AFFORDABLE HOUSING MARKET OVERVIEWS JANUARY 2016 Ho Chi Minh
Market Overviews Ho Chi Minh
Vietnam Economy Overview Vietnam s GDP growth rate in Q4 2015 continuously exceeded expectations Vietnam (VN) s GDP in Q4 2015 expanded 7.01% YoY, contributing to the 6.68% YoY growth rate of the country in 2015, which is the highest growth rate in the past 5 years. Stronger performance was recorded in all major sectors in Q4 2015, continue the economic recovery. Growth in the industrial and construction sectors outweighed other sectors with 9.49% YoY. Export volume in Q4 2015 was $41.7 billion, increasing by 3.20% YoY. Reference exchange rate was slightly increased in Q4 2015 Latest in December 2015, the government adjusted the reference exchange rate of USD/VND to be slightly increased from VND 21,800 to VND 21,890 buying rate and from VND 22,475 to VND 22,575 selling rate. The interbank exchange rate of USD/VND has been maintained at VND 21,890 since the last adjustment in August 2015, increasing by 3% YoY. % 14 12 10 8 6 4 2 0 7.40 GDP Growth Rate 8.70 9.60 10.40 10.20 10.70 11.20 10.30 7.60 8.10 7.70 8.70 8.00 10.20 9.10 12.10 4.00 4.66 5.35 5.44 4.76 5.00 5.54 6.04 6.19 6.96 6.12 6.47 6.87 7.01 5.09 5.25 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2012 2013 2014 2015 VN Growth rate (YoY) HCMC Growth rate (YoY) Interbank Exchange Rate USD/VND 21,890 21,890 22,000 21,458 21,246 21,500 21,036 21,036 21,000 20,500 20,828 20,828 21,246 21,036 21,036 20,828 20,828 20,828 21,673 20,000 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2012 2013 2014 2015 Interbank exchange rate Ho Chi Minh City (HCMC) continued to be the dynamic center of VN with an outstanding GDP growth at 12.10% YoY in Q4 2015, contributing to the 9.85% growth rate of the city in 2015 and much higher than VN s GDP growth rate. Bank lending interest rates have remained stable since November 2014 The average bank lending interest rates in Q4 2015 remained stable at 11% per annual. The rates are expected to fall slightly towards the first half of 2016, further boosting individual investments. In addition, in order to encourage long term loans for buying cars or houses, many banks such as Vietcombank, Techcombank and ACB offering incentive lending rates of 6%-8% for the first year or even 0% with specific conditions. 13% Lending Interest Rates of Some Banks 11% 9% Average interest rates p.a in Q4 2015
Vietnam Economy Overview (cont.) Implemented FDI in VN was increased significantly in Q4 2015 After reaching a peak in Q3 2015 with $11.7 billion, the total new and additional registered FDI in VN in Q4 2015 was cooled down with $5.60 billion, decreasing by 38% YoY. Meanwhile, implemented FDI hit $4.8 billion during this quarter, increasing by 37% YoY. Overall, the country attracted $22.8 billion of total new and additional registered FDI (13% YoY) and got $14.5 billion implemented FDI (17% YoY). Such improvement resulted from the stable macroeconomic backdrop with relatively low inflation and low interest rates, turning VN into a favorable destination among South East Asia countries for foreign investors. M&A hit $4.3 billion in 2015, increasing 40% YoY Asset Seller Buyer Value (mil USD) % Trans. Industry MD Bank MD Bank Maritime Bank N/A N/A Banking PG Bank PG Bank VietinBank N/A N/A Banking MHB MHB BIDV 150 100% Banking Sounthern Bank Southern Bank Sacombank N/A N/A Banking Hanoi Landmark Tower 4 Investment Projects Keangnam Indochina Land Holdiings 2 Qatar Investment Authority 800 100% Banking Gaw Capital Partners 106 N/A Real Estate Celadon City Sacomreal Gamuda Land 64 100% Real Estate An Gia An Gia Investment Creed Group 200 20% Real Estate Casino Hoi An Vina Capital Chow Tai Fook N/A N/A Hositality Masan Consumer Holdings & Masan Brewery Masan Singha 1,100 25% Masan Consumer Holdings 33.3% Masan Brewery FMCG The total new and additional registered FDI of HCMC was also decreased in Q4 2015 with $0.63 billion (-54% YoY) as the result of the strong investment wave in the previous quarter. In 2015, the city attracted $3.64 billion (13% YoY). The total value of M&A transaction reached $4.3 billion in 2015 (40% YoY). Consumer goods, real estate, retails and banking are the most active sectors to the M&A activity in this year. $ billion 15 Registered and Implemented FDI in Vietnam 11.7 % 100% 10 9.0 5 0 6.0 6.5 5.60 4.4 4.5 4.3 3.7 3.1 3.5 3.3 3.5 3.7 2.6 1.8 4.8 2.5 2.8 2.9 2.4 2.7 3.0 3.0 2.8 2.9 2.9 3.2 3.5 3.1 3.3 3.4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2012 2013 2014 2015 VN New and additional Registered FDI ($ billion) VN Implemented FDI Change of VN implemented FDI (YoY) 0% -100%
Vietnam Economy Overview (cont.) Vietnam to be an attractive destination for retailers Leading the Asia-Pacific region in the growth of retails sales volume in 2015 (forecasted by Oxford Economics), Vietnam promises a healthy demand resulting from optimistic economic conditions and a growing young and educated population, which are the ideal settings for affordable housing investors. HCMC returns to the top cities for investment and development, as a survey by PwC shows. Source: Emerging Trends in Real Estate Asia Pacific 2015 Survey, CBRE Source: Oxford Economics (17 Nov 2014) Key Information for Vietnam s 3 Main Cities in 2015 Ha Noi Population : 7.38 million people Average annual income/person: $3,422 GDP Growth: 9.24% (YoY) CPI: 0.7% (YoY) Industrial zones: 13 zones International airport capacity: 12 million people/year Registered FDI: $1.4 billion Total transaction value in stock market (HNX): $6.0 billion. Da Nang Population : 1.03 million people Average annual income/person: $2,036 GDP Growth: 8.71% (YoY) CPI: 0.52% (YoY) Industrial zones: 6 zones International airport capacity: 10 million people/year Registered FDI: $3.30 billion. Ho Chi Minh (Fund Target City) Population : 8.22 million people Average annual income/person: $5,500 GDP Growth: 9.85% (YoY) CPI: 0.23% (YoY) Industrial zones: 18 zones International airport capacity: 25 million people/year Registered FDI: $3.64 billion Total transaction value in stock market (HOSE): $21.6 billion. HCMC is the right location in Vietnam to start the AH
EZLAND AFFORDABLE PRESENTATION HOUSING FUND Housing Law and Real Estate Business Law Amendments The amended housing law and real estate business law take effect from July 1 st 2015. Foreigners are allowed to buy projected houses and condominium Effective from July 1 st 2015, foreigners are allowed to buy or lease real estate products in VN as long as total number of units owned by foreigners do not exceed 30% of total apartments or 250 villas or townhouses in a project. In addition, foreign owners have the same rights (including sublease, mortgage, trade and inherit) as Vietnamese owners towards their own properties. Taking more advantage to the housing law is Viet Kieu (Overseas Vietnamese), who will have full rights to property ownership in Vietnam. Raise the Legal Capital of Real Estate Enterprise to approximately $1 million Minimum legal capital for each real estate enterprise is increased from $0.28 million to approximately $1 million, which will immediately help remove unqualified companies out of the real estate market. Real estate Presale and Project Guarantee To improve guarantee for customers buying projects, developers are required to obtain a bank guarantee for the under-construction projects. In case of default, the bank must be responsible for refunding to buyers. In addition, customers will only need to pay maximum 70% value of the property before handover date and not exceed 95% value of the property before receiving Ownership Certificate if not agreed by buyers. The amended laws helps VN s real estate market to become more competitive in the South East Asia region. (Source: Savills, Q4 2014)
MARKET UPDATE Ho Chi Minh Page 2 of 19
HCMC Overview Binh Duong Province Binh Chanh Nha Be Dong Nai Province Central Business District (CBD) & Surrounding Areas: District 1, District 3, District 4, District 5, District 10, Binh Thanh, Phu Nhuan; Outer Areas: Tan Binh, District 11, District 12, Go Vap, District 2, District 9, Thu Duc, District 6, District 7, District 8, Binh Chanh, Binh Tan, Nha Be, Tan Phu. Note: The order of districts in the following charts corresponds to the relative geographical location of districts We focus on the districts and areas visible above Page 7 of 19
Update HCMC Infrastructure Long Thanh Dau Giay Expressway, the most modern expressway in Vietnam, was completed and opened on 8 th February 2015 Long Thanh Dau Giay Expressway connects District 2 and District 9 of HCMC with Dong Nai and Vung Tau; It helps to reduce travel time from HCMC to Vung Tau from 2.5 to 1.5 hours. Long Thanh Dau Giay Expressway Long Thanh International Airport Long Thanh International Airport The new airport will be operated by 2025 Approved by deputies on June 24 th 2015; Long Thanh Airport will be located at a 35 minutes driving time from CBD via the new HCMC-Long Thanh-Dau Giay expressway; It will help transporting the increasing flow of international tourists expected to rise from 15% to 20% annually and the increasing number of locals travelling abroad; 3 phases: 1 st phase to be completed in 2025 will handle 25m passengers per annum. After completion, the airport will will serve over 100m passengers annually. Part of Inner Ring Road 2 (2.7 km) was started construction in Dec 2015 Inner Ring Road 2 map (The red solid line) 2.7 km of Inner Ring Road 2 (blue line) links Pham Van Dong Street and 1A High Way in Thu Duc District; The 1 st phase was started construction in Dec 2015 with total investment of VND 1,135 billion and it is expected to be completed in 2017 with 6 car lanes and 3 bridges. The 2 nd phase will then building the main road with 8 car lanes; Other part of Inner Ring Road 2 from My Thuy Roundabout (District 2) to Rach Chiec Bridge 2 (District 9) has already use since August 2013; Rach Chiec Bridge 2 was opened on 29 th Dec 2015, fully connects Districts 2 with District 9, reducing travel distance from Ha Noi HighwaytoCatLaiportfrom14kmtoonly8km. Thu Thiem Bridge 2 was started construction in Feb 2015 Thu Thiem Bridge 2 Interchange Nguyen Huu Tho Nguyen Van Linh Thu Thiem Bridge 2 will connect District 1 and District 2, easing the traffic pressure in this central; It is expected to be completed by April 2018. Vietnam-Taiwan joint venture to build $115 million interchange Nguyen Huu Tho Nguyen Van Linh The project will be developed under the Build-Transfer (BT) mechanism and 240 hectares of land in Nha Be will be transferred in exchange after the project is completed; Stage 1 will be a central circular island and two tunnels along many branches of Nguyen Van Linh worth $37 million; Stage 2 will be two overpasses and two other tunnel worth $78 million; The construction of the Nguyen Huu Tho Nguyen Van Linh interchange will be combined with the Nguyen Huu Tho Street s expansion. Source: Tuoi tre; Vnexpress 2015 Page 8 of 19
Update HCMC Infrastructure HCMC announces to expand Tan Son Nhat Airport Tan Son Nhat Airport will be expanded by 8 hectares in 2019 with a total budget of $283 million. The airport terminals will be upgraded to increase the passenger capacity to 25 million passenger a year by 2020. The aircraft parking capacity will also increase to 82, twice the current number. Tan Son Nhat Airport Metro Line No.1 Metro lines Metro line No. 1 will connect Ben Thanh (District 1) and Suoi Tien park (District 9) with total length of 19.7km (in which 2.6 km underground and 17.1 km elevated) and 14 stations. It is expected to be completed by 2019 and put into operation in 2020. Metro line No.2 will include 11 stations stretching between Ben Thanh and Tham Luong in District 12 with total length of 11.3 km (in which 9.6 km will be underground).this was started construction at Tham Luong Depot (District 12) in December 2014 and is expected to complete in Q3 2016. Stage 1 of metro line No. 5 will connect Bay Hien intersection (Tan Binh) to Sai Gon Bridge (Binh Thanh) and stage 2 will connect Bay Hien intersection to Binh Chanh. HCMC plans to build 6 Bus Rapid Transit (BRT) routes and the first route will be operated by 2018 HCMC will build 6 BRT routes with a total budget of $155 million, mainly provided by the World Bank. HCMC has studied the feasibility of building the first BRT route (on Vo Van Kiet Avenue) and plans to complete by 2018. Bus Rapid Transit HCMC is seeing major infrastructure projects being realized, in particular to the East, an area we are focusing on. Progress of Metro line No.1 The six metro lines planned for HCMC Source: Tuoi tre; Vnexpress; CBRE 2015 Page 9 of 19
HCMC Market Update Market supply (all segments) Existing Supply 2010-2015 Primary asking price (all segments) Primary asking price/sqm (*) high-end 17% below affordable 6% below affordable affordable mid-end high-end mid-end 25% affordable 52% The supply of mid-end and affordable segment increased notably in 2010 2015 period. As the period saw housing prices were kept under control and speculators were moving out from the market, developers has began to focus on middle income customers who are the actual buyers. In Q4 2015, there were 14,038 units launched from 29 new and existing projects to the apartment market in HCMC (56% YoY). From 2010 to 2015, there were 79,976 units launched in the market from 153 projects, of which affordable units took the majority with 52%. The HCMC average primary price across all segments was $1,285/sqm in 2015, increasing by 4.4% YoY and 2.5% QoQ. Price improvements were recorded for all segments in 2015 as a result of the strong sales momentum, especially high end segment, which increased by 8.3% YoY, resulting that the real estate market is more attractive to buyers (CBRE, Q4 2015). Market performance (all segments) Sold units by quarter (*) Units 50,000 40,000 Current Supply by Year 40,008 30,000 17,486 20,000 7,333 9,201 10,000 3,369 2,579 0 2010 2011 2012 2013 2014 2015 below affordable affordable mid-end high-end Total There were 40,008 units launched in 2015 from 77 projects (129% YoY). Of which, District 2, District 7 and Binh Thanh District continue to lead the market with 16,722 units from 27 projects, representing 42.8% of total apartment supply. 2015 recorded a notably high sales volume with 36,160 units sold, up by 98% YoY. In Q4 2015, there were 10,340 unit were absorbed, marking the new record in historical quarterly absorption, up by 38% YoY (CBRE, Q4 2015), thanks to: Positive signals of Vietnamese economy such as low CPI and high GDP growth rate. Smaller unit sizes and attractive sales strategies from developers such as flexible payment terms, price discount, promotion, etc. (*) CBRE Research Definitions (Affordable units with sales price lower than $800/sqm; Mid-end units with sales price from $800-1500/ sqm; High-end units with sales price from $1500-$2000/sqm, Luxury units with sales price larger than $2000/sqm) Page 10 of 19
HCMC Affordable Market Update Market supply (affordable segment) Units 1500 1000 500 0 District 8 New Affordable Supply Q4 2015 District 9 District 12 Units launched Binh Thanh No. of projects Tan Phu Thu Duc Nha Be No. of Projects Since 2013, it has been showing a rebound responding to recovering economic conditions, developers better ability to deliver suitable products and enhanced buyers confidence. With 5,759 units from 11 projects, the affordable segment continued to rank first in total supply, accounting for 41% of new launches in Q4 2015. Of the new affordable unit launches, 2 of those are the second phases of projects in Nha Be ncluding Dragon Hill Residence and Suite 2 and Hung Phat Silver Star. Others are new projects in which the most outstanding ones were developed by reputation developers such as Gia Hoa (The Art District 9), Novaland (Rich Star Tan Phu), Hung Thinh (Lavita Garden Thu Duc). As the target customers of affordable segment are middle income with limited budgets, most new affordable projects are located in outer districts for relatively low land prices compared to the CBD. Top three largest affordable supply districts from the period 2010-2015 are Tan Phu (5,005 units), Thu Duc (4,733 units) and Binh Tan (4,376 units). Looking forward, better connectivity to the outer districts thanks to the development of infrastructure such as Metro Line No.1 creates more opportunity to the rise of the HCMC s affordable apartments supply. Generally, the market is expected to welcome around 11,239 affordable units in 2016. 3 2 1 0 Primary asking price (affordable segment) Price improvement was recorded in Q4 2015 with theincreaseof10%qoq.despiteoftheincrease in price, the demand was kept stable reflecting the attractiveness of the affordable segment to buyers since most buyers in this segment are end-users with limited budgets so price is the most sensitive factor to this group. Affordable Average Asking Price/sqm Q4 2015 by District US$/sqm 1,100 900 700 500 Prices of affordable units were mainly depend on their location, so projects locating near the CBD such as District 2, District 6, District 7, Tan Binh have higher prices than outer districts such as District 8, District 12, Thu Duc, Binh Tan and District 9. Market performance (affordable segment) Affordable Sales Performance (*) Accumulatively since 2000, there were 46,166 affordable units have been absorbed, contributing to 81% of total affordable supply (CBRE, Q4 2015). In 2015, 8,564 affordable units were absorbed, increasing by 27% YoY. The top three best seller included Sunview Town (Thu Duc), Topaz City (District 8) and Tecco Green Nest (District 12). (*) CBRE Research Definitions (Affordable units with sales price lower than $800/sqm; Mid-end units with sales price from $800-1500/ sqm; High-end units with sales price from $1500-$2000/sqm, Luxury units with sales price larger than $2000/sqm) Page 11 of 19
HCMC Affordable Market Update Market Demand Household Income Breakdown in HCMC in 2014 (Nielsen, 2015) 1% 3% US$/household 9% 18% 1,400+ 700-1,400 350-700 31% 200-350 140-200 38% 140- Growing population is one of the main drivers for housing demand According to HCMC s Statistics Office, HCMC is the most crowded city in Vietnam and the population of the city has increased at an average rate of 3.9% per year, from 7.0 million people in 2008 to 8.2 million people in 2015. HCMC population is expected to reach 10 million in 2020, according to World Bank 2015. HCMC is VN s most densely populated city with 3,731 persons/km2 (2013), which generates increasing demand for condominium developments. Due to limited land availability in the city center, there is an increasing decentralization trend to the city s outer districts such as District 2, District 7 and District 9, where infrastructure developments have seen certain improvements. According to ASEAN Statistic 2014, 69.4%% of the VN population are aged from 15 to 64 years old, which is the golden period to the development of the country. This will add to housing demand in the country as well as HCMC as Vietnamese people have shifted to a nuclear family model and average household size is decreasing. Many will look for apartments as prices of landed houses are systematically higher than condominiums in the same area and household budgets limited. Increasing household income and stabilizing economic conditions make buying apartments more affordable According to Nielsen, 18% of HCMC households had revenues in the $700-$1,400 per-month income range in 2014, and this percentage is supposed to rise and exceed expectations in the forthcoming years confirming the emergence of a middle class. According to a recent study of Nam Long in 2014, 32% of their customers have monthly household income over $1,000 and this percentage is expected to rise further in the near future. A steady increasing demand for HCMC is predicted by CBRE Together with the urbanization and changes in buyers preferences, CBRE estimates the current demand for affordable units (including houses and apartments) to be 201,615 in 2016, increasing 22% compared to 2015. The demand for affordable uniis expected to continue growing steadily in the next 5 years. Page 12 of 19
Interest Rates of Major Banks Interest Rate of Major Banks 13% 11% 12.5%12.5%12.5% 12.0% State-owned banks 11.5%11.5% 11.5% Foreign banks 11.0% 11.0%11.0% 10.2% 10.5%10.5%10.5%10.5% 10.4% 10.0% 9.5% 9.5% 9.5% 9% Home mortgage debt market: HCMC has more than 35 local banks and 10 international banks offering home loan products. The standard interest rates range from 9.5% to 13%. Most of the banks offer loan incentives such as one year of low-interest rate (6-9%), a few banks such as HD Bank offer free interest rate for the first year subject to certain conditions. Most of the banks offer loans up to 70% of property values, a few banks like BIDV offer loans even up to 80% - 100% of property values. We take an example of a buyer who borrows 70% of a property value to illustrate the affordability of an average apartment by EZLAND. Assumed average property purchase budget ($) Calculation for a typical apartment purchase: Affordability of EZLAND Open market Government package financing (*) 38,000-65,000 38,000-50,000 size from 45-65 sqm, include 10% VAT; excludes basic furniture and moving costs 26,600-70% of property value 45,500 26,600-35,000 Loan ($) Interest rate (per annum) 11.50% 5% Payment terms 17 years 15 years Monthly payment ($) 297-508 210-276 Average household 991-1,693 700-920 income ($) Monthly reimbursement 30% 30% * See the explanation on (*) in next page. principal and interest, based on reducing loan balance of average household income Conclusion: Apartments with a price range from $40,000 to $70,000 (= EZLAND) are and will become ever more affordable by the middle income class in HCMC. Demand for affordable apartments is already high and increasing sharply due to the growth of the middle income class and demographic changes of HCMC. Page 13 of 19
Affordable Condominium Shortfall Units 140,000 Forecasted Affordable Condominium (only) Supply and Demand - HCMC 120,000 100,000 80,000 60,000 shortfall 40,000 20,000 0 2013 2014 2015 2016 2017 2018 2019 2020 Demand 23,838 33,347 41,036 55,444 67,820 87,975 104,202 130,962 Supply 12,128 12,730 12,642 15,447 18,571 22,099 26,208 31,042 Source: CBRE Reflecting the increasing demand for affordable housing in general, demand for affordable apartments in particular is forecasted to increase 5.5 times from 23,838 units per annum in 2013 to 130,962 units per annum in 2020. Though a surge in supply is foreseen at 25% each year to capture this demand, the gap keeps accumulating, resulting in a shortfall of 333,006 (cumulative 2016-2020) apartment units for the market. The is targeting a market showing a current shortfall in the supply of new units; a near-ideal investment scenario which will only be enhanced over the term of the Fund Page 14 of 19
THANK YOU! Contact us Address: Suite 2105, Melinh Point Tower, No. 2 Ngo Duc Ke Street, District 1, HCMC, Vietnam Tel: (08) 3827 5000 Fax: (08) 3827 5050 2016 EZLAND Vietnam Co., Ltd. All materials presented in this report, unless specifically indicated otherwise, is under copyright and proprietary to EZLAND. Information contained herein, including projections, has been obtained from materials and sources believed to be reliable at the date of publication. While we do not doubt its accuracy, we have not verified it and make no guarantee, warranty or representation about it. Readers are for EZLAND professionals, and is not to be used or considered as an offer or the solicitation of an offer to sell or buy or subscribe for securities irresponsible for independently assessing the relevance, accuracy, completeness and currency of the information of this publication. This report is presented for information purposes only, exclusively r other financial instruments. All rights to the material are reserved and none of the material, nor its content, nor any copy of it, may be altered in any way, transmitted to, copied or distributed to any other party without prior express written permission of EZLAND. Any unauthorized publication or redistribution of EZLAND research reports is prohibited. EZLAND will not be liable for any loss, damage, cost or expense incurred or arising by reason of any person using or relying on information in this publication. Page 19 of 19