Yahoo Finance Singaporeans get first dibs on CapitaLand’s luxury condo in HCMC
Chen Lian Pang, CEO of CapitaLand Vietnam, believes “a bit of luck” played a part in the developer’s acquisition of a prime site in District 1 of Ho Chi Minh City recently.
After all, it was during a casual conversation with a Vietnamese businessman at an airport lounge that Chen first learnt about the site last November. They were waiting to depart HCMC for Singapore when the businessman told Chen that he had a piece of land that he wanted to sell. He wanted to know whether CapitaLand would be interested in buying it. “So, it shows that you can do business anywhere,” he says.
During his tenure in Vietnam from 2008 to 2011, Chen made it a point to “breathe the culture and understand the mentality of the people and the place. If you tell me a location, I know exactly where it is and whether you should buy the site”.
Chen says it is rare for a foreign developer to be able to purchase a prime site in District 1, the most coveted neighbourhood in Ho Chi Minh City. Thus, most foreign developers are purchasing sites in District 2 as well as other districts around the CBD, such as Districts 3, 5 and 10. “There are hardly any foreign developers with a project in District 1,” says Chen.
CapitaLand Vietnam paid US$51.9 million ($70.9 million) for the 0.5ha site in Cau Kho ward in District 1, according to a Sept 23 announcement. The site is located in the vicinity of shopping malls, cinemas, schools, restaurants and office buildings. It is a five-minute drive to Ho Chi Minh City’s CBD and a 10-minute drive to the vibrant retail area of Tran Hung Dao and Nguyen Van Cu Streets.
JLL’s Fossick (left) and CapitaLand’s Chen. JLL Singapore has been appointed the sole marketing agency for the launch of CapitaLand’s D1MENSION in Ho Chi Minh City.
Setting benchmark in luxury
The District 1 site will be developed into a mixed-use complex with a 17-storey, 102-unit luxury residential tower called D1MENSION; and a 22-storey serviced apartment block with 200 units to be managed by CapitaLand’s wholly-owned serviced apartment arm, The Ascott, under the Somerset brand. When completed in 1Q2018, the project will have an estimated value of US$106 million.
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The luxury residences at D1MENSION will be launched in Singapore ahead of Ho Chi Minh City. The VIP preview in Singapore is scheduled for Oct 21 and a one-day public launch will be held the following day at St Regis Singapore. “Investor interest has been very strong,” says Vanessa Chan, associate director of international residential property services at JLL Singapore, which has been appointed the exclusive marketing agent for the project.
The units at D1MENSION range from two-bedroom units starting from 646 sq ft to four-bedroom units of up to 1,830 sq ft, as well as 3,660 sq ft penthouses. The units will be priced from US$300,000 to US$500,000.
“It’s priced at a very attractive entry point for investors,” says Chris Fossick, JLL’s managing director for Singapore and Southeast Asia. “And it’s going to be one of the most luxurious projects in HCMC. From a foreign investor’s perspective, being able to buy a property in prime District 1, especially from a premier developer like CapitaLand, presents a unique opportunity.”
Artist’s impression of the 102-unit luxury condo D1MENSION in prime District 1
Artist’s impression of the living area of a three-bedroom apartment at D1MENSION
Gaining momentum
Vietnam’s residential market gained momentum last year because of stronger economic fundamentals as well as government regulatory changes in July 2015, which included allowing foreigners to buy up to 30% of any condominium development or a maximum of 250 houses in a landed housing ward.
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Foreigners will also be able to own property for 50 years and enjoy the same rights to transfer leases or sell the property. At the end of the 50-year lease, foreigners may also extend their home ownership for 50 years, subject to approval.
In the secondary market, when a foreigner sells the residential property to a local Vietnamese, the title will be converted into a freehold tenure. “If you’re a foreigner, it makes sense to buy a property on a 50-year lease from a reputable developer and sell to a local Vietnamese national in the secondary market who will be able to convert to a freehold tenure, which should command a premium,” reckons JLL’s Fossick.
The regulatory changes have certainly spurred foreign investor interest in Vietnam property. A year ago, Keppel Land launched its HCMC project in Singapore over the weekend of Oct 24 and 25. It was the second phase of Estella Heights in District 2, and more than 50 units were sold that weekend. The launch was followed by CapitaLand’s Singapore launch of two projects in District 2 of HCMC: the 1,152-unit Vista Verde and the 750-unit The Vista. About 100 units were sold on the weekend of Nov 7 and 8.
Motivated by the strong sales achieved at CapitaLand’s and Keppel Land’s launches towards the end of last year, other developers with projects in Vietnam brought them to Singapore.
In mid-January, a joint venture between Hongkong Land and its Vietnamanese partner Sonkim Land launched the 238-unit The Nassim in Thao Dien Ward in District 2. The project, priced from US$3,000 psm, saw strong sales in Singapore and is said to have hit the 30% cap on foreign buyers.
The launch of The Nassim in HCMC was followed by the launch of three resort properties by Vietnamese developer Sun Group at end-January. The three resort properties showcased were the Premier Village Phu Quoc Resort and Premie Residence Phu Quoc Emerald Bay on Phu Quoc Island; as well as a luxury villa project, InterContinental Sun Peninsula Residences, in Danang.
In February, privately held Vietnamese developer Tan Hoang Minh International previewed its high-end condo D’Le Roi Soleil, located in Hanoi. The project is a mixed-use development with 498 residential units in an exclusive neighbourhood in the vicinity of foreign embassies, and serviced apartment projects such as Fraser Suites Hanoi and the Somerset West Point Hanoi.
Since the initial burst of launches of projects from Vietnam, there has been a lull over the past eight months. “It could be due to the fact that some developers have hit the 30% quota on foreign buyers for their projects,” reckons CapitaLand’s Chen. “Once they hit the limit, there’s no need to launch the project overseas.”
Healthy local demand
In the meantime, local demand remained healthy. The number of new launches in HCMC doubled from 12,703 units in 2014 to 24,574 units in 2015, with 2016 expected to see 27,054 units launched, according to JLL.
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Artist’s impression of the master suite of a three-bedroom unit at D1MENSION
Master suite of a four-bedroom unit at D1MENSION
Artist’s impression of the living and dining area of a four-bedroom unit at D1MENSION
Meanwhile, a total of 24,905 units have been sold so far this year, which translates to a sales rate of 92%.
Residential sales volume in HCMC was strong in 2015 and 1H2016. This was borne out by CapitaLand’s own sales figures. Last year, CapitaLand sold 1,321 residential units totalling $226.5 million in sales value in Vietnam, putting it among the top-performing foreign developers in 2015. This year, the developer sold 470 units worth $80 million in 1H2016, which translates to a 20% increase in sales value and volume on a y-o-y basis.
A fortnight ago, CapitaLand previewed its eighth residential project in Vietnam — Feliz En Vista, a joint-venture development with its Vietnamese partner Thien Duc. Located in District 2 of HCMC, it comprises three residential towers with about 800 units and a serviced residential tower managed by Ascott under the Somerset brand.
In HCMC, other significant projects slated for launch in 4Q2016 are Keppel Land’s 816-unit Palm Heights and 3,000-unit Empire City, in a joint venture with Gaw Capital, Tran Thai and Thien Phuoc, according to CBRE in its 3Q2016 market report.
An oversupply?
The residential supply in HCMC is expected to grow 74% over the next three years, sparking fears of an oversupply. “If you look at the combined figures in the pipeline for the low-, mid- and upper-end of the market, there’s definitely an oversupply,” says CapitaLand’s Chen. “But if you have the right project in the right location, you will still achieve a good sales rate even if there’s a bit of an oversupply in the overall market.”
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Premium apartment prices have risen 9% in the last six quarters, according to JLL in a report on HCMC in August. The sales rate was 60% to 70% in 2015 and 1H2016 compared with 30% in 2010 to 2014, adds JLL.
In contrast, prices rose 106% in the last property boom from 2005 to 2007, when a surge in foreign capital flowed into Vietnam in anticipation of a strong recovery in the economy and the property market, according to JLL. During that period, developers sold just 1,500 units a year, and achieved an average sales rate of 65%. Prices have corrected by 30% from 2007 to 2014. Thus, the premium apartment prices of US$2,180 psm is still 24% below the 2007 peak, observes JLL.
At the peak of the market in 2007, there were many speculators, says Chen. Today, there are more genuine home buyers. The proportion of people who bought and flipped their property within the same year was 17% at the peak of the market. This year, the figure is 3.4%, “which is very healthy”, he adds.
Investment opportunity
Apartment rents in HCMC have also risen 4% in the last six years, according to JLL. Rental yields have therefore been relatively stable at 5.7%. The gap between rental yield and borrowing cost has narrowed from 880 basis points in 2008 to 280 bps in 1H2016.
“As the supply in the pipeline is completed over the next three years, there may be downward pressure on rents and yields,” according to the JLL report. “Given the low inflation in 2015/16, however, there is scope for interest rates to continue to fall, supporting prices.”
There is a strong desire among the middle class in Vietnam to own homes, though. The Boston Consulting Group says Vietnam’s middle and affluent class is expected to double to 33 million people, or onethird of the population, by 2020. The middle class are people who earn at least US$714 a month.
“Post-global financial crisis, Vietnam is one of the best-performing economies in Southeast Asia and around the world,” says JLL’s Fossick. “The ratio between house prices and local income has narrowed to 3.9 years, compared with 5.6 in Singapore, and double digits in Australia, London and Hong Kong. The property market in Vietnam is therefore very affordable.”
Vietnam is the most sought-after market in Southeast Asia among overseas developers. “The challenge is in finding the right site to buy,” says Fossick. “The fact that Capita- Land is able to find such a prime site and bring it to market is an opportunity that rarely comes by.”
Sales of D1MENSION could spur more launches of HCMC condos in Singapore in the coming months.
This article appeared in The Edge Property Pullout, Issue 751 (Oct 24, 2016) of The Edge Singapore.
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