“In contrast to many people’s concerns at the end of the first quarter about the macro economy and its impacts on real estate market, the second quarter has actually been encouraging,” Matthew Powell, Hanoi branch director of Savills Vietnam, remarks in a statement sent to the Daily last week.

Given the positive economic signals, the real estate market has turned active during the second quarter of this year, when important fluctuations have been adjusted in time by the market at the end of the quarter, he notes.

The market research company says performance of Hanoi’s office for lease market was stable compared the previous quarter with average occupancy achieving better results. The average occupancy increased to nearly 87%, or a rise about two percentage points compared with the previous quarter. Meanwhile office rent saw a decline of about 4% compared with the first quarter of this year.

According to Savills, there are some 640,000 square meters of total office space in the capital city of Hanoi, contributed by 95 office buildings across all grades, in which nine more office buildings entered the market in the quarter providing about 28,600 square meters of additional office space.

Demand for office space is increasing partly because many companies are expanding their scale of business and recruiting more employees. There have appeared demands for larger office space, 500 to 1,000 square meters, in the market. Office take-up by Grade A increased steadily while Grade B continued to decrease compared with the previous quarter.

Savills projects that in the next four years, nearly 1.8 million square meters of additional office space from about 130 projects would come online, most of which is outside the central business districts.

“Oversupply of office space is anticipated to significantly affect the office market in the next few years,” says the company’s report.

Rental rates are expected to remain stable for office buildings in the central business district area in the remaining quarters of this year; however, greater competitive pressure on rents is expected for the area west of Hanoi because a large new supply is to be launched into the market in the coming time.

In another segment, the apartment for sale in Hanoi was quieter in the primary market during the second quarter. This was reflected by a lower number of units sold, 670 units, accounting for 48% of the primary supply compared to around 1,200 units in the previous quarter.

The total primary supply in the second quarter is 1,400 units, provided by thirteen active projects in nine districts, in which Tu Liem District alone accounts for nearly half of the primary supply.

The market research says investors have created a significant demand for the apartment for sale market, as property has seen a safe and attractive investment channel, especially after the closing of all gold trading floors as of the end of this year’s March.

There is a new supply of 2,900 units from five projects to enter the primary market in the next quarter, and it is expected to see a new supply of over 1,500 units from nine projects in the final quarter of this year. In addition, an estimated 26 projects may enter the primary market by 2011 with over 11,800 units and an amount of apartments from the new urban areas is expected.

Savills says demand from overseas Vietnamese may not make a significant increase in sales in the short-term, but it is expected to increase considerably in the coming time, which may increase the demand for medium- and high-end residential real estate.

In another segment, the retail space market witnessed a good performance in the second quarter with average occupancy rate increasing to approximately 95%, up 3% against the previous quarter of this year. Rents in the central business districts stayed high, from US$40 to US$150 per square meter.

Savills projects that demand for retail would continue to increase in the central business districts, expanding strongly to the secondary area while the suburban area will experience a slower growth in the short and medium term.

There are some 62,100 square meters of retail area from nine projects to be launched onto the market in the latter half of this year, and there will have approximately 1.1 million square meters of retail space from 81 projects supplied to Hanoi’s retail market by 2013.

It is expected to see the property market supported in the coming time given positive economic signals, outstanding loan for property segment on the upward trend and lending rate on downward trend.

The Saigon Times Daily