CBRE MARKET UPDATE Da Nang Q1/2012 Presented by: THAO LE Da Nang Research Opening Remarks from: ADAM BURY Senior Manager CB Richard Ellis (Vietnam) Co., Ltd Friday, April 20th, 2012 TIEN CAO Da Nang Research OPENING WORDS Da Nang 2012 – Continued Signs of Growth Hyatt Regency Da Nang Da Nang International Airport The Summit Harmony Tower All Pictures – Source: CBRE Vietnam Date 19th April, 2012 CBRE RESEARCH & CONSULTING MARKET INSIGHTS FROM CBRE’s DA NANG QUARTERLY UPDATES | APRIL 2012 VIETNAM ECONOMIC OVERVIEW Q1/2012 PERFORMANCE 3.5 3.0 Inflation surged 20 Monetary controls took effect 2.5 15 2.0 10 1.5 CPI (% m-o-m) CPI (% y-o-y) / Interest rates (%) 25 CPI, VN (% y-o-y)) CPI, VN (% m-o-m) Refinancing rate (%) Rediscounting rate (%) 1.0 Jan-10 Monetary controls on interest rates Mar-10 May-10 Jul-10 Sep-10 Nov-10 Jan-11 Mar-11 May-11 Jul-11 0.5 0.0 Sep-11 Nov-11 Jan-12 Mar-12 Q1/2012 Q4/2011 GDP (% y-o-y) 4% 6.1% CPI (% y-o-y, e-o-p) 14.15% 18.13% Exchange rate (e-o-p) 20,828 20,828 Export (US$ Bn) 24.52 (23.6% y-o-y) 26.23 (31.7% y-o-y) Import (US$ Bn) 24.77 (6.9% y-o-y) 28.9 (23.4% y-o-y) FDI Implemented (US$ Bn) 2.5 (-0.8% y-o-y) 2.8 (-5.1% y-o-y) International Arrivals (million arrivals) 1.9 (24.5% y-o-y) 1.7 (29.3% y-o-y) Retail and Services Turnover (trillion dong) 569.7 (21.8% y-o-y) 611.5 (47.2% y-o-y) Source: General Statistics Office CBRE RESEARCH & CONSULTING MARKET INSIGHTS FROM CBRE’s DA NANG QUARTERLY UPDATES | APRIL 2012 VIETNAM ECONOMIC OVERVIEW INFLATION Time 9-Aug-10 24-Feb-11 29-Mar-11 26-Aug-11 29-Mar-12 A95 A92 Chg Pct Chg 16,900 16,400 410 2.56% 19,800 19,300 2,900 17.68% 21,800 21,300 2,000 10.36% 21,300 20,800 (500) -2.35% 23,400 22,900 2,100 10.10%  Inflation continuing to trend down, possibility of upward revisions remain;  Petroleum prices increased 10.1% compared to the previous adjustment, leaving more pressure on CPI in the second quarter; • March CPI recorded the lowest m-o-m increase since January 2011 at 0.16% m-o-m, (or 14.15% y-o-y) • Bounce back in the stock market, in part a reflection of decreasing inflation Stock Index and Inflation 550 3,000 700 600 VNIndex 1,500 400 1,000 350 500 300 4-Jan 1-Feb 1-Mar 29-Mar 26-Apr 24-May 21-Jun 19-Jul 16-Aug 13-Sep 11-Oct 8-Nov 6-Dec 3-Jan 31-Jan 28-Feb 27-Mar Trading value VNIndex 2011 VNIndex 2,000 450 Trading Value (Billions VND) 2,500 500 25 20 500 15 400 10 300 200 Dec-08 Mar-09 Jun-09 Sep-09 VNIndex CPI (%) Petroleum Price Adjustments Dec-09 Mar-10 Jun-10 CPI Sep-10 Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 VNIndex Q1/2012 CBRE RESEARCH & CONSULTING MARKET INSIGHTS FROM CBRE’s DA NANG QUARTERLY UPDATES | APRIL 2012 VIETNAM ECONOMIC OVERVIEW MONETARY CONTROLS Base rate Re-financing rate Re-discounting rate 20  Positive signs with the downward adjustments 15 of key interest rates • By 1% during the first quarter (March) – refinancing adjusting to 14%, Rediscount Rate to 12% and the deposit cap to 13% 10 2008 2009 2010 2011 2012 • A further 1% reduction to each measure was announced in the second week of April  Lower interest rate mortgage loans still scarce • Still only limited signs of commercial loans being reduced to reflect the revised interest rates Slight decreases of approx 0.5% in the beginning of 2012 • 20% - 25% for non-productive sector and 16.5% - 20% for productive sector (SBV)  More stable USD/VND exchange rate, strict controls on USD/gold trading remain CBRE RESEARCH & CONSULTING MARKET INSIGHTS FROM CBRE’s DA NANG QUARTERLY UPDATES | APRIL 2012 VIETNAM ECONOMIC OVERVIEW BUSINESS ENVIRONMENT World Bank Ranking 2011 2012  The 4% y-o-y GDP growth rate is the lowest recorded since Q2/2009  Imports saw their lowest growth since Q4/2009 Ease of doing business Vietnam 78 98 (6.9% y-o-y) resulting in low trade deficit in Q1/2012 Singapore 1  Real estate ranked first in FDI attraction, Malaysia 21 18 Thailand 19 17 Indonesia 121 129  Bank restructuring continues to be a key topic • VietinBank to issue first dollar-bond in July; received a B+/B credit rating from S&P Protecting investors Vietnam 173 166 Singapore 2 Malaysia 4 Thailand 12 13 Indonesia 44 uncertain if that will be disbursed in the longterm of conversation; 46 CBRE RESEARCH & CONSULTING • Changes in top management at a couple of banks • Bank shareholders’ conflict MARKET INSIGHTS FROM CBRE’s DA NANG QUARTERLY UPDATES | APRIL 2012 HOTEL MARKET SNAPSHOT STAR STAR STAR TOTAL 31 41 Total supply (room) 1,452 563 1,874 3,889 New supply (room) 0 0 Average occupancy rate (%) 43.5% 45.9% Q-o-q change (%) 9.4pp 12.7pp Y-o-y change (%) 5.3pp -13.9pp Average daily rate (US$/room/night) 104.00 55.73 Q-o-q change (%) -5.3% 1.5% Y-o-y change (%) -6.9% -26.1% Number of hotels Source: CBRE Vietnam CBRE RESEARCH & CONSULTING MARKET INSIGHTS FROM CBRE’s DA NANG QUARTERLY UPDATES | APRIL 2012 HOTEL HIGHLIGHTS star Average Daily Rate(US$) star • Achieved Room Rate (US$/room/night) 150 120 90 • 60 30 • Q1/08 Q3/08 Q1/09 Q3/09 Q1/10 Q3/10 Q1/11 Q3/11 Q1/12 5-star 4-star • star Occupancy (%) • star 80% Occupancy Rate 70% 60% • 50% 40% 30% Q1/08 Q3/08 Q1/09 Q3/09 5-star CBRE RESEARCH & CONSULTING Q1/10 Q3/10 4-star Q1/11 Q3/11 Q1/12 • In Q1/2012, Da Nang welcomed almost 590,000 visitors - a 31.9% q-o-q increase and 35.0% y-o-y increase The opening of Da Nang International Airport led to the number of visitors arriving increasing by 94.3% yo-y In addition, arrivals by sea increased by 260.8% y-oy, thanks to the arrival of famous cruise ships such as the Superstar Aquarius (Star Cruises) First charter flights between Russia and Da Nang will be opened in May 2012 The ‘Lao Farmtrip’, which came to Da Nang in March, appears to be a first step in a new tourism relationship between the two countries It is though noted that at the current time there is no charter flight between the two countries On a y-o-y basis it is noted that ADR’s at both and 5-star hotels decreased – though this was not unexpected as the new hotels are aiming to establish themselves for the longer term Occupancy in the 5-star hotel sector increased on a y-o-y basis, reflecting new tourism arrivals, whilst 4star occupancy decreased y-o-y as new supply took effect MARKET INSIGHTS FROM CBRE’s DA NANG QUARTERLY UPDATES | APRIL 2012 HOTEL OUTLOOK  Upcoming festivals and the high-season will put new supply, which came on line in 2011, through its first full test  There appears to be a growing trend of MICE travelers combining business with pleasure and thus the city may become a more rounded destination  Travelers from China, Korea, Japan, America, Australia, Germany and Russia are expected to grow throughout the year  A second hotel operated by Intercontinental Hotel Group is expected to become operational in Q2/2012  It is expected that over 1,000 rooms of additional supply will be launched in 2012; launched by Melia, Pullman, InterContinental, Novotel and Dragon Vinh Trung CBRE RESEARCH & CONSULTING MARKET INSIGHTS FROM CBRE’s DA NANG QUARTERLY UPDATES | APRIL 2012 CONDOMINIUM FOR SALE MARKET SNAPSHOT LUXURY HIGH-END MID-END TOTAL 5 13 New launch (units) 307 1,046 1,132 28 2,485 30 Average asking price (US$ psm) 2,972 1,786 937 Q-o-q change (%) -2.0% 0.0% 2.0% Y-o-y change (%) -0.5% -0.1% 8.7% Total supply (projects) Total supply (units) Source: CBRE Vietnam •“Existing supply”: is the total number of units that have been handed over for occupation •“New launch”: the number of units that were released to the market by developers (official start of sales for a project) in the review quarter All units in each development are included in the calculations, however, the developer may divide sales into numerous phases and thus not all units may come online at launch date 10 CBRE RESEARCH & CONSULTING MARKET INSIGHTS FROM CBRE’s DA NANG QUARTERLY UPDATES | APRIL 2012 CONDOMINIUM FOR SALE Condominium Supply (units) MARKET SNAPSHOT Opening supply Change in quarter 3,000  DN welcomed 28 units of additional new supply from one midend condo project, La Paz Tower  In total there were over 30 units sold in the condo sector, more than 70% of these were in the mid-end sector;  2,500 Developers in Da Nang are keeping in line with the trend seen in HCMC, of keeping asking prices relatively stable but offering discounts/incentives during negotiation 2,000 1,500 1,000 500 2009 2010 Q1/11 Q2/11 Q3/11 Q4/11 Q1/12  Luxury projects saw prices decrease to US$ 2,972 psm, a 2.0% q-o-q decrease, while the price of mid-end segment went up to US$ 937 psm, a 2% q-o-q increase due to new supply joining the sector Luxury Asking Price (US$ psm) High-end Mid-end 3,500  3,000 2,500 The high-end projects saw prices remain stable 2,000 1,500 1,000 500 Q1/09 Q3/09 Q1/10 Q3/10 11 CBRE RESEARCH & CONSULTING Q1/11 Q3/11 Q1/12 MARKET INSIGHTS FROM CBRE’s DA NANG QUARTERLY UPDATES | APRIL 2012 CONDOMINIUM FOR SALE OUTLOOK Azura, VinaCapital  All Pictures – Source: CBRE Vietnam Date 19th April, 2012 In Q1, majority of condo units transacted are in the price range of VND 0,75 – 3,0 billion   La Paz Tower, DHI The majority of sales in Q1/2012 were at projects which were nearing or completed In 2012, DN market is expected to welcome an addition of 217 units which have prices in the range of US$ 700 – 1,500 psm  Construction progress has been pushed forward sharply in some condo projects  It appears that there has been a slight increase in enquiries since interest rates were dropped  With the macro economy showing some positive signs for the real estate market, and some developers showing an increase in enquiries, it is hoped that the number of sales will increase in the coming months 12 CBRE RESEARCH & CONSULTING MARKET INSIGHTS FROM CBRE’s DA NANG QUARTERLY UPDATES | APRIL 2012 SECOND-HOME VILLA FOR SALE MARKET SNAPSHOT TOTAL Total supply (projects) 12 Total supply (units) 572 New launch (units) Percentage of total units sold (%) 52.5% Q-o-q change (pts) -0.5pp Y-o-y change (pts) 1.1pp Source: CBRE Vietnam All prices are quoted exclusive of VAT and service charges •“Total supply”: is the total number of units available for sale – both primary and secondary market •“New launch”: the number of units that were released to the market by developers (official start of sales for a project) in the review quarter All units in each development are included in the calculations, however, the developer may divide sales into numerous phases and thus not all units may come online at launch date 13 CBRE RESEARCH & CONSULTING MARKET INSIGHTS FROM CBRE’s DA NANG QUARTERLY UPDATES | APRIL 2012 VILLA FOR SALE HIGHLIGHTS 2nd Home Villa Supply (units) 700 Number of units 600  In Q1, DN market witnessed no new supply 500  Although there were 10 units sold in Q1, the average sale rate 400 dropped to 52.5%, a 0.9pp decrease due to the rescission of some deals 300 200  Only of the villa 12 projects reduced asking price in Q1 The 100 2009 Q1/10 Q2/10 Q3/10 Q4/10 Q1/11 Q2/11 Q3/11 Q4/11 Change in supply Openning supply OUTLOOK OUTLOOK Sales rate (%)  In 2012, DN market is expected to welcome additional 133 85.0 55.0 units of new supply from new projects The majority of them will priced from US$ 500,000 to US$800,000 and sized from 400 – 700 sqm per unit 40.0  Despite tight monetary policy over previous quarters it is 70.0 Sold rate (%) decrease was from 17 – 20% Other projects chose to leave headline pricing stable 25.0 10.0 Q1/09 Q3/09 Q1/10 Q3/10 Q1/11 Q3/11 Q1/12 apparent that some activity has remained in the second home market – showing the wealth and disposable income that still exists in some portions in society;  It would be hoped that as monetary policy eases greater levels of liquidity may be created within the market; 14 CBRE RESEARCH & CONSULTING MARKET INSIGHTS FROM CBRE’s DA NANG QUARTERLY UPDATES | APRIL 2012 LAND PLOT MARKET SNAPSHOT Northwest East South Total Number of projects 14 7 28 Total supply (plots) 6,980 1,445 3,813 12,238 New supply (plot) 0 0 VND3.1 -18.5mil VND8.5 – 40mil VND5.0 -43mil - – 5% - – 5% -0–7% Average price (VND per sm) Q-o-Q Change (%) Source: CBRE Vietnam 15 CBRE RESEARCH & CONSULTING MARKET INSIGHTS FROM CBRE’s DA NANG QUARTERLY UPDATES | APRIL 2012 LAND PLOT HIGHLIGHTS Opening supply Change in quarter Land Plot Supply  18,000 In Q1, the unchanged supply showed that developers hesitated in launching new land plots and reflected the reduced sentiment for this market 16,000 Plots 14,000 12,000 10,000 8,000  Price were flat ,or down, owing to the 6,000 4,000 2,000 2009 Q1/10Q2/10Q3/10Q4/10Q1/11Q2/11Q3/11Q4/11Q1/12 Est 2013 Maximum price 48,000,000 42,000,000 36,000,000 30,000,000 24,000,000 18,000,000 12,000,000 6,000,000 Average price  The coastal, southern and Thuy Tu areas saw greatest price declines – these were also the areas that saw the largest price increases 16 CBRE RESEARCH & CONSULTING Cam Le Ngu Hanh Son My An Son Tra Man Quang … Thanh Khe Lien Chieu  Thuy Tu VND Price range by submarkets (VND mil psm) selling of land plots by speculators having difficulties who want to mobilise cash The secondary market is more active whilst primary market appears to be in hibernation  Land plots priced less than 1,5 billion VND are more attractive buyers in current market MARKET INSIGHTS FROM CBRE’s DA NANG QUARTERLY UPDATES | APRIL 2012 LAND PLOT OUTLOOK  The recent market brings good opportunities for end-user buyers and long-term investors with strong financial abilities  DN market is expected to see positive signs from the upcoming festivals (International Firework Competition/International Paramotor Competition), held in April and May   17 CBRE RESEARCH & CONSULTING DN Land plot market is expected to have a slight recovery in the second half of 2012 as transactions increase with interest reductions Some developers are considering breaking larger land plots into smaller, 65 – 90sm plots, in order to counter the slow down in the land plot market It is hoped this will draw endusers to purchase MARKET INSIGHTS FROM CBRE’s DA NANG QUARTERLY UPDATES | APRIL 2012 OFFICE MARKET SNAPSHOT GRADE A GRADE B GRADE C TOTAL 20 27 NLA (sm) 6,314 35,823 41,756 83,893 Vacancy rate (%) 8.8% 26.1% 34.8% 29.1% Q-o-q change (pts) -4.8 pp 2.9pp -0.2pp 0.8 pp Y-o-y change (pts) -18.2 pp -17.7pp -4.7 pp -11.5 pp Average asking rent (US$ psm per month) $19.00 $13.75 $10.84 $12.70 Q-o-q change (%) 0.0% -0.4% -6.4 % 0.4% Y-o-y change (%) 0.0 % 1.0 % 8.5% 1.2% Number of buildings Source: CBRE Vietnam All rents are quoted on NLA Rents are quoted including service charges and excluding VAT 18 CBRE RESEARCH & CONSULTING MARKET INSIGHTS FROM CBRE’s DA NANG QUARTERLY UPDATES | APRIL 2012 OFFICE HEADLINE STORIES Average Rental Price (US$/m2) Asking Rents (US$ psm per month)  Grade A Grade B Grade C 20  15 The average rent remained stable in Grade A properties and insignificant changes were seen in both Grade B and Grade C properties; The office market witnessed no new supply in the first quarter of 2012  10 The total vacancy of this quarter was up to 29.1% from 28.3% in Q4/2011, an increase of 0.8 pts q-o-q • Q1/09 Q2/09 Q3/09 Q4/09 Q1/10 Q2/10 Q3/10 Q4/10 Q1/11 Q2/11 Q3/11 Q4/11 Q1/11 Grade A and C saw good take-up with decreasing vacancy; • Vacancy rate(%) The majority of Grade B projects saw good performance during Q1/2012, however one Grade B building saw a dramatic increase in vacancy as two companies withdrew leaving large empty space that affected headline numbers; Grade A Grade B Grade C OUTLOOK 80 Vacancy (%) 70 60  50 40 30 Two grade B buildings, with a total 19,200 sm, likely to come online by the end of 2012 Will put pressure on vacancy rate  In the next two quarters it is likely that the market will remain flat,  By the end of 2015 the total supply may reach 236.747 sm NLA, 20 10 Q1/09 Q2/09 Q3/09 Q4/09 Q1/10 Q2/10 Q3/10 Q4/10 Q1/11 Q2/11 Q3/11 Q4/11 Q1/12 19 CBRE RESEARCH & CONSULTING though this is dependent on all projects being completed – this is unlikely MARKET INSIGHTS FROM CBRE’s DA NANG QUARTERLY UPDATES | APRIL 2012 To subscribe, please contact… Q1/2012 released TODAY, April 20, 2012 quarterlyreports@cbrevietnam.com THANK YOU © 2012 CB Richard Ellis (Vietnam) Co., Ltd This report has been prepared in good faith and with due care by CB Richard Ellis (Vietnam) Co., Ltd We obtained some of the information above from sources we believe to be reliable However, we have not verified the accuracy of the information which we obtained from other sources and make no guarantee, warranty or representation about it We include projections, opinions, assumptions or estimates which are made with careful consideration of factors known to us for example only, and they may not represent current or future performance of the market This information is designed exclusively for use by CB Richard Ellis clients, and cannot be reproduced without prior written permission of CB Richard Ellis 20 CBRE RESEARCH & CONSULTING MARKET INSIGHTS FROM CBRE’s DA NANG QUARTERLY UPDATES | APRIL 2012 ... being completed – this is unlikely MARKET INSIGHTS FROM CBRE? ? ?s DA NANG QUARTERLY UPDATES | APRIL 2012 To subscribe, please contact… Q1 /2012 released TODAY, April 20, 2012 quarterlyreports@cbrevietnam.com... number of sales will increase in the coming months 12 CBRE RESEARCH & CONSULTING MARKET INSIGHTS FROM CBRE? ? ?s DA NANG QUARTERLY UPDATES | APRIL 2012 SECOND-HOME VILLA FOR SALE MARKET SNAPSHOT TOTAL... numerous phases and thus not all units may come online at launch date 13 CBRE RESEARCH & CONSULTING MARKET INSIGHTS FROM CBRE? ? ?s DA NANG QUARTERLY UPDATES | APRIL 2012 VILLA FOR SALE HIGHLIGHTS 2nd