Savills Vietnam announces the Property Price Index November 2016 for Ho Chi Minh City and Hanoi

Savills Vietnam would like to announce Savills Property Price Index (SPPI) in November 2016 for Ho Chi Minh City and Hanoi with highlighted information as below:

At HCMC

Residential Index

In Q3/2016, the Residential Index was 93.5, increasing 0.6 point quarter-on-quarter (QoQ) and 4.5 points year-on-year (YoY).

There were approximately 7,500 sales, increasing 7% QoQ and 43% YoY. The absorption rate was 19%, increasing 2 percentage points (ppts) QoQ and YoY.

While there were many Grade A and C sales, Grade B sales decreased -12% QoQ. Grade C sales exceeded 3,700 units, accounting for 50% of quarterly sales. Grade A also performed well with 780 sales, increasing 140% QoQ. 

Grade C pricing is closer to most Vietnamese purchasers’ affordability and hence captures a larger pool of end-users. Developers offering reasonably priced units typically target areas with inexpensive and readily available land, and improved and planned infrastructure. In Ho Chi Minh City, Grade C development hotspots include the areas surrounding Vo Van Kiet Boulevard in the west and Pham Van Dong Boulevard in the east.

Office Index

In Q3/2016, the Office Index was 86.7, increasing 2 points QoQ and 7 points YoY. Improvements resulted from occupancy increases of 1 ppt QoQ and 4 ppts YoY, and rent increases of 1% QoQ and 3% YoY. The average occupancy reached a new high of 98 percent!

Grade A projects in the CBD performed well with average rent increasing 4% QoQ and YoY. As a result, the CBD index rose 2 points QoQ and 5 points YoY.

Meanwhile, the non-CBD also performed well with average occupancy increasing 2 ppts QoQ and 6 ppts YoY, resulting in the non-CBD index rising 2 points QoQ and 10 points YoY.

In Q3/2016, the total office take-up was approximately 7,000 m2, decreasing -50% QoQ and -89% YoY due to limited vacancy. Office rents are expected to increase in coming years due to rising demand and low new supply. Savills forecast approximate rent increases of 4% pa over the next two years.

At Hanoi

Residential Index

In Q3/2016, the residential index was 105.8, increasing 1 point quarter-on-quarter (QoQ) but decreasing -2.4 points year-on-year (YoY) with an average selling price of VND 27.6 million/m².

There were approximately 5,660 sales, down -6% QoQ and -15% YoY. The primary absorption rate was approximately 33%, down -2 ppts QoQ due to the Lunar July Ghost month and -12 ppts YoY. Tu Liem district led with 1,800 sales or a 32% share, equivalent to absorption of 44 percent.

Grade B had the most primary sales for the 6th consecutive quarter with 51%. While Grade A absorption decreased -8 ppts QoQ to 20% with 130 sales and Grade B absorption decreased -6 ppts QoQ to 34% with 2,900 sales, the Grade C performance was positive with absorption increasing 8 ppts to 33% with 2,620 sales.

Circular No. 19/2016/TT-BXD tightened resale procedures, dissuading short-term investors. Ha Dong and Hoang Mai will face rising pressure with 48% of future supply.

Office Index

In Q3/2016, the Office Index was 60.4, increasing 1 point QoQ and 3.2 points YoY. Improvements were the result of occupancy increases of 2 ppts QoQ and YoY, and rent unchanged QoQ but increasing 3% YoY.

The CBD lost -1.6 points QoQ but gained 1.7 points YoY due to decreases in occupancy of -1.3 ppts QoQ and in rent of -0.9% QoQ. The non-CBD gained 1.8 points QoQ and 5.1 points YoY due to occupancy increases of 2.6 ppts QoQ overshadowing slight rent decreases of -0.4% QoQ.

In the next two years there will be limited CBD supply. With a substantial available land bank, the non-CBD will become increasingly more competitive due to a large future supply as well as sizeable vacancies. As a result of the expected supply, new projects may struggle to gain new tenants, and be forced to lower rent and offer more flexible leasing policies.