Savills Vietnam has introduced the Savills Property Price Index (SPPI) - a tool for tracking quarterly price movement of different property markets.

The index offers market participants a quantitative way to determine market trends, helps to increase market transparency and provides more decision-making tools.

It also track sub-indices in which price movements in grades, location, development areas etc are measured on a quarterly basis.

For residential, the index is determined based on a sample of more than primary and secondary 200 projects in HCMC. For offices, the basket at Q3/ 2012 is comprised of 196 HCMC projects.

In calculating the index, Savills has applied the constant – dynamic basket.

The constant basket is maintained as price comparison between quarters, but new projects are included in the basket to ensure in-time reflection of the market dynamic.

The base period of the SPPI is set at Q1/2009 with two separate indices: QoQ (quarter-on-quarter) index and QoB (quarter-on-base) index.

By calculating and benchmarking the two indices against each other as well as other indicators, analysts can have an in-depth understanding of market variables and their impact on price movement.

The QoQ index is based on the aforementioned constant - dynamic basket and is able to measure price changes on the continuous growth of the market above the base. i.e. the entrance of new project(s).

The QoB index is a more static measurement and is calculated from the fixed basket of the base quarter as it measures price changes of one specific quarter compared to the base quarter. The QoB index minimizes the impact of market dynamics on price trend.

Savills has applied a “liquidity ratio” to adjust the asking price to transacted price discount. This ratio is sensitive to market conditions and therefore, can itself be a useful parameter in evaluating market performance.

Residential, office index on a slide

The QoQ SPPI of Q3/ 2012 stood at 90.6, a slight decrease of -1.7 index point compared to the last quarter. Overall, the QoQ index has decreased by approximately -14 percent since its peak of 105 in Q3/2009.

Meanwhile, the market average price (including new projects) decreased at a faster pace of -23 percent during the same period. This illustrates that the decrease in market price mainly comes from the entrance of new projects rather than price correction of existing projects.

The QoB index has substantially increased during the period 2004 – 2009. Market immaturity and speculation are the main reasons for this strong growth during this period. Since Q1/ 2009, QoB index has been stable then slightly decreasing recently. This may be an indication of market adjustment toward end-users.

The QoQ office index sharply increased from 2006, peaking in Q2/ 2008. After a sudden drop in the two following quarters, the market continued its upward trend although at a steadier rate.

On the other hand, the dynamic basket office index shows a contrast as it has steadily decreased since 2008. This demonstrates that the market dynamic is sensitive to the entrance of new projects.