May 28, 2021
Ho Chi Minh City - An apartment project situated on the golden soil of Ba Son, District 1 has just closed a deal, valued at 18.000 USD per square meter, cementing the price as record-breaking.
At the end of March 2021, investors of ultra-luxurious real estate in Ho Chi Minh city are excited about the appearance of an apartment project valued at 18.000 USD (around 423 million VND) per m2 on Ton Duc Thang street, one of the main roads along the Saigon River. Rumoured prices (probe pricing and popular publications) of this line of product will start at 16.000 USD per m2, targeting upper class customers.
Golden soil of Ba Son, District 1
According to rumors, apartments will start at 18-24 billion VND each, depending on the area of 40 - 110 m2. In addition to the facilities and utilities of an advertised 5 star standard, the luxuriousness of the project is shown in its low building density with only 10 apartment units and 8 elevators per level. Furthermore, tree density surrounding the area reaches 60%, and building materials and furniture are made from luxury materials. The apartments have unobstructed views of the Saigon River, Landmark 81 (the highest tower in Vietnam), Vo Van Kiet boulevard and the core center of District 1.
Based on the apartment classification criterias of JLL, CBRE and Savills, luxury apartments have an average starting price of 4.000 USD per m2 in the primary market, but this project is expected to cost 18.000 USD per m2, putting it in the ultra-luxury segment.
According to the latest report of CBRE, in the first 3 months of 2021, the average selling price of luxury apartments in all markets in the Ho Chi Minh city area reached 6.898 USD per m2, an increase of 4,7% compared to last year’s first quarter. Market movements indicate that the expected price of this ultra-luxury apartment project is 2,6 times higher than the market average of luxury apartments in Ho Chi Minh city, which is at around 7.000 USD per m2.
Perspective of reception hall as a 5-star hotel of the luxury apartment with selling price 18000USD
Around April 2019, the Saigon real estate market once saw an ultra-luxury apartment that is also situated along the river in District 1, and it was priced 168-280 million VND per m2, the highest price tag in history at the time. However, in March 2021, the buying price of this ultra-luxury apartment reached 423 million VND per m2. This is the most expensive apartment since the start of the Ho Chi Minh city apartment real estate market.
As reported by Savills Vietnam, the ultra-luxury 18.000 USD per m2 apartments in Ho Chi Minh city belongs to the branded property group. This is a new model of real estate in Vietnam - properties that are developed by reputable investors and are then attached to one or multiple prestigious brands (branded residence).
See more: Grand Marina - branded residence
Savills confirmed that branded residences are quite expensive, but the value of this kind of real estate is worth it. The “luxury” standard is a challenge, requiring real estate investors to bring about the highest value possible for buyers. This is similar to a customer buying a designer bag or staying at a luxury hotel. The market average of a 5 star resort run by international companies will cost more than unnamed 4 and 5 star hotels, as such, the customer experience will vastly differ. That is the contrast between price and value.
Still according to Savills, despite the impact of the pandemic on the real estate market in 2020, branded residences are still growing in comparison with other global industries. After a decade of growth at a rate of 170%, branded residences continue to flourish in 2020. New data from Savills pointed out that Vietnam has one of the 10 fastest growing branded residence markets in the world.
Branded residences trend in 2021
The Asia-Pacific region is expected to be a hotspot for branded residences development, thanks to low market entry costs and risks, meaning luxury brands can now sufficiently satisfy domestic demands. Thailand and Vietnam are gaining a reputation of being fully developed vacation destinations and are satisfying many demands of the international market. Furthermore, in these two countries, more residences are gaining wealth, thus increasing demand for branded residences.
In reality, the appearance of the 18.000 USD per m2 apartment project has changed the housing allocation ratio in Ho Chi Minh city in the first quarter of 2021 due to the large scale of the project. At the end of March 2021, luxury apartments accounted for 39% of the total market supply (CBRE Vietnam). What is noteworthy, however, is that supply for luxury apartments surpass that of high-end apartments (20% of total supply).
Supply rate of apartments in the first quarter of 2021, in HCMC
On the topic of luxury apartments being in the leading real estate group in Ho Chi Minh City, Mr. Hanh Loc Nguyen, CEO of Ngoc Chau A Real Estate Investment Joint Stock Company, advised buyers and investors to be extremely careful of the luxury apartments inflating to 39% of total supply. These changes do not indicate a stable housing market.
According to Mr. Hanh, in the last few decades, real estate experts explained that for a safe and reasonable housing market, luxury apartments should only account for 1-2% of total supply. With the proportion of luxury and ultra-luxury apartments currently, the market trend is to only target the rich and ultra rich.
Meanwhile, the CEO of a certain real estate company in Eastern Ho Chi Minh city said that the standards of luxury, ultra luxury apartments and branded residences are still too ambiguous, with not enough precedents to ascertain whether the selling price is expensive or reasonable.
Said CEO further explained that, currently, the price and quality of branded residences depend on the spending ability, satisfaction and trend of customers. However, because the real estate market in Ho Chi Minh city is quite young and underdeveloped, there is a shortage of cheap housing options for the majority of consumers, and record-breaking prices tend to attract attention and controversy.
“The 18.000 USD per m2 price tag can shock the market in its first appearance, but at the same time, a successful transaction of this product suggests that the ultra-wealthy are ready to buy it. As such, let the market regulate supply and demand by itself”, he said.
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