Apartment real estate, meeting real demand, especially the affordable and mid-end segments, is increasingly attractive to investors when rents and selling prices are continuously increasing and show no signs of stopping.
Apartment prices increase continuously
Apartment prices have continuously increased over the years, despite the general difficult context of the entire real estate market. Accordingly, while the new real estate market is “toddling” to find the “bottom” in the last months of 2023, the real estate segment serving real estate demand, especially the type of apartments has recovered, welcomed the growth wave again, even maintained the momentum throughout the difficult market period.
Specifically, research data of the Vietnam Association of Real Estate Brokers (VARS) shows that, over the past years, on average, apartment prices have grown by double digits each year. In 2023 alone, the apartment price index in Hanoi at the end of 2023 has increased by 16 percentage points compared to the beginning of the year.
Meanwhile, this index in the Ho Chi Minh City area has also entered the growth cycle again from Q3/2023, thanks to the gradual decline in prices in high-end and luxury projects in the secondary market. The average primary selling price of apartments nationwide is also anchored high when the new supply to the market is mostly products priced at over 40 million VND/m2, there are almost no affordable apartment segment projects.
Apartment projects in cities are constantly establishing new price levels, rents of old and new apartments in residential areas are constantly increasing. Especially since the mid-2022 period, when leases during the peak of the pandemic – matured and were renewed if the two parties continued to be in demand. Many apartments have increased in price by up to 40% compared to the peak of the pandemic, and by about 20% compared to mid-2022.
Information from VARS said that apartment rents in Hanoi have increased relatively strongly in recent years, especially in the studio type (1-bedroom apartment) with a profit margin up to twice higher than that of apartments with larger areas.
Specifically, in Long Bien district, studio apartments are being rented at a price of 7-8 million VND/month, which has increased by 10-15% over the same period last year and about 30-40% compared to 2022. 2-bedroom, fully furnished apartments have higher prices, with a lower increase, about 10% over the same period, to about 10-11 million VND/month.
In Greenbay Me Tri project (Nam Tu Liem), fully furnished studio apartments are currently for rent for about 10 million VND, 2-bedroom apartments range from 14-16 million VND, up more than 15% over the same period. Rental apartment prices in other districts also recorded similar increases.
Similarly, in Ho Chi Minh City. In HCMC, apartment rents have also started to tend to increase slightly in recent years, especially in the inner city, popular from 500 thousand to 1 million VND/month. Although before that, in mid-2023, apartment rental prices in Ho Chi Minh City. HCMC remained the same, even slightly reduced in some apartments with large areas after the “step” of rents increased sharply at the end of the epidemic.
For example, the rental price of a one-bedroom apartment in Vinhomes Golden River in District 1 has increased from 15 million VND/month to 20 million VND/month when the old contract just expired. The new price has just been announced by the landlord, immediately there are tenants. Outlying projects such as Sunrise Riverside, New Saigon (Nha Be district)…. also increased the price of rental units with a massive increase in tenant demand.
VARS forecasts that apartment prices are forecast to continue their upward trend, around 10% for at least another year, when there is more supply of affordable housing.
Many young people choose to rent a house
Renting is chosen by many families, as high anchor apartment prices make home ownership increasingly difficult for the vast majority of people. Although interest on loans, including home loans have fallen. However, home loans and monthly repayments are still a burden for many families when people are not really confident in their future work and income situation due to the fluctuating economic situation.
Renting will continue to increase sharply, thanks to an increase in the number of foreign experts coming to Vietnam through FDI projects. Especially in the context of consumer trends that have changed a lot. When the Millennial-Z generation, accounting for 47% of Vietnam’s population, pays more attention to lifestyle, living environment, utility system to improve the quality of life. Most of them will choose to live in apartments with full utilities, a better living environment – something that residential housing at the same price cannot have. Renting is also the preferred choice of this generation.
Rental demand is still in an uptrend while available supply is in short supply due to the continuous decline in housing supply, especially apartments, causing rents to rise. VARS data shows that the supply of new apartments in the first half of 2022 reached over 22,700 units, less than half compared to the same period in 2021. More than half of the apartments being traded (purchased, sold, rented) on the market are apartments of previously offered projects.
The end of the apartment investment period is “consumption”
The constantly increasing price of buying, selling and renting apartments in recent years has also broken the stereotype of apartment investment as “consumption”. In the past, most people thought that apartments were an unprofitable type of purchase and sale, with only losses, while choosing to invest in residential real estate, having a land plugged in was the optimal solution because of its liquidity and high profitability. Currently, apartment investment and sublease have become a popular trend in big cities when both earning regular cash flow from monthly rentals – higher than savings, and benefiting from the possibility of price increases.
VARS forecasts that rental prices will continue to rise but at a slower pace. The prospect of the apartment market becomes clearer when production and business activities are gradually recovering, leading to a large demand for housing in big cities. Facing the challenge of escalating apartment rents, people wishing to rent in the long term need to make appropriate decisions.
With a stable income, the young generation can choose to buy apartments with reasonable and safe installment policies. Especially, in the market, some large developers have started to launch policies to help young people buy houses with installment costs equivalent to rent. By committing to a maximum interest rate cap, homebuyers will avoid the “risks” associated with floating interest rates.
