construction cost review

DAVIS LANGDON & SEAH VIETNAM

Q1 - 2011

Global construction consultants Cost Management | Project Management | Legal Support Services |

Specification Consultancy | Specialist Cost Engineering Consultancy Services |

Feasibility Studies

QUARTERLY

CONSTRUCTION COST REVIEW

IN VIETNAM

OVERVIEW

APPROXIMATE BUILDING COST IN VIETNAM

AVERAGE DAILY LABOUR COST

MATERIAL COST TREND IN VIETNAM

STATUS OF VIETNAM PRICE MOVEMENTS

GOVERNMENT’S SUBSIDIZED MATERIALS

TABLE OF CONTENTS

Davis Langdon & Seah Vietnam Copyright Page | 3 of 11

Construction prices have raised higher in the first quarter of 2011 then during any quarter of

2010 and this is generally attributed to rises in global commodity prices notably steel and oil.

In the first quarter of 2011 construction prices have risen in all sectors as follows:

Medium Grade Apartments +2.50%

High End Apartments +2.45%

Grade A Office +2.37%

Medium Grade Office +2.38%

Retail +2.44%

Hotel 5 Star +2.40%

Hotel 3 Star +2.40%

Reinforcing steel prices in Vietnam have increased some 6.6% over this quarter, this is lower

than international market growth for steel but it should be noted that rebar steel prices are

always generally higher than international market prices. Structural steel prices have

increased over 18%. Oil prices like steel prices are regulated by the Vietnam government

and although oil prices have risen sharply they do not compare with the volatility

experienced on the international market.

It is noted that GDP in 2011 is forecast to be lower than in 2010 and it follows that

Construction growth will follow the same trend.

The potential reduction in construction growth will arise due to; increases in interest rates,

the end of the disbursement of economic stimuli and a reduction in FDI disbursement. All of

these measures came into fruition at the end of 2010 and in early 2011.

Vietnam’s high balance of payment deficit is representing an economic problem for Vietnam

and a number of fiscal measures have been adopted by the government in order to curtail

the ever increasing deficit. All these deficit reduction measures affect construction growth in

Vietnam, generally these measures comprise:

Continued VND devaluation. The VND had consistently devalued at 4% per annum

against the USD over the last five years but the last devaluation in February 2011

was circa 10% against the USD. In essence this inflates the prices of imported

construction materials. Also this affects the capital gearing of developers whose

incomes are in VND and whose loans are in foreign currencies.

OVERVIEW


Increases in bank base rates which are now at 13% and typical commercial lending

rates are circa 20%. This clearly has an effect on asset valuations and the

profitability of any feasibility study.

Restricted domestic lending to developers. The Banks are being influenced by the

government to lend to the exporting sector in lieu of the domestic sector and in an

effort to reduce the burgeoning current account deficit.

Reduced FDI disbursement as a function of the reduced FDI commitments since the

end of 2008. FDI disbursement had previously continued to flow due to FDI

committed pre 2008 however this disbursement is depreciating.

Both GDP and Construction growth will be lower in 2011 than in 2010 and the key market

investment drivers are all likely to be affected for reasons as follows:

Local private investment will be adversely affected by increased interest rates and by

VND devaluations.

The disbursement of FDI will fall as a function of decline in FDI investment during

2009 & 2011.

ODA investment will not fall in 2011. JICA are a major player in ODA investments

and despite the necessary investment now required arising from the Japan

earthquake and tsunami it is not expected that Japanese ODA will subside in 2012.

A reduction in government infrastructure spending arising from the final

disbursement of the 2009 stimulus.

The major drivers in construction costs over 2011 will be external factors and particularly the

volatility of global commodity prices.


US$ PSM, CONSTRUCTION FLOOR AREA

RESIDENTIAL Q4 09 Q1 10 Q2 10 Q3 10 Q4 10 Q1 11

Detached Houses and Bungalows 480 485 490 497 507 495 – 595

Average Standard Apartment, High rise 605 615 620 629 642 630 – 750

Luxury Apartments, High rise 770 780 788 808 815 810 – 940

Terraced Houses 395 400 403 408 417 418 – 475

Specification 1. Average Standard Apartments to be 30-50 storey 60-90 m2 per flat. 2. Average Luxury Apartment to be 30-50 storey 100-150 m2 per flat. 3. Apartments and Houses include air conditioning, kitchen cabinets, kitchen cooktop, exhausted hood but exclude loose furniture and home

appliances.

OFFICE /COMMERCIAL Q4 09 Q1 10 Q2 10 Q3 10 Q4 10 Q1 11

Prestige Offices, High Rise 875 885 900 913 930 880 – 1,110

Average Standard Office, High Rise 710 720 730 740 757 750 – 870

Shopping Centers 655 665 675 684 697 685 – 800

Specification 1. Offices based on buildings 20-30 storeys high with floor plans minimum 1,000m2 per level. 2. Shopping centres and average standard offices exclude finishes, A/C ducting and light fittings to tenant areas, standard façade. 3. Prestige offices are fitted with raised floor, suspended ceiling, A/C ducting and light fittings to tenant areas, standard façade.

INDUSTRIAL Q4 09 Q1 10 Q2 10 Q3 10 Q4 10 Q1 11

Light Duty Flatted Factories 265 270 280 284 290 238 – 385

Heavy Duty Flatted Factories & Warehouses 380 385 405 411 417 390 – 500

Single Storey Conventional Factories 380 385 405 411 417 390 – 500

Owner Operated Factories, Low Rise 380 375 395 401 410 390 – 495

Specification 1. Flatted factories and industrial –office buildings exclude manufacturing equipment, special services provisions, air-conditioning and electrical

distribution system to tenant areas.

HOTEL Q4 09 Q1 10 Q2 10 Q3 10 Q4 10 Q1 11

Resort Hotel 1,175 1,190 1,200 1,217 1,240 1,185 – 1,475

03 Star Budget Hotel inclusive of F.F.&E 1,425 1,440 1,455 1,475 1,502 1,485 – 1,735

05 Star Budget Hotel inclusive of F.F.&E 1,695 1,715 1,730 1,754 1,787 1,800 – 2,030

Specification 1. F. F & E includes interior decoration and loose furniture etc. but excludes hotel operated equipment costs (e.g. cutlery, crockery, linen, uniform, etc.)

OTHER Q4 09 Q1 10 Q2 10 Q3 10 Q4 10 Q1 11

Basement Car Parks (< 3 levels) 565 575 610 619 632 630 – 720

Elevated Car Parks (< 4 levels) 345 350 353 357 367 390 – 450

Primary and Secondary schools 425 430 435 441 450 470 – 495

Student Hostels 490 500 503 510 520 495 – 620

Sport Club inclusive of F.F.&E 705 710 713 723 737 750 – 830

Specification Underground car park cost including temporary steel works and bottom-up

Note 1. The costs for the respective categories given above are averages based on fixed price competitive tenders. It must be understood that the actual cost

of a building will depend upon the design and many other factors and may vary from the figure shown. 2. The costs per square metre are based on Constructions Floor Areas measured to the outside face of the external walls/external perimeter including lift

shafts, stairwells, balconies, plant rooms, water tanks and the like. 3. All buildings are assumed to be built on flat ground, with normal soil and site condition. The cost excludes site formation works, external works, land

cost, professional fees, finance and legal expenses. 4. The standard for each category of building vary from country to country and do not necessarily follow those of Vietnam.

APPROXIMATE BUILDING COST

IN VIETNAM – Q1/2011


(Source: DLS Database)

Description Mar-10 Jun-10

Sep-10

Dec-10 Jan 11 Feb 11 Mar 11

General Worker 9.46 9.52 10.39 10.91 11.09 11.33 11.58

Concretor 10.67 10.74 11.73 12.31 12.52 12.79 13.07

Bar Bender and Fixer 11.45 11.52 12.58 13.20 13.43 13.72 14.02

Carpenter (formwork) 10.67 10.74 11.73 12.31 12.52 12.79 13.07

Plumber 15.25 15.35 16.75 17.58 17.88 18.27 18.67

Electrical Fitter 15.25 15.35 16.75 17.58 17.88 18.27 18.67

Brick layer 12.20 12.28 13.40 14.06 14.31 14.62 14.94

Metal Worker 12.20 12.28 13.40 14.06 14.31 14.62 14.94

Construction Plant Mechanic 22.10 22.24 24.28 25.80 25.92 26.48 27.06

AVERAGE DAILY LABOUR COST IN PRIVATE SECTOR CONSTRUCTION

PROJECT IN VIETNAM – Q1/2011


AVERAGE PRICE (USD) Excluded:

1. Labour, plant, transport, wastage and other incidentals (and is ex-works price). 2. Tax (VAT, Import tax).

NO Description Unit 2010 2011

Mar Jun Sep Dec Jan Feb Mar

ex-rate 19,100 19,008 19,500 19,500 19,500 20,395 20,874

1 Portland Cement (PCB40) Bags 3.14 3.18 3.08 3.25 3.25 3.30 3.25

2 Mild steel round bars Kg 0.62 0.61 0.72 0.74 0.78 0.79 0.79

3 High tensile steel bars Kg 0.63 0.62 0.70 0.72 0.77 0.75 0.77

4 40mm aggregate Cum 6.41 6.60 6.44 6.44 6.44 6.15 6.01

5 20mm aggregate Cum 8.50 9.15 8.92 8.63 8.63 8.25 8.06

6 Yellow sand Cum 10.21 9.73 9.74 9.74 9.74 9.32 9.34

7 Clay brick units Pcs 0.22 0.23 0.23 0.23 0.23 0.22 0.21

8 Concrete blocks Pcs 0.49 0.51 0.50 0.50 0.53 0.51 0.49

9 Structural Steel MT 661.57 779.57 769.23 839.18 885.79 936.06 914.58

10 Clear Float Glass M2 9.53 9.57 9.49 9.13 9.13 9.32 9.10

11 Laminated Glass M2 25.97 23.25 23.59 22.56 22.56 22.95 22.42

12 Tempered Glass 10mm M2 27.23 27.36 26.67 28.21 26.67 27.46 26.83

13 RMC M20 Grade Cum 45.24 46.88 45.23 46.41 46.15 44.13 46.61

14 RMC M35 Grade Cum 52.36 54.08 52.26 53.38 53.15 50.82 53.18

15 RMC M40 Grade Cum 55.24 56.92 54.56 56.21 55.95 53.49 55.76

16 Diesel Lit 0.76 0.77 0.75 0.75 0.75 0.89 0.87

17 Petrol (Mogas 92) Lit 0.89 0.89 0.84 0.84 0.84 0.95 0.92

18 Hardwood m3 497.38 541.88 553.85 620.51 692.31 676.64 661.11

19 Plywood m2 9.69 10.15 9.90 10.21 10.21 10.93 10.68

20 Local Homogeneous floor tiles m2 7.79 7.83 7.63 8.03 9.62 9.19 8.98

21 Emulsion paint Lit 3.81 3.82 3.96 4.22 4.36 4.17 4.07

AVERAGE MATERIAL COST TREND IN VIETNAM – Q1/2011


-

0.20

0.40

0.60

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar

2010 2011

USD

/B

AG

Clay Brick + Concrete

Clay brick units Concrete blocks

-

10.00

20.00

30.00

40.00

50.00

60.00

70.00


2010 2011

USD

/B

AG

Ready Mixed Concrete

RMC M20 Grade RMC M35 Grade RMC M40 Grade

-

0.50

1.00


2010 2011U

SD /

BA

G

Steel Bars

Mild steel round bars (6-20mm)

High tensile steel bars (10-40mm)

2.00

3.00

4.00


2010 2011

USD

/B

AG

Portland Cement (PCB40)

Portland Cement …


2005 J-07 F-07 M-07 A-07 M-07 J-07 J-07 A-07 S-07 O-07 N-07 D-07 J-08 F-08 M-08 A-08 M-08 J-08 J-08 A-08 S-08 O-08 N-08 D-08 J-09 F-09 M-09 A-09 M-09 J-09 J-09 A-09 S-09 O-09 N-09 D-09 J-10 F-10 M-10 A-10 M-10 J-10 J-10 A-10 S-10 O-10 N-10 D-10 J-11 F-11 M-11

HN 100 109 114 111 112 113 114 115 116 116 117 119 124 128 134 135 137 145 147 148 151 149 148 146 144 146 149 147 148 149 151 152 151 152 153 154 158 159 164 166 166 167 168 169 169 186 190 198 205 212 221 231

HCMC 100 110 115 109 112 114 115 115 115 116 117 119 126 126 134 135 138 147 147 146 151 148 147 145 142 146 150 148 149 150 150 153 151 152 152 155 159 159 162 165 166 167 168 168 168 184 187 194 201 206 214 224

VN 100 109 111 111 111 112 113 114 115 116 116 118 121 124 129 133 135 141 144 145 148 148 148 147 146 146 148 148 148 149 149 150 151 152 152 153 155 157 160 161 161 162 162 162 162 177 179 182 186 189 193 197

100%

120%

140%

160%

180%

200%

220%

240%CONSUMER PRICE INDEX

CONSUMER PRICE INDEX

for whole country and major cities of Hanoi and Ho Chi Minh

(Source: GSO of Vietnam)



2005 J-07 F-07 M-07 A-07 M-07 J-07 J-07 A-07 S-07 O-07 N-07 D-07 J-08 F-08 M-08 A-08 M-08 J-08 J-08 A-08 S-08 O-08 N-08 D-08 J-09 F-09 M-09 A-09 M-09 J-09 J-09 A-09 S-09 O-09 N-09 D-09 J-10 F-10 M-10 A-10 M-10 J-10 J-10 A-10 S-10 O-10 N-10 D-10 J-11 F-11 M-11

HN 100 109 114 109 111 113 114 117 116 116 118 120 128 127 130 133 136 142 149 148 150 148 147 145 142 146 151 147 147 149 153 154 153 153 153 154 158 159 163 167 170 174 174 174 173 191 195 203 213 220 225 238

HCMC 100 107 112 110 113 113 116 115 113 117 118 121 126 128 130 137 137 142 148 146 151 146 145 145 144 147 150 149 149 151 152 153 152 153 153 154 158 160 163 166 170 173 175 174 176 192 196 204 213 221 226 237

VN 100 111 113 113 114 115 117 118 118 119 120 123 127 130 132 137 140 142 145 147 150 150 148 143 137 138 141 141 142 143 145 148 149 149 149 149 151 153 156 157 161 163 163 163 183 207 209 213 218 221 223 228

100%

120%

140%

160%

180%

200%

220%

240%

260%

HOUSING & CONSTRUCTION MATERIALS

PRICE INDEX: HOUSING AND CONSTRUCTION MATERIALS for whole country and major cities of Hanoi and Ho Chi Minh

(Source: GSO of Vietnam)



DIESEL PRICE in Vietnam market against the world price market

GASOLINE PRICE in Vietnam market against the world price market

GOVERNMENT’S SUBSIDIZED MATERIALS

0.40

0.45

0.50

0.55

0.60

0.65

0.70

0.75

0.80

0.85

0.90

0.95

1.00

1.05

1.10

1.15

1.20

1.25

J-0

7

F-0

7

M-0

7

A-0

7

M-0

7

J-0

7

J-0

7

A-0

7

S-0

7

O-0

7

N-0

7

D-0

7

J-0

8

F-0

8

M-0

8

A-0

8

M-0

8

J-0

8

J-0

8

A-0

8

S-0

8

O-0

8

N-0

8

D-0

8

J-0

9

F-0

9

M-0

9

A-0

9

M-0

9

J-0

9

J-0

9

A-0

9

S-0

9

O-0

9

N-0

9

D-0

9

J-1

0

F-1

0

M-1

0

A-1

0

M-1

0

J-1

0

J-1

0

A-1

0

S-1

0

O-1

0

N-1

0

D-1

0

J-1

1

F-1

1

M-1

1

USD/Liter

Month

DIESEL PRICE 2007 - 2010 World market VN market

0.400.450.500.550.600.650.700.750.800.850.900.951.001.051.101.151.201.25

J-0

7

F-0

7

M-0

7

A-0

7

M-0

7

J-0

7

J-0

7

A-0

7

S-0

7

O-0

7

N-0

7

D-0

7

J-0

8

F-0

8

M-0

8

A-0

8

M-0

8

J-0

8

J-0

8

A-0

8

S-0

8

O-0

8

N-0

8

D-0

8

J-0

9

F-0

9

M-0

9

A-0

9

M-0

9

J-0

9

J-0

9

A-0

9

S-0

9

O-0

9

N-0

9

D-0

9

J-1

0

F-1

0

M-1

0

A-1

0

M-1

0

J-1

0

J-1

0

A-1

0

S-1

0

O-1

0

N-1

0

D-1

0

J-1

1

F-1

1

M-1

1

USD/Liter

Month

GASOLINE PRICE 2007 - 2010 World market VN market

construction cost review

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