MARKET OVERVIEW QI/2020

MARKET OVERVIEW QI/2020 27 April

A. WORLD ECONOMY:

Starting from December 2019 until middle of April 2020, the coronavirus COVID-19 pandemic has been spreading to more than 210 countries / territories around the world, with nearly 2.2 million confirmed cases, more than 150 million deaths. Since there has been no vaccine in existence, the pandemic still could not be constrained, continue spreading and happening complicatedly in Europe, America and many other Asia countries; negatively impact every global socioeconomic activities. Most of world-wide countries have to apply the strict social distancing policies, accordingly many businesses, activities, department store chains and retailers which are considered as “nonessential” have been forced to close up. The drawbacks of these measures are interrupting global supply chain operation, stagnant manufacturing, increasing unemployment rate, precarious financial market, causing numerous companies to be on the edge of insolvency and bankuptcy.

As in the “World Economic Outlook Reports” released on April 6, International Monetary Fund (IMF) forecasts, if COVID-19 pandemic fades in the second half of 2020, the global economy is projected to contract sharply by -3 percent in 2020 compared with the growth of 2.9% y-o-y, much worse than the rate of -0.1% during 2008-2009 financial crisis. Subsequently, by policy support, the global economy is expected to regrow by 5.8%.

B. VIETNAM ECONOMY:

Average CPI in the first quarter of 2020 increased by 5.56% compared to the same period in 2019, mainly driven by higher pork price which has occurred since December 2019. Apart from this reason, more pressure was also put on inflation by erratic oil price fluctuation, health service price increased on account of the implementation of the road map and pandemic prevention, for instance, face masks, hand sanitizers, …

The import and export turnover of many Vietnamese products were significantly influenced as COVID-19 outbreak spreads among Viet Nam’s major trade partners such as China, South Korea, Japan, the EU and the United States. Total import-export turnover of goods in the first quarter reached US$115.34 billion, down 0.7% over the same period last year.

Total foreign direct investment (FDI) in Vietnam as of March 20th 2020, decreased 20.9% compared to the same period last year.

Number of International visitors to Vietnam in  Q1 2020 decreased by 18.1% compared to the same period last year, mainly visitors from China, South Korea, US.

The group of enterprises have experienced difficulty due to be temporarily closed after nationwide social distancing order of Prime Minister. The number of enterprises suspending operation for a definite time in the first three months of the year was 18.6 thousand ones, increasing by 26% compared to the similar period last year. The number of enterprises registered to cease operation was 4,240 (up 36% y-o-y); the number of workers who apply for unemployment insurance benefits was 13,215 people, up by 22.2% y-o-y.

Viet Nam’s gross domestic product (GDP) expanded by 3.82% in the first quarter of this year, the lowest growth rate posted since 2010,  a decline in all of three focal sectors: Industy and construction; Agriculture, forestry and fishery; Services. The agriculture, forestry and fishery suffered from the African swine fever epidemic, severe drought and saltwater intrusion in Mekong Delta region. Potential outbreak of avian influenza and COVID-19 pandemic affected negatively to manufacturing activities, exporting and importing agricultural goods. The most seriously hit industries were airline, travel, hotel, textile, wood exports,

C. REAL ESTATE MARKET:

The total nation-wide supply (including both inventory and new launch) reaches 53,236 units. In which, the number of new launch were 18,695 units, consisting of 8,363 apartments and 10,322 villas & townhouses. The apartments have been built and developed substantially in big cities, namely Hanoi, Ho Chi Minh city,… in other regions, villas and townhouses are the predominant type of new launch house to be sold.

It is quite obvious that this is the most sluggish period of the real estsate market development in the past 3 years. In spite of the fact that the new supply is introduced at a unhurried pace owing to the anxiety of continuous pandemic’s impact, the absorption rate was still recorded at a strikingly low rate of 14%, equivalent to 7,641 successful transactions. This rate in two biggest and bustling cities, Hanoi and Ho Chi Minh city, also fluctuate around 16 – 17%.

Although the number of successful transactions and revenues fall considerably, there seem to be no demand stimulation, discount policy given out. According to many surveys and interviews with real estate experts, most of developers and investors might think this circumstance only prevails in short-term. The housing demand is still relatively strong, hence the market recovery will soon take place when the pandemic ends.

Office market was not yet recorded any noticeable reduction, like residential market, as a matter of fact that a lot of enterprises are still able to bear losses, fixed expenses after cutting off some unnecessary spending, within the duration of several months. However, the damage will likely be shown in the second quarter of 2020, when enterprises run out of money in the reserve fund, subsequently return the premises to lessors, many foreign enterprises delay to sign the lease agreement and move in the office because of border entry restrictions. Furthermore, the majority of lessors have to accept giving a 20 – 50% discount, extend the payment schedule. This also makes the price to be adjusted downward from now on to the end of the year.

The resort real estate market was considered to be deep into hibernation, although recently on February 14th 2020, Ministry of Natural Resources and Environment issued official dispatch number 703/BTNMT-TCQLD, providing instructions about use of land and grant of certificates of ownership of construction works other than residential homes, including vacation condotel and villa. This phenomenom could be explained as the problem is not only about the lack of legal framework, but also the developer’s capability to pay guaranteed rental income, especially after the collapse of Cocobay Danang and the late payment notifications of many projects of FLC Group.

Industrial real esate market is probably the only exception which stay unscathed in this period of time. Industrial property is even believed to be strongly developed when pandemic is over and the trend of moving production, factory out of China’s territory heats up. As stated in Q1 2020 report of JLL, the average land price is around $ 99/m2/tenure, up 6.5% y-o-y. Ready-built factories – the favourite preference of SMEs – kept the rent stable, ranging from $3.5 – 5/m2/month in Q1 2020 and have been fully occupied.



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