A view of HCM City. Savills Việt Nam's property indices for residential and office markets in this southern city improved in Q1/2016, compared to the same period in 2015. — Photo bitexco.com.vn

HA NOI (Biz Hub) — Consulting firm Savills Việt Nam's property price indices for real estate in two major cities of the country improved in the first quarter of this year, compared to the same period last year.

The company said in a Thursday report that the residential index for HCM City increased one point quarter-on-quarter (QoQ) in Q1/2016, and two points year-on-year (YoY) to 91.3.

There were appoximately 6,400 sales, a decrease of 18 per cent QoQ, but an increase of 49 per cent YoY. The overall absorption rate was 17 per cent, down four percentage points both QoQ and YoY, due to abundant new supply.

Grade C transaction volume increased by seven per cent QoQ. Although Grade A and B sales decreased by 34 per cent and 32 per cent QoQ respectively, there was an increase of 83 per cent YoY for Grade A transaction volume and 68 per cent YoY for Grade B.

Many factors contributed to high sales and price movement in Q1/2016, including seasonal variability, better construction progress, diversified product types, and flexible and prolonged payments offered by developers.

The office index for HCM City was 83.6 in Q1/2016, up two points QoQ and seven points YoY. The improvements were a result of increased occupancy at one percentage point QoQ and five percentage points YoY, and increased rent at one per cent QoQ and four per cent YoY.

The average occupancy reached an eight year high at 96 percent. Newly-launched Grade A and B in the central business district (CBD) performed well this quarter, leading to a yearly increase in both occupancy, at three percentage points, and rent, at four per cent. As a result, the CBD index rose one point QoQ and six points YoY.

Meanwhile, a three percentage points QoQ and seven percentage points YoY increase in occupancy was the main reason for a surge in the office index in the non-CBD by three points QoQ and nine points YoY.

In Q1/2016, total take-up of office space was approximately 26,400 sq.m, decreasing 54 per cent QoQ but increasing 176 per cent YoY. With growing demand, Grade A and B office rent is expected to increase in coming years. Savills expects the rent to rise about four per cent per annum over the next three years.

For Ha Noi, the residential index was 107.5, decreasing by less than one point QoQ, but increasing 0.2 point YoY. The overall absorption rate was 34 per cent, decreasing six percentage points QoQ and nine percentage points YoY, due to the usual effect of Lunar New Year holidays.

After high primary sales in the second half of last year, Q1/2016 declined sharply to 5,600 sales or 13 per cent QoQ, but unchanged YoY.

Grade B had the best performance at 66 per cent of sales with absorption of 37 per cent, a decrease of four percentage points QoQ. Grade A and C sales dramatically decreased by 61 per cent and 17 per cent QoQ respectively. Savills forecasts that the Ha Noi residential market will continue to stabilise in 2016.

In Q1/2016, the office index for the capital was 57.8 points, increasing 0.7 point QoQ and 1.8 points YoY. The increased rent across all grades was the main reason for the upward index adjustment.

The CBD index improved 2.6 points QoQ and 2.9 points YoY. Grade A recovered in both rent and occupancy as a result of limited vacancy in the CBD. In the non-CBD, stable occupancy and rent increases of one per cent QoQ led the index in the non-CBD to increase 0.7 point QoQ and 2.2 points YoY.

In 2016, the CBD will continue to perform well, with average rent forecast to increase seven per cent. The non-CBD is expected to face supply pressure, due to new projects and existing vacancies in the recently opened projects. — VNS