VIETNAM

REPORT
CONSTRUCTION
MARKET UPDATE
JUNE 2018
VIETNAM
REPORT | JUNE 2018

MARKET VIETNAM ECONOMY

TRENDS
In 2017, the country achieved its investments accounting for 25.4%
strongest growth in five years when (US9.11 billion) and 23.6% (US$8.49
its gross domestic product (GDP) billion) of the total FDI respectively.
reached 6.8%, which surpassed In 1Q 2018, foreign investment capital
the government’s annual target of poured more than USD 5.8 billion
6.7%. The construction sector was into the country, but was lower than
the second highest contributor that in 1Q17. In 1Q 2018, there were
to the total GDP with a 33.34% about 26,800 new registration of
contribution. The government has enterprises with a total capital of
set a similar annual growth target of nearly VND278.5 trillion. This marked
6.7% for 2018. a year-on-year (y-o-y) increase of

Source: Vietnam’s General Statistics Office; Bloomberg

Backed by growth in the 1.2% in number and 2.7% in capital.

manufacturing and agriculture In addition, nearly 8,450 businesses
sectors, Vietnam’s economy in 1Q resumed operations, a decrease of
2018 reached a ten-year high of 8.9% y-o-y.
7.38% from a year earlier, according
to the General Statistics Office While Vietnam outperformed most
(GSO). With regard to economic of its Southeast Asian peers as
structure, the industrial and export growth remained resilient on
construction sector and services the back of a global trade recovery
reached the highest growth rates last year, the Vietnamese economy
of 9.7% and 6.7% y-oy, respectively. and other regional countries are not
The country maintained a trade immuned to the many challenges
surplus from January to April this due to rising protectionism in large
year. Exports increased 22% in countries, all factors affecting the
1Q 2018 from a year earlier, while Vietnamese economy and other
imports rose 13.6%. regional countries, the government
remains positive.
Total foreign direct investments
(FDI) reached nearly US$35.9 Vietnam’s economic growth
billion in 2017, which was the momentum is expected to
highest since 2009. The disbursed remain robust along with broad
capital was a ten-year high as it macroeconomic stability. The World
hit US$17.5 billion. The majority Bank revised upwards its previous
of the country’s FDI came from estimate of 6.5% and now projects
Japan and South Korea, with their Vietnam’s GDP to expand by 6.8%
for the whole of 2018.

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VIETNAM
REPORT | JUNE 2018

MARKET PROPERTY MARKET

TRENDS
After the real estate sector grew by There were a total retail space of
4.1% in 2017, its highest since 2011, it 55,000m2 entering the sub-market
is likely to remain an attractive busi- in 1Q 2018. Overall vacancy rates fell
ness sector for investors through- in to 9.3% quarter-on-quarter (q-
out 2018. Data from the Vietnam- o-q) as a result of improving leas-
ese Construction Ministry’s Housing ing activity and rising purchasing
and Property Market Management power of the city households. JLL
Department showed Ho Chi Minh observed that retail tenants have
(HCMC) recorded 1,900 deals in strong focus on the F&B, fashion,
January 2018, a rise of 8.6% over health and entertainment retail sub-
the preceding month’s figure. There categories. Lifestyle concept and
were also 3,077 real estate develop- co-working space will likely attract
ment projects underway across the interest of experiential retail opera-
country with a total investment of tors in the market. Nearly 50,000m2
VND3.3 quadrillion. in suburban areas is expected to be
completed within 3Q 2018, account-
Recent reports of land fever have ing for around 25% of total future
raised concerns another poten- supply in 2018. Rental rates is pro-
tial real estate bubble in Vietnam, jected to record steady growth for
similar to the one back in 2008. In- the rest of the year.
dustry experts listed the increased
numbers of transactions, new con- Real estate consultant CB Rich-
structions, areas under develop- ard Ellis reported there were about
ment, participants in the market; 35,000 new high-end apartments
rising prices; and presence of pro- — those commanding more than
jects that are bigger in terms of US$1,500/m2 — that came to market
scale, value and funding as some of in HCMC in the past three years. It is
the warning signs. a dramatic increase on 2012-14, dur-
ing which fewer than 10,000 units
Based on Jones Lang LaSalle (JLL) were listed for sale. Housing de-
data, for 1Q 2018 in HCMC, no new mand is rising fast in the country but
Grade A office building entered the the availability of affordable housing
market while the Grade B segment remains a pressing issue nationwide.
had a slight increase in office spac- Municipal construction authorities
es. Overall, there is healthy demand reported home ownership remains
for both grades of office spaces. out of reach for the many low and
The office sub-market record- medium-income earners in urban
ed strong rental growth in both areas. The real estate market is at
Grade A and Grade B segments, risk of a severe imbalance in supply
with landlords of Grade A buildings if developers are predominantly fo-
increasing rental rates. Average cused on the high-end segments of
rental growth for existing Grade B the market, leaving Vietnam’s larg-
office space is expected to remain est cities, namely HCMC and Hanoi
moderate until the end of 2018. in critical need of affordable supply
Meanwhile, new Grade B buildings by 2030.
have improved building quality and
rental rates are kept affordable to
compete with Grade A buildings.

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VIETNAM
REPORT | JUNE 2018

MARKET CONSTRUCTION INDUSTRY

TRENDS
Gross domestic product (GDP) estimates in 2007, total investment
from the construction sector of the project was VND 17 trillion.
achieved VND32,385 billion in 1Q As at 1H 2018, 51% of the project’s
2018. Construction GDP reached workload has been completed
an all time high of VND205,628 and the project is scheduled to be
billion in 4Q 2017 and a record low completed in 2020.
of VND24,018 billion in 1Q 2013. The
labour force across all sectors is Since late 2017, land prices increased
healthy. In 1Q 2018, The total labour rapidly in three areas which have
force was estimated at 54 million been earmarked to become special
persons. This figure includes the 14.4 economic zones (SEZs). These ar-
million working in the industry and eas include Phu Quoc Island in the
construction sector. far south, Bac Van Phong in central
Khanh Hoa province and Van Don in
Authorities are accelerating the northern Quang Ninh province.
measures to curb the urgent issue Land prices in Van Don, Van Phong
of Vietnam’s rapid urbanisation and Phu Quoc rose to VND60 million
and population growth, and private (approx. US$2,632) per square me-
vehicle ownership. The technical and tre, according to a report from the
social infrastructure in Ho Chin Minh Viet Nam Association of Real Estate
City (HCMC) is overstretched. Under Brokers. Industry experts expect the
the HCMC Zone Master Plan, the current land fever to continue for at
construction of new expressways least the next 12 months. As a result,
including Bien Hoa – Vung Tau, the MOC ordered local authorities
HCMC – Thu Dau Mot – Chon Thanh, to take control of the land market
HCMC – Moc Bai, and Dau Giay – Da and prevent speculators from creat-
Lat, are scheduled for completion ing instability, as well as identify the
by 2030. causes of market volatility and han-
dle cases of land legislation viola-
The government also ordered tions of the three SEZs. The central
HCMC authorities to accelerate bank also ordered lenders to tighten
the city’s metro project, which was control over investment loans in-
first proposed in 2001 as part of a tended for the stock and real estate
comprehensive public transport plan markets, warning of bad debt risks.
for HCMC and neighboring provinces
to mitigate traffic congestions. It The construction industry is expect-
includes three monorail lines with a ed to continue expanding until 2021,
total length of 37km and six partly due to investments in transport in-
underground metro routes running frastructure, energy and utilities,
a total of 107km from Ben Thanh commercial and affordable housing
to Suoi Tien, Ben Thanh to Tham projects. Based on current demand
Luong, Ben Thanh to Binh Tan, Lang and cost trends, barring any unfore-
Cha Ca to Van Thanh, Thu Thiem to seen market conditions, building
Can Giuoc, and Ba Queo – Phu Lam. tender prices in HCMC are anticipat-
Ben Thanh will be a hub connecting ed to increase by 3% to 5% y-o-y in
all the lines. According to the initial 2018.

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 VIETNAM
REPORT | JUNE 2018

METAL USD/Tonne
7500
USD/Tonne
2350

PRICES
7000 2250

6500 2150

Copper (LHS)
Aluminium (RHS)
6000 2050

5500 1950

5000 1850
May 17 Jun 17 Jul 17 Aug 17 Sep 17 Oct 17 Nov 17 Dec 17 Jan 18 Feb 18 Mar 18 Apr 18 May 18
Copper 5591 5699 5978 6477 6582 6796 6825 6800 7079 7001 6795 6838 6821
Aluminum 1913 1886 1903 2029 2100 2130 2100 2070 2214 2184 2076 2245 2290
Data Source: London Metal Exchange (LME) LHS: Left Hand-Side axis
RHS: Right Hand-Side axis

Note:
The London Metal Exchange has suspended its physically-settled steel billet contract with immediate effect from
April 2017.

CONSTRUCTION AVERAGE SUPPLY RATE (VND)

MATERIAL UNIT
MATERIAL 3Q2017 4Q2017 1Q2018 2Q2018P
PRICES Concreting Sand m3 506,561 406,477 374,698 398,943

Stone Aggregate (20mm) m3 218,182 280,000 280,000 280,000

Ordinary Portland Cement (PCB40) kg 1,505 1,364 1,363 1,465

Reinforced Concrete (Grade 30 MPA) m3 1,163,636 1,200,000 1,118,182 1,200,000

Reinforced Concrete (Grade 40 MPA) m3 1,272,727 1,310,000 1,218,636 1,310,000

High Tensile Steel Bars (10 - 40mm) kg 13,983 14,250 14,526 14,480

Mild Steel Round Bars (6 - 20mm) kg 13,691 14,147 14,347 14,710

Structural Steelwork (U-beam, stanchions) tonne 13,913,333 15,330,000 15,480,000 15,420,000

Timber Sawn Formwork m2 145,000 145,000 148,000 150,000

Clay Bricks (100mm thick wall) m2 95,000 98,000 100,000 103,000

Data Source: Ho Chi Minh City Construction Department
p: preliminary

Exclusions:
• Plant and Equipment • Transport • Wastage • Overheads and Profit • Tax Expenses (VAT)

Notes:
All supply prices stated above are only applicable for building construction projects in Ho Chi Minh
City. Specific cost consultancy should be sought for your particular factual situation prior to utilising
this information.

CURRENCY CURRENCY
UNITS PER USD

EXCHANGE 3Q2017 4Q2017 1Q2018 2Q2018P

Vietnamese Dong (VND) 22,984 22,919 22,677 22,714
Data Source: Oanda
p: preliminary

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 VIETNAM
REPORT | JUNE 2018

HO CHI MINH CITY DEVELOPMENT TYPE

COST PER CFA COST PER CFA
VND (’000) / m2 USD / m2
CONSTRUCTION
OFFICE
PRICES
Good Quality, 10 to 25 storeys 23,500 - 26,500 1,040 - 1,170

Good Quality, 26 to 40 storeys 24,700 - 26,600 1,090 - 1,170

Prestige, 10 to 25 storeys 24,900 - 30,800 1,100 - 1,360

Prestige, 26 to 40 storeys 26,100 - 32,200 1,150 - 1,420

HOTEL (Excluding FF&E)

Three Star 24,400 - 31,500 1,070 - 1,390

Four Star 31,200 - 37,000 1,380 - 1,630

Five Star 34,700 - 41,600 1,530 - 1,830

COMMERCIAL

Retail 20,100 - 26,800 890 - 1,180

RESIDENTIAL

Good Quality Condominium 15,400 - 18,400 680 - 810

Luxury Condominium 16,600 - 23,300 730 - 1,030

INDUSTRIAL

Warehouse 6,200 - 9,400 270 - 410

Factory 6,500 - 9,800 290 - 430

CAR PARK

Multi Storey 8,900 - 13,300 390 - 5890

Basement, outside CBD 16,500 - 23,300 730 - 1,010

Basement, CBD 18,300 - 25,500 810 - 1,100

Notes:
Construction Floor Area (CFA) - The area of all building enclosed covered spaces measured to the outside
face of external walls including covered basement and above ground car park areas.

All Ho Chi Minh City construction prices stated herein are as at 1st Quarter 2018, and include a general
allowance for preliminaries, foundation and external works. The price ranges herein are indicative and due
consideration should be given to the different specification, size, location and nature of each project when
utilising this information. The prices here may not fully reflect the extent of current market forces and
tendering conditions.

Exchange Rate Used: USD 1.00 = 22,677

Exclusions:
• Land cost • Legal and professional fees • Development charges • Authority fees • Finance costs
• Site infrastructure work • Diversion of existing services • Models and prototypes • Future cost escalation
• Loose furniture, fittings and works of art • Tenancy work • Resident site staff cost • Value-Added Tax (VAT)

Disclaimer: While Rider Levett Bucknall Co. Ltd (“RLB”) has endeavoured to ensure the accuracy of the information and
materials in this report (the “Materials”), it does not warrant its accuracy, adequacy, completeness or reasonableness and
expressly disclaims liability for any errors in, or omissions therefrom. RLB shall not be liable for any damage, loss or expense
whatsoever arising out of or in connection with the use or reliance on the Materials. The Materials are provided for general
information only. Professional advice should be obtained for your particular factual situation before making any decision. The
Materials may not, in any medium, be reproduced, published, adapted, altered or otherwise used in whole or in part in any
manner without the prior written consent of RLB.

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Cover: Ho Chi Minh City skyline