After hot growth, price of da nang real estate is down

Savills Vietnam has just released a survey report on real estate market in Da Nang in the second quarter 2017.

Noticeably, the latest report from Savills shows that the real estate market in Da Nang is showing signs of slowdown in many segments after a rather hot growth period, of which the most significant is the apartment segment and retail space, office for rent.

In the segments of apartment, condotel, there is only one condotel project opened for sale in the first half of 2017. Similarly, the market of apartment for sale has only one new project opened for sale which makes the total supply of apartments increase trivially, only 3% per year.

The average absorption rate of apartments for sale reached about 33%. Average primary selling price reached USD 1,690/m2, down compared to the same period last year. In the second half of the year, two projects are expected to supply about 1,200 units to the market.

However, the absorption rate of the condotel market is quite high, reaching about 70%. This is attributed to commitment profit up to 12% /year and recent commitment to re-purchase of owner attracted many customers.

It is predicted that the large supply of condotel mainly from domestic owners will be launched to the market in the second half of 2017 and 2018, promising to boost this market next year.

Similarly, the office rental segment is also less bright as the occupancy rate is lower than previous year. Total office supply increased 6% yearly as a project was closed and another project went into operation. Hai Chau District accounts for 74% market share.

In particular, the average rental rate increased by 11% but the rental occupancy decreased 4 percentage points yearly to 87%. Class C segment performance improved, while A segment declined slightly.

Savills’s survey shows that in the second half of 2017, there are no new projects entering the market, only expected to receive a project with 3,000 m² in Hai Chau district in 2018.

At the retail segment, total retail supply increased 17.3% year on year as F Home shopping center entered the market in the third quarter of 2016 and Nguyen Kim supermarket resumed operations in fourth quarter of 2016. Hai Chau continues to be the place of largest supplier with 35% of share market, followed by Thanh Khe district with 30%.

The factor making the owners less happy was that the rental rate of ground floor fell by 0.2% year on year and rental occupancy dropped by 1.7% year on year, mainly due to a slight decrease in the retail ground segment.

It is expected that there has no new project coming into operation in the second half of the year. Three projects with 22,000 m² are planned for 2018. The future supply will mainly concentrate in Hai Chau District.

Only the hotel segment has the most positive signs. Total market supply includes 86 three to five star hotels with about 9,400 rooms. Average rental rates increased by 11% year on year. Average revenue increased 22% year on year.

Average capacity reached 72%, up 7 percentage point year on year, the leading five-star and the best performing segment up to now.

Savills said that Da Nang continues to maintain its position as a leading destination for domestic and international tourists. In the first half of the year, the number of tourists reached 3.2 million, up 33% over the same period last year. In which, international visitors increased 72% year on year, reaching 1.2 million arrivals.

In the second half of 2017, more than 1,300 hotel rooms in four and five star segments will enter the market.

As for resort villas, the rate of absorption is relatively good. Total supply of resort villas is 801 units, of which the primary supply is 169 units. Ngu Hanh Son district has the largest supply with 728 units, equivalent to 91% of market share, followed by Son Tra district with 73 units (9% of market share).

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By the end of the first 6 months of 2017, the whole market absorption rate reached 81%. In which 7 projects have been sold out. Prestige of owners, profit commitment and location near the sea are the main successful factors.

According to the survey of Savills, the price of villa fully furnished with furniture ranges from 650 USD/ m2 to about 3,000 USD / m2. In the second half of the year, the market is expected to have 45 additional resort villas.

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