The office-leasing market in Ho Chi Minh City continued to improve in the second quarter and rentals are expected to remain stable for the next two quarters. Chesterton Petty said both leasing activity and rentals reaped moderate gains but an oversupply situation persisted. With the government recently allowing licensed insurance companies to be 100 per cent foreign-owned, the insurance sector had been extremely active in leasing larger office accommodation and planning further expansion, it said. This trend was expected to persist for at least the next 12 months. Chesterton Petty said multinational technology firms were entering Vietnam at a rapid pace, with an eye to establishing strategic locations for software development. These companies would increase demand for office space. Landlords were offering fewer rental concessions with quality space dwindling and demand strong, implying upward pressure on rentals, it said. Activity in Ho Chi Minh City's residential leasing market remained at a low level in the second quarter but the expansion of foreign insurance companies was expected to boost the demand for housing to accommodate expatriates. Chesterton Petty said the establishment of offices by technology companies should also raise the take-up of luxury apartments. The fact that no major projects would be completed within the next three years should help reduce oversupply and further stabilise rentals. However, persisting restrictive government regulations continued to discourage foreign investment and constrained the further expansion of the residential leasing market, it said. In Hanoi, the office-leasing market also improved with slightly quicker take-up in the second quarter and overall vacancy rate was down from 26 per cent in the first quarter to 23 per cent, according to the consultant. Rentals ranged from US$12 per square metre, including value-added tax and service charges, for larger tenancies or off-central locations to US$30 per sq metre for smaller tenancies in the city centre. Chesterton Petty expected rentals and incentives to firm further this year as several larger commitments were under negotiation. Business optimism was improving moderately as more companies were expanding, but they were mostly seeking budget accommodation.