page 17 CB Richard Ellis Fearless Forecasts 2011 Residential Overview Prices of landed houses skyrocketed in the first 5 months, due to Hanoi s Proposed Master Plan Infrastructure projects progressed well or completed Decree 71 & Circular 16 caused concerns for both developers & investors esp. about the legality of sales under capital contribution agreements (CCA) High-end & luxury products under-performed For the first time, the market saw many sales incentives, re-launches, & developers expansion of distribution ib ti channels Mid-end products maintained good sales rate and received increased attention from developers CB Richard Ellis Page 18 CB Richard Ellis Fearless Forecasts 2011

10 Residential Forecast Continued large supply: Majority have few unique selling points, stiff competition Properties with unique selling points, that are well-branded and marketed will out-perform Landed home prices will continue to steadily rise: based on infrastructure improvements, the Hanoi Master Plan, limited ability to purchase HANOI CONDOMINIUM MARKET SUPPLY ts Uni 100,000 80,000 60,000 40,000 20, Total Supply: - Double 2008 figure 46,000 94,000 16,000 15,000 15, _F 2011 New supply 16,000 units: - Same as 2010 & Mid-end to still dominate, but to a lesser extent than 2010 Beginning Supply New Supply Source: CB Richard Ellis Vietnam CB Richard Ellis Page 19 CB Richard Ellis Fearless Forecasts 2011 Residential Forecast Developers will change their tactics Foreign & Local developers: move from high-end to mid-end segment (Indochina Land, CapitaLand, Posco, Vihajico, etc.) Raising capital: through partnerships rather than through condo sale due to legal changes under Decree 71 & Circular 16 & higher interest rates More innovative: new products to differentiate More market awareness: study buyers preferences more closely Sales techniques: Multiple agents & pushing their own sales teams/ trading floors Increased advertising & marketing expenditures Flexible payment terms Increased incentives promotions, discounts, merchandising Buyers behavior: Desire for landed property and mid-end condos to remain strong Fear for depreciation of VND => hedge risk in property Fewer speculators LUXURY CONDO CAPITAL VALUES & RENTS IN KEY ASIAN MARKETS ) Capital Valu ue (US$ psm $30,000 $25,000 $20,000 $15,000 $10,000 $5,000 $0 $70 $60 $50 $40 $30 $20 $10 $0 Kuala Manila Bangkok Hanoi Shanghai Beijing Singapore Hong Kong Lumpur Source: CBRE Asia MarketView Q Capital Value Rents CB Richard Ellis Page 20 CB Richard Ellis Fearless Forecasts 2011 Rents (US$ psm/month h)

11 Second-homes Forecast 2011 follows the trend from mid-2010 towards smaller & more affordable second homes Ecological / second-home projects around Hanoi Market turns from flight driven coastal properties to mountain/lakeside ones within 1-hour from Hanoi Local buyers continue to dominate this market, particularly from Hanoi International buyers return for a look, still in a minority Million dollar home buyers are an extremely thin market Overall slowdown in sales and timeline of projects released, yet overall increasing supply Market responses to rental-pool programs to be observed CB Richard Ellis Page 21 CB Richard Ellis Fearless Forecasts 2011 Serviced Apartment Overview New supply: Grand Plaza Serviced Residence units Hanoi Club Residences - 51 units Vacancy: consistently low throughout 2010 (7% compared to 11% of 2009) (excl. Grand Plaza) Rentals: recovered from the lowest levels in mid-2009 Grand Plaza Serviced Apartment Substitute market of buy-to- let apartments in large projects (Vincom Park Place, Golden Westlake etc.) emerged. Tenants top concerns: location, facilities, communities CB Richard Ellis Page 22 CB Richard Ellis Fearless Forecasts 2011

12 Serviced Apartment Forecast Supply is up with more than 700 units to come on-line this year + existing Buy-to-let market is here to stay with Vincom Park Place and Golden Westlake units coming to the market in 2010 Demand returns to pre-crisis levels with more Asian expats Increased competition in 2011 due to increased supply and buyto-let market entries Overall rents will slide, HANOI CUMULATIVE STOCK & CBD rates remain stable units ANNUAL CHANGES IN SUPPLY with rents falling in the 2,800 West Newer Serviced Apartments will change their strategies to compete Wealthy Vietnamese become tenants! 2,300 1,800 1, , , 1, , f CB Richard Ellis Page 23 CB Richard Ellis Fearless Forecasts , ,885 Existing Stock Supply 231 Office Overview 1, ,121 New supply: ~80,000sm, 20% increase of Grade A&B supply Rents are stable in both Grade A&B buildings Absorption: 70,000 sm largest historical rate of take-up. Heavy take up from telecoms, banks & insurance companies. 80,000 sm of Grade A and B space was vacant at the end of 2010 Overall gross rents dropped to a low in Q Rental recovery started in Hoan Kiem District during Q driven by the financial sector Supply Demand gap in Hoan Kiem vastly reduced over 2010 CB Richard Ellis Page 24 CB Richard Ellis Fearless Forecasts 2011

13 2011 Hanoi Office Overall market sees Demand to increase as headcounts rise Keangnam enters the market in the West but will impact overall rates and Tenant expectations 2011 take-up rates expected to be the highest yet over 100, sm Rents diverge, CBD increases as Decentralised (the West) falls as Rise of the banks as ATM and branch expansions roll-out across the city and the nation with most seeking new locations CB Richard Ellis Page 25 CB Richard Ellis Fearless Forecasts Hanoi Office 2011 Tale of Two Cities CBD & Decentralised (cont.) 2011 looks bright(er) for CBD Landlords Supply: 150,000sm from Keangnam, EVN, etc Demand gap narrows for A&B as limited it stock enters Demand driven by Financial Sector Rents stabilise, with increases expected by end of 2011 Landlords d will be able to revitalize tenant t mix and focus on large occupiers Head West for best rents it s a Tenants market Expected stock coming in 2011 across A, B, and C Buildings with surrounding facilities for staff will benefit Demand driven by financial institutions, insurance firms, IT firms Keangnam will dictate rental rates and terms for the West, and will impact on CBD and Tenant expectations Rents peaked in 2010 and expected to slide as more stock enters CB Richard Ellis Page 26 CB Richard Ellis Fearless Forecasts 2011

14 Retail Overview The West and Ha Dong welcomed large new supply (15,000 sm) from Saigon Co.opMart, Hapro, Grand Plaza & consumers follow new supply International brands (Gucci, Moschino, Chopard), local electronic marts (Pico Plaza, Media Mart), F&B franchisees (KFC, Lotteria, Kichi Kichi) actively expanded Improved marketing events ents (Vincom City Towers, Parkson, The Garden) & sales activities (Hang Da Galleria, Pico Mall) Supermarket chains showed aggressive plans for nationwide expansion: Saigon Co.opMart, Hapro Trend of selling shop lots: Grand Plaza, Hang Da Galleria Top rent achieved record level US$150 psm in CBD PRIME RETAIL RENTS IN KEY ASIAN MARKETS Prime Retail Rent (US$/ps sm/month) $800 $600 $400 $200 $0 Manila Bangkok Hanoi Taipei Singapore Beijing Shanghai Kuala Tokyo Hong Lumpur Kong Source: CBRE Asia MarketView Q CB Richard Ellis Page 27 CB Richard Ellis Fearless Forecasts 2011 Retail Forecast More than 25 new international retailers (& franchises) will enter the market and those here will expand Rapid expansion of large Vietnamese big-box stores & supermarkets and specialty stores More entertainment-oriented developments needed More medium-to-large-size new retail developments Consumer sentiment: Shopping and entertainment experience Increasing demand for fast-fashion products Tenant sentiment: Continue expansion from the south to the north F&B, electronics marts continue to be key drivers Increasing rental cost concern in CBD Landlord sentiment: More responsive to tenants needs More market-sensitive to customers Better informed & use of consultants CB Richard Ellis Page 28 CB Richard Ellis Fearless Forecasts 2011

15 Hospitality Forecast More international brands will compete aggressively for new projects in prime locations and actively seek for close co-operations with second-home developments Banks enter the hospitality sector with city hotels and beach resorts. They will partner with international operators Performance of mid/upscale hotels will continue improvement trend while 5-star hotels still under pressure Forming niches: CBD/Old Quarter for tourists and the West for business travellers More buildings renovations and refurbishments expected Success at many large hotels in the West of Hanoi will depend on their ability to attract MICE & business travelers Large new supply in 2011: 184 rooms in CBD, over 1,000 rooms in the West will increase pressure on room rates Still shortage of mid-range branded hotels CB Richard Ellis Page 29 CB Richard Ellis Fearless Forecasts 2011 Residential land Prices rocketed first 5 months in certain places (e.g. Ba Vi, Thach Ban) then increased consistently tl Transactions: focus on projects in the West Land Overview Commercial land Limited land transactions among local and foreign developers Transaction prices are highly discreet and back-office negotiation Prices are dependent on valuation of finished products CB Richard Ellis Page 30 CB Richard Ellis Fearless Forecasts 2011

16 Land Forecast Residential land Stable rather than sharp increases Transactions more exciting in projects that Deliver quality promised Are located in clusters Have access to infrastructure Commercial land Transactions expected to occur mostly in projects where developers experience lack of capital Projects of focus: industrial i parks, mixed-use projects Prices: upward trend following movements in market prices of finished products Co-operation expected between developers rather than just M&A (for know-how/expertise) CB Richard Ellis Page 31 CB Richard Ellis Fearless Forecasts 2011 Investment 2011 Vietnam ranked the fourth most preferred emerging market for Investment in 2011 by AFIRE the Association for Foreign Investors in Real Estate 1. Brazil 2. China 3. India 4. Vietnam (unranked in 2010) 5. Mexico (#4 in 2010) Reuters reports that Vietnam is one of three "frontier" markets Franklin Templeton expects to place its biggest bets on in 2011 Emerging markets head Mark Mobius says that the firm seeks opportunities in countries shunned by most money managers CB Richard Ellis Page 32 CB Richard Ellis Fearless Forecasts 2011

17 Investment Property Deals of 2010 (deals remain discreet & done through back-office negotiations) Large hotel chain in VN sold to local tourism company Large 5-star hotel complex in Hanoi sold to international investors Dalat Sofitel and Dalat Mercure changed hands Lotus Hotel from the Riviera Group to Kinh Bac City Diamond Tower from PVFC Land to IMICO PVR Hanoi Time Towers from Van Phu Invest to PVR Same same but different Dominated by local investors, followed by established foreign investors New foreign investment will be limited but conditions (weakening dong, inflation) make market attractive to certain groups Established companies seek further entrance into the property market IPOs more limited due to poor market response, Vietnam s global credit ratings dropped Top 10 VN companies looking at international listing options Alternative structures allowing others to buy into companies through convertible bonds has become popular CB Richard Ellis Page 33 CB Richard Ellis Fearless Forecasts 2011 Investment Property Forecast More transaction ti activities iti among local l developers Indirect property investment (M&A, shares, stock) will become more prevalent than direct sales More international retail operators/investors and developers looking for investment opportunities Regulations on construction will be stricter and licenses will be more difficult to obtain More M&A and direct sales due to the seeking of financial support and avoidance of project being revoked Rental rate may face downward trend, however project s capital value will not fall Developers will apply BT model more often CB Richard Ellis Page 34 CB Richard Ellis Fearless Forecasts 2011

18 Industrial & Business Parks Forecast Regional interest in business park development increases Industrial parks change shape, moving from heavy industry into mixed-use / softer services and townships Continued reliance on Korean, Japanese, Taiwanese and Singaporean investors Business process outsourcing (BPO) becomes more competitive as costs in competitor countries rise IT outsourcing remains strong with major IT firms increasing activities Supply chain management efficiencies increase 2010 saw the first direct container shipping from VN to North America Continuing i development of deep-water ports CB Richard Ellis Page 35 CB Richard Ellis Fearless Forecasts MOST Fearless Forecasts Investors Property investment remains dangerous for your health Change in asset class as gold dips and people p move in other directions Developers Marketing spending TRIPLES as developers search for new ways to sell / lease their units Increased use of technology in property building management systems, CRM systems, etc. Local companies seek capital through IPO s and more sophisticated financial structures Some residential developers will convert units for sale to units for lease due to unsold units in completed buildings, or instituting rental pools (guarantees) Office Tenants multiple choices and softening rents CB Richard Ellis Page 36 CB Richard Ellis Fearless Forecasts 2011

19 2011 MOST Fearless Forecasts Ritz Carlton, St. Regis, Mandarin Oriental, Shangri-La and Four Seasons to enter Vietnam within the next 5 years Growth of neighbourhood retail centers due to lack of land in CBD Regional malls coming up outside of traditional shopping areas Ciputra Mall, Savico Mega Mall Demand for data centres grows due to the continuing movement online, as our businesses become more immediate with wi-fi, smart phones and ipads. Developers prepared to deliver with the requirements needed to support these trends will profit. CB Richard Ellis Page 37 CB Richard Ellis Fearless Forecasts 2011 Quarterly Reports for HCMC & Hanoi quarterlyreports@cbrevietnam.com Economic Overview Current Rents and Prices Office Retail Hotel Residential for Sale Investment Serviced Apartments Construction Costs Legal Updates Available for each city, in English or Vietnamese CB Richard Ellis Page 38 CB Richard Ellis Fearless Forecasts 2011

20 Thank you for attending CB Richard Ellis, We obtained the information above from sources we believe to be reliable. However, we have not verified its accuracy and make no guarantee, warranty or representation about it. It is submitted subject to the possibility of errors, omissions, change of price, rental or other conditions, prior sale, lease or financing or withdrawal without notice. We include projections, opinions, assumptions or estimates for example only, and they may not represent current or future performance of the property. You and your tax and legal l advisors should conduct your own investigation of the property and transaction. ti CB Richard Ellis Page 39 CB Richard Ellis Fearless Forecasts 2011