Increased supply fails to deter apartment price spike
By Mong Binh - The Saigon Times Daily
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| The HCMC market sees apartment prices and office rent growing in the second quarter of the year - Photo Mong Binh |
HCMC – The average price of high-class apartments in HCMC leapt strongly in the second quarter of this year despite a significant rise in supply, according to property service firm Savills Vietnam.
Savills Vietnam said in its quarterly report that the average price of the whole market in the April-June period was quoted at US$1,370 per square meter, up nearly 40% from the previous quarter.
“The higher price is the result of a price increase for all grades,” Savills said in the report obtained by the Daily. Average Grade A price skyrocketed 68% as new projects in good locations in HCMC are demanding high prices, providing a new price benchmark.
“Due to a number of luxury products entering the market with much higher pricing such as New Pearl, Xi Riverview Palace and Diamond Island, the average price of new to market products in the second quarter is higher,” said Brett Ashton, managing director of Savills Vietnam.
Savills Vietnam estimated 11,200 primary apartments put up for sale in the second quarter, a quarter-on-quarter rise of 24%. Secondary supply was around 49,400 apartments, or 2,160 units more than the previous quarter.
The second quarter saw 14 new projects with about 3,100 apartments in the primary market, with Binh Tan, Binh Thanh and District 2 being the top three districts for primary supply. Districts 7, Binh Thanh and 2 remained the top locations for the secondary market.
The Grade A apartment segment fared better in the April-June period because of good sales performance by new projects and low sales performance in the first quarter when only 90 units were sold.
Savills Vietnam predicted 16 new projects with an estimated 5,800 apartments to begin sale phases in the second half of this year. There are 28,500 apartments to be completed from 2010 to 2012, with Tan Phu District expected to provide the largest new supply, accounting for 27% of the future supply.
The segments of offices and serviced apartments for lease also posted growth in both rent and supply, signaling the recovery of the market when supply is seen surpassing demand.
HCMC has 147 office buildings of all grades at the moment, with a total leaseable area of around 952,000 square meters, a 16% rise over the previous quarter. Savills Vietnam said 11 new office buildings with a combined 129,000 square meters began operation in the second quarter.
Vincom Tower, A&B Tower and Bao Viet Building contributed to a quarter-on-quarter increase of 20% in the supply in District 1 and helped the downtown area retain its biggest market share of 57%.
In spite of more supply, the average office rent for all grades and districts stood at US$32 per square meter per month, inching up 5% from the first quarter. The rate for Grade B offices grew up to 14% quarter-on-quarter.
The company said the office occupancy of 88% did not vary much quarter-on-quarter although 129,000 new square meters of all grades came online in April-June. The majority of office transactions occurred for small space, usually below 100 square meters, with Grade B still being a favorite option for existing companies as well as new investors who are keen on business in HCMC.
Savills Vietnam counted 20 office buildings with a total of 153,000 square meters would be available in the market by the end of 2010.
As for the serviced apartment segment, Savills Vietnam said there were 49 buildings of all grades, including 2,770 serviced apartments for lease in HCMC. Districts 1, 7 and 3 remain the top locations, accounting for a combined market share of about 82%.
The occupancy of 91% in the second quarter was unchanged compared to the first quarter but the monthly rent averaged US$24 per square meter, up 5% quarter-on-quarter. In this period, the Grade A rate was US$30 per square meter per month, a 2.7% rise over previous quarter and 4.2% year-on-year.