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Metro line changes face of HCMC's property market

Released at: 08:21, 23/04/2015

Metro line changes face of HCMC's property market

Properties located along first metro line already rising in value and transaction numbers as 2020 opening appears on horizon.

by Thu Hoang

The opening of metro lines will improve the ability of the population to reach employment, retail and recreation activities, according to CBRE Vietnam’s report on the impact of metro lines on the property market. “With the first metro line in Ho Chi Minh City making good construction progress and set to open in 2020, all of us who live and work in the city are gearing up for some big and exciting changes,” said Mr. Marc Townsend, Managing Director of CBRE Vietnam. “For those of us in real estate, the game will be changing even more dramatically.”

According to CBRE Research, properties located along Metro Line No. 1, including in Binh Thanh district, District 2, District 9 and Thu Duc district, currently sell at small to modest premiums, somewhere between 2 per cent and 5 per cent, compared to properties with similar finishings and facilities but not located along metro lines. Asking prices of high-end residential projects in District 2 have increased from an average of $1,490 per sq m in 2012 to $1,650 today, or 11 per cent, compared with just 3 per cent city-wide (see Figure 1).

CBRE believes that, in the future, when the metro line comes into operation the premium for land prices on sites located within a ten-minute walk of stations could be up to 10 to 20 per cent compared to sites in other areas.

In terms of new launches, CBRE also found that the number of apartment units has surged in areas close to stations over the last three years. The average growth in supply in District 2 is 36 per cent, compared to just 24 per cent in District 4 and 10 per cent in District 7. It is expected that apartment supply in District 2 and District 9 will surge by 58 per cent and 200 per cent, respectively, in 2017.

Similarly, a 10 per cent increase in retail podium gross floor area (GFA) is reported in District 2 over the next three years, including but not limited to Estella Heights (37,290 sq m GFA), Vincom Megamall Thao Dien (120,000 sq m GFA), Thao Dien Pearl (20,400 sq m GFA), Lexington Residence, and The Sun Avenue.

Interestingly, the number of successful transactions has also gone up. According to CBRE’s research, the number of units sold in District 2 was as low as 329 in 2012 and is now 3,710 (see Figure 2). Although no concrete conclusion on the impact of the metro line can be drawn from the increase in selling prices or transaction numbers, it would make sense that developers have raised their prices in anticipation of significant demand once the metro line starts running.

“Better connectivity will allow commercial activities to be decentralized away from the congested CBD,” said Ms. Duong Thuy Dung, Head of CBRE’s Research and Consulting Department. “This will also allow occupancy costs for the city to be controlled and managed by there being alternative locations away from the CBD that are still well connected.” It is expected that new clusters of commercial properties will arise along metro lines, especially for properties in mid-end levels.

With 186,000 travelers per day expected on the first line in Ho Chi Minh City, clear opportunities will be seen in the retail sector, where a retail mall is usually incorporated within a community to benefit from commuter traffic. The metro line will also help in expanding the retail catchment area by providing vehicle cost savings to remote shoppers, encouraging them to come to the city center for shopping.

“One of the things that has traditionally held Ho Chi Minh City back has been its poor infrastructure and lack of an efficient public transport system,” she said. For property investors, especially foreign ones, anywhere outside a catchment area of half an hour’s drive from the city center doesn’t really come into play as a serious investment opportunity. Commuting times are just too long and it can be a struggle to get into the city at the best of times. However, the introduction of Metro Line No. 1 in 2020 will cut journey times by at least half, meaning that anywhere with decent access to these lines will benefit.

“For this reason we can expect mixed-use developments along the metro line, which will include condos, apartments, offices, hotels, restaurants, shops, outdoor activities, educational institutions and cultural and other attractions; much as can be seen today in cities such as Hong Kong, Bangkok and Singapore,” she added.

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