CBRE MARKET UPDATE. Da Nang Q1/2012. Presented by: TIEN CAO Da Nang Research. THAO LE Da Nang Research. Opening Remarks from: ADAM BURY Senior Manager

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1 CBRE MARKET UPDATE Da Nang Q1/212 Presented by: THAO LE Da Nang Research TIEN CAO Da Nang Research Opening Remarks from: ADAM BURY Senior Manager CB Richard Ellis (Vietnam) Co., Ltd. Friday, April 2 th, 212

2 OPENING WORDS D a N a n g C o n t i n u e d S i g n s o f G r o w t h Hyatt Regency Da Nang Da Nang International Airport The Summit All Pictures Source: CBRE Vietnam. Date 19 th April, 212 Harmony Tower 2 CBRE RESEARCH & CONSULTING MARKET INSIGHTS FROM CBRE s DA NANG QUARTERLY UPDATES APRIL 212

3 CPI (% y-o-y) / Interest rates (%) VIETNAM ECONOMIC OVERVIEW CPI (% m-o-m) Source: General Statistics Office Inflation surged Monetary controls took effect Monetary controls on interest rates Jan-1 Mar-1 May-1 Jul-1 Sep-1 Nov-1 Jan-11 Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12 Q 1 / P E R F O R M A N C E Q1/212 Q4/211 GDP (% y-o-y) 4% 6.1% CPI (% y-o-y, e-o-p) 14.15% 18.13% Exchange rate (e-o-p) 2,828 2,828 CPI, VN (% y-o-y)) CPI, VN (% m-o-m) Refinancing rate (%) Rediscounting rate (%) Export (US$ Bn) (23.6% y-o-y) (31.7% y-o-y) Import (US$ Bn) (6.9% y-o-y) 28.9 (23.4% y-o-y) FDI Implemented (US$ Bn) 2.5 (-.8% y-o-y) 2.8 (-5.1% y-o-y) International Arrivals (million arrivals) 1.9 (24.5% y-o-y) 1.7 (29.3% y-o-y) Retail and Services Turnover (trillion dong) (21.8% y-o-y) (47.2% y-o-y) CBRE RESEARCH & CONSULTING MARKET INSIGHTS FROM CBRE s DA NANG QUARTERLY UPDATES APRIL 212

4 VNIndex VIETNAM ECONOMIC OVERVIEW Trading Value (Billions VND) VNIndex CPI (%) I N F L A T I O N 55 Petroleum Price Adjustments Time A95 A92 Chg Pct. Chg 9-Aug-1 16,9 16, % 24-Feb-11 19,8 19,3 2, % 29-Mar-11 21,8 21,3 2, 1.36% 26-Aug-11 21,3 2,8 (5) -2.35% 29-Mar-12 23,4 22,9 2,1 1.1% Stock Index and Inflation Inflation continuing to trend down, possibility of upward revisions remain; Petroleum prices increased 1.1% compared to the previous adjustment, leaving more pressure on CPI in the second quarter; 3, March CPI recorded the lowest m-o-m increase since January 211 at.16% m-o-m, (or 14.15% y-o-y). Bounce back in the stock market, in part a reflection of decreasing inflation , , ,5 1, Jan 1-Feb 1-Mar 29-Mar 26-Apr 24-May 21-Jun 19-Jul 16-Aug 13-Sep 11-Oct 8-Nov 6-Dec 3-Jan 31-Jan 28-Feb 27-Mar Dec-8 Mar-9 Jun-9 Sep-9 Dec-9 Mar-1 Jun-1 Sep-1 Dec-1 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 VNIndex CPI Trading value VNIndex 211 VNIndex Q1/212 4 CBRE RESEARCH & CONSULTING MARKET INSIGHTS FROM CBRE s DA NANG QUARTERLY UPDATES APRIL 212

5 VIETNAM ECONOMIC OVERVIEW Base rate Re-discounting rate Re-financing rate M O N E T A R Y C O N T R O L S Positive signs with the downward adjustments of key interest rates. By 1% during the first quarter (March) refinancing adjusting to 14%, Rediscount Rate to 12% and the deposit cap to 13%. A further 1% reduction to each measure was announced in the second week of April. Lower interest rate mortgage loans still scarce Still only limited signs of commercial loans being reduced to reflect the revised interest rates. Slight decreases of approx..5% in the beginning of % - 25% for non-productive sector and 16.5% - 2% for productive sector (SBV). More stable USD/VND exchange rate, strict controls on USD/gold trading remain. 5 CBRE RESEARCH & CONSULTING MARKET INSIGHTS FROM CBRE s DA NANG QUARTERLY UPDATES APRIL 212

6 VIETNAM ECONOMIC OVERVIEW B U S I N E S S E N V I R O N M E N T World Bank Ranking Ease of doing business Vietnam Singapore 1 1 Malaysia Thailand Indonesia Protecting investors Vietnam Singapore 2 2 Malaysia 4 4 Thailand Indonesia The 4% y-o-y GDP growth rate is the lowest recorded since Q2/29 Imports saw their lowest growth since Q4/29 (6.9% y-o-y) resulting in low trade deficit in Q1/212 Real estate ranked first in FDI attraction, uncertain if that will be disbursed in the longterm Bank restructuring continues to be a key topic of conversation; VietinBank to issue first dollar-bond in July; received a B+/B credit rating from S&P. Changes in top management at a couple of banks Bank shareholders conflict 6 CBRE RESEARCH & CONSULTING MARKET INSIGHTS FROM CBRE s DA NANG QUARTERLY UPDATES APRIL 212

7 HOTEL M A R K E T S N A P S H O T 5 STAR 4 STAR 3 STAR TOTAL Number of hotels Total supply (room) 1, ,874 3,889 New supply (room) Average occupancy rate (%) 43.5% 45.9% Q-o-q change (%) 9.4pp 12.7pp Y-o-y change (%) 5.3pp -13.9pp Average daily rate (US$/room/night) Q-o-q change (%) -5.3% 1.5% Y-o-y change (%) -6.9% -26.1% Source: CBRE Vietnam 7 CBRE RESEARCH & CONSULTING MARKET INSIGHTS FROM CBRE s DA NANG QUARTERLY UPDATES APRIL 212

8 Achieved Room Rate (US$/room/night) Occupancy Rate HOTEL Average Daily Rate(US$) 5 star 4 star H I G H L I G H T S Q1/8 Q3/8 Q1/9 Q3/9 Q1/1 Q3/1 Q1/11 Q3/11 Q1/12 5-star 4-star Occupancy (%) 5 star 4 star 8% 7% 6% 5% 4% 3% Q1/8 Q3/8 Q1/9 Q3/9 Q1/1 Q3/1 Q1/11 Q3/11 Q1/12 5-star 4-star In Q1/212, Da Nang welcomed almost 59, visitors - a 31.9% q-o-q increase and 35.% y-o-y increase. The opening of Da Nang International Airport led to the number of visitors arriving increasing by 94.3% y- o-y. In addition, arrivals by sea increased by 26.8% y-oy, thanks to the arrival of famous cruise ships such as the Superstar Aquarius (Star Cruises). First charter flights between Russia and Da Nang will be opened in May 212. The Lao Farmtrip, which came to Da Nang in March, appears to be a first step in a new tourism relationship between the two countries. It is though noted that at the current time there is no charter flight between the two countries. On a y-o-y basis it is noted that ADR s at both 4 and 5-star hotels decreased though this was not unexpected as the new hotels are aiming to establish themselves for the longer term. Occupancy in the 5-star hotel sector increased on a y-o-y basis, reflecting new tourism arrivals, whilst 4- star occupancy decreased y-o-y as new supply took effect. 8 CBRE RESEARCH & CONSULTING MARKET INSIGHTS FROM CBRE s DA NANG QUARTERLY UPDATES APRIL 212

9 HOTEL O U T L O O K Upcoming festivals and the high-season will put new supply, which came on line in 211, through its first full test. There appears to be a growing trend of MICE travelers combining business with pleasure and thus the city may become a more rounded destination. Travelers from China, Korea, Japan, America, Australia, Germany and Russia are expected to grow throughout the year. A second hotel operated by Intercontinental Hotel Group is expected to become operational in Q2/212. It is expected that over 1, rooms of additional supply will be launched in 212; launched by Melia, Pullman, InterContinental, Novotel and Dragon Vinh Trung. 9 CBRE RESEARCH & CONSULTING MARKET INSIGHTS FROM CBRE s DA NANG QUARTERLY UPDATES APRIL 212

10 CONDOMINIUM FOR SALE M A R K E T S N A P S H O T LUXURY HIGH-END MID-END TOTAL Total supply (projects) Total supply (units) 37 1,46 1,132 2,485 New launch (units) Average asking price (US$ psm) 2,972 1, Q-o-q change (%) -2.%.% 2.% Y-o-y change (%) -.5% -.1% 8.7% Source: CBRE Vietnam Existing supply : is the total number of units that have been handed over for occupation. New launch : the number of units that were released to the market by developers (official start of sales for a project) in the review quarter. All units in each development are included in the calculations, however, the developer may divide sales into numerous phases and thus not all units may come online at launch date. 1 CBRE RESEARCH & CONSULTING MARKET INSIGHTS FROM CBRE s DA NANG QUARTERLY UPDATES APRIL 212

11 CONDOMINIUM FOR SALE Condominium Supply (units) 3, Opening supply Change in quarter M A R K E T S N A P S H O T 2,5 2, 1,5 1, Q1/11 Q2/11 Q3/11 Q4/11 Q1/12 Asking Price (US$ psm) 3,5 3, 2,5 Luxury High-end Mid-end DN welcomed 28 units of additional new supply from one midend condo project, La Paz Tower. In total there were over 3 units sold in the condo sector, more than 7% of these were in the mid-end sector; Developers in Da Nang are keeping in line with the trend seen in HCMC, of keeping asking prices relatively stable but offering discounts/incentives during negotiation. Luxury projects saw prices decrease to US$ 2,972 psm, a 2.% q-o-q decrease, while the price of mid-end segment went up to US$ 937 psm, a 2% q-o-q increase due to new supply joining the sector. The high-end projects saw prices remain stable. 2, 1,5 1, 5 Q1/9 Q3/9 Q1/1 Q3/1 Q1/11 Q3/11 Q1/12 11 CBRE RESEARCH & CONSULTING MARKET INSIGHTS FROM CBRE s DA NANG QUARTERLY UPDATES APRIL 212

12 CONDOMINIUM FOR SALE O U T L O O K Azura, VinaCapital La Paz Tower, DHI All Pictures Source: CBRE Vietnam. Date 19 th April, 212 In Q1, majority of condo units transacted are in the price range of VND,75 3, billion. The majority of sales in Q1/212 were at projects which were nearing or completed. In 212, DN market is expected to welcome an addition of 217 units which have prices in the range of US$ 7 1,5 psm. Construction progress has been pushed forward sharply in some condo projects. It appears that there has been a slight increase in enquiries since interest rates were dropped. With the macro economy showing some positive signs for the real estate market, and some developers showing an increase in enquiries, it is hoped that the number of sales will increase in the coming months. 12 CBRE RESEARCH & CONSULTING MARKET INSIGHTS FROM CBRE s DA NANG QUARTERLY UPDATES APRIL 212

13 SECOND-HOME VILLA FOR SALE M A R K E T S N A P S H O T Total supply (projects) 12 TOTAL Total supply (units) 572 New launch (units) Percentage of total units sold (%) 52.5% Q-o-q change (pts) Y-o-y change (pts) -.5pp 1.1pp Source: CBRE Vietnam All prices are quoted exclusive of VAT and service charges. Total supply : is the total number of units available for sale both primary and secondary market. New launch : the number of units that were released to the market by developers (official start of sales for a project) in the review quarter. All units in each development are included in the calculations, however, the developer may divide sales into numerous phases and thus not all units may come online at launch date. 13 CBRE RESEARCH & CONSULTING MARKET INSIGHTS FROM CBRE s DA NANG QUARTERLY UPDATES APRIL 212

14 Number of units Sold rate (%) VILLA FOR SALE 2 nd Home Villa Supply (units) Q1/1 Q2/1 Q3/1 Q4/1 Q1/11 Q2/11 Q3/11 Q4/11 Change in supply Openning supply Sales rate (%) Q1/9 Q3/9 Q1/1 Q3/1 Q1/11 Q3/11 Q1/12 H I G H L I G H T S In Q1, DN market witnessed no new supply. Although there were 1 units sold in Q1, the average sale rate dropped to 52.5%, a.9pp decrease due to the rescission of some deals. Only 2 of the villa 12 projects reduced asking price in Q1. The decrease was from 17 2%. Other projects chose to leave headline pricing stable. O U T L O O K OUTLOOK In 212, DN market is expected to welcome additional 133 units of new supply from 3 new projects. The majority of them will priced from US$ 5, to US$8, and sized from 4 7 sqm per unit. Despite tight monetary policy over previous quarters it is apparent that some activity has remained in the second home market showing the wealth and disposable income that still exists in some portions in society; It would be hoped that as monetary policy eases greater levels of liquidity may be created within the market; 14 CBRE RESEARCH & CONSULTING MARKET INSIGHTS FROM CBRE s DA NANG QUARTERLY UPDATES APRIL 212

15 LAND PLOT M A R K E T S N A P S H O T Northwest East South Total Number of projects Total supply (plots) 6,98 1,445 3,813 12,238 New supply (plot) Average price (VND per sm) VND mil VND8.5 4mil VND5. -43mil Q-o-Q Change (%) - 5% - 1 5% - 7 % Source: CBRE Vietnam 15 CBRE RESEARCH & CONSULTING MARKET INSIGHTS FROM CBRE s DA NANG QUARTERLY UPDATES APRIL 212

16 Plots VND Thuy Tu Lien Chieu Thanh Khe Man Quang Son Tra My An Ngu Hanh Son Cam Le LAND PLOT H I G H L I G H T S Land Plot Supply Opening supply Change in quarter 18, 16, 14, 12, 1, 8, 6, 4, 2, 29 Q1/1Q2/1Q3/1Q4/1Q1/11Q2/11Q3/11Q4/11Q1/12 Est 213 Price range by submarkets (VND mil psm) 48,, 42,, 36,, 3,, 24,, 18,, 12,, 6,, Maximum price Average price In Q1, the unchanged supply showed that developers hesitated in launching new land plots and reflected the reduced sentiment for this market. Price were flat,or down, owing to the selling of land plots by speculators having difficulties who want to mobilise cash. The coastal, southern and Thuy Tu areas saw greatest price declines these were also the areas that saw the largest price increases. The secondary market is more active whilst primary market appears to be in hibernation. Land plots priced less than 1,5 billion VND are more attractive buyers in current market. 16 CBRE RESEARCH & CONSULTING MARKET INSIGHTS FROM CBRE s DA NANG QUARTERLY UPDATES APRIL 212

17 LAND PLOT O U T L O O K The recent market brings good opportunities for end-user buyers and long-term investors with strong financial abilities. DN market is expected to see positive signs from the upcoming festivals (International Firework Competition/International Paramotor Competition), held in April and May. DN Land plot market is expected to have a slight recovery in the second half of 212 as transactions increase with interest reductions. Some developers are considering breaking larger land plots into smaller, 65 9sm plots, in order to counter the slow down in the land plot market. It is hoped this will draw endusers to purchase. 17 CBRE RESEARCH & CONSULTING MARKET INSIGHTS FROM CBRE s DA NANG QUARTERLY UPDATES APRIL 212

18 OFFICE M A R K E T S N A P S H O T GRADE A GRADE B GRADE C TOTAL Number of buildings NLA (sm) 6,314 35,823 41,756 83,893 Vacancy rate (%) 8.8% 26.1% 34.8% 29.1% Q-o-q change (pts) -4.8 pp 2.9pp -.2pp.8 pp Y-o-y change (pts) pp -17.7pp -4.7 pp pp Average asking rent (US$ psm per month) $19. $13.75 $1.84 $12.7 Q-o-q change (%).% -.4% -6.4 %.4% Y-o-y change (%). % 1. % 8.5% 1.2% Source: CBRE Vietnam All rents are quoted on NLA. Rents are quoted including service charges and excluding VAT. 18 CBRE RESEARCH & CONSULTING MARKET INSIGHTS FROM CBRE s DA NANG QUARTERLY UPDATES APRIL 212

19 Vacancy (%) Average Rental Price (US$/m2) OFFICE H E A D L I N E S T O R I E S Asking Rents (US$ psm per month) 2 Grade A Grade B Grade C The average rent remained stable in Grade A properties and insignificant changes were seen in both Grade B and Grade C properties; 15 1 The office market witnessed no new supply in the first quarter of 212. The total vacancy of this quarter was up to 29.1% from 28.3% in Q4/211, an increase of.8 pts q-o-q. 5 Q1/9 Q2/9 Q3/9 Q4/9 Q1/1 Q2/1 Q3/1 Q4/1 Q1/11 Q2/11 Q3/11 Q4/11 Q1/11 Grade A and C saw good take-up with decreasing vacancy; Vacancy rate(%) Grade A Grade B Grade C Q1/9 Q2/9 Q3/9 Q4/9 Q1/1 Q2/1 Q3/1 Q4/1 Q1/11 Q2/11 Q3/11 Q4/11 Q1/12 The majority of Grade B projects saw good performance during Q1/212, however one Grade B building saw a dramatic increase in vacancy as two companies withdrew leaving large empty space that affected headline numbers; OUTLOOK Two grade B buildings, with a total 19,2 sm, likely to come online by the end of 212. Will put pressure on vacancy rate. In the next two quarters it is likely that the market will remain flat, By the end of 215 the total supply may reach sm NLA, though this is dependent on all projects being completed this is unlikely. 19 CBRE RESEARCH & CONSULTING MARKET INSIGHTS FROM CBRE s DA NANG QUARTERLY UPDATES APRIL 212

20 To subscribe, please contact Q 1 / r e l e a s e d T O D A Y, A p r i l 2, 212 quarterlyreports@cbrevietnam.com THANK YOU 212 CB Richard Ellis (Vietnam) Co., Ltd. This report has been prepared in good faith and with due care by CB Richard Ellis (Vietnam) Co., Ltd. We obtained some of the information above from sources we believe to be reliable. However, we have not verified the accuracy of the information which we obtained from other sources and make no guarantee, warranty or representation about it. We include projections, opinions, assumptions or estimates which are made with careful consideration of factors known to us for example only, and they may not represent current or future performance of the market. This information is designed exclusively for use by CB Richard Ellis clients, and cannot be reproduced without prior written permission of CB Richard Ellis. 2 CBRE RESEARCH & CONSULTING MARKET INSIGHTS FROM CBRE s DA NANG QUARTERLY UPDATES APRIL 212