Although condominiums are constantly increasing in price, some experts believe that the profit from investing in this real estate product depends on the time and duration of the investor’s investment.
In the context of the difficult real estate market, many market research units assess that the condominium segment is least affected by negative impacts because this type serves real estate demand. However, the imbalance and scarcity of supply make apartment prices anchor high.
Information about the real estate market in the third quarter, the Ministry of Construction said that in Hanoi, the average selling price of newly launched apartments in the primary market increased by nearly 7% quarter-on-quarter, up 14% year-on-year and reached about 50.8 million VND/m2.
According to the Ministry of Construction, this price increase is due to the overwhelming proportion of new supply in the high-end segment (over 90%). Along with that, some investors have increased prices and opened more goods on higher floors.
Apartment prices in many apartment buildings in Linh Dam urban area (Hoang Mai, Hanoi) have increased in price rapidly in recent times.
In Ho Chi Minh City, in the third quarter, the primary selling price of the Ho Chi Minh City apartment market in the third quarter reached more than 60 million VND/m2. On the secondary market, the average apartment price reached 45 million VND/m2, up 3% compared to the previous quarter.
Faced with developments in the apartment market continuously reaching peaks in many areas in Hanoi, many investors also question whether they will continue to invest in this real estate segment?
Answering the above question, financial expert, Assoc. Dr. Dinh Trong Thinh – lecturer of the Academy of Finance – said that, unlike ground houses with too high rental prices, apartments for rent are suitable for the vast majority of people with decent incomes because of the moderate price.
“When investing in apartments, it is very easy to sublease and rent at high prices”, Mr. Thinh commented on the biggest advantage of apartment real estate products.
In addition, the living space and amenities of apartments will almost be better than ground houses, townhouses. If there is no business need, tenants will prioritize the option of renting cheap apartments and mini apartments.
“Living in high-rise apartment projects, residents will enjoy the facilities of good facilities and infrastructure. Therefore, the return on investment in apartments increases more than other types is understandable”, the expert emphasized.
From an investor perspective, Nguyen Van Thuan, director of a real estate brokerage office in Hanoi, said that the profitability of investing in apartments depends on the time of investment.
According to Mr. Thuc, in the normal market state, buying apartments before handing over is a time when it brings a lot of profit to investors. And after the project tops out or as soon as it is handed over, the buyer can transfer and have a profit ranging from 25-50% of the value of the money paid to the investor.
If the investment is determined to be 3 years or more, investors can expect the condominium to achieve a price increase of 10% a year. However, the price increase of the apartment will gradually decrease the longer the investor holds, due to the deterioration of the building. However, the point to compensate for the profit is that the apartment after handover also generates cash flow with a rental efficiency of about 5% a year.
Although there are many factors that bring profits, but with apartments, this expert said that it is also risky for investors to buy apartments in apartment projects formed in the future. That is what they have to face is that the investor does not complete the project on schedule, resulting in the buyer being buried capital in the project for a long period of time.
“If investors buy apartments in the secondary market of the handed over condominium project, it is difficult to achieve the expected profit. Because currently, the price of apartments in the market is quite high, while new projects are almost nonexistent”, Mr. Thuc shared.
