My child passed the university entrance exam and has 2 billion VND. Should I buy an apartment or save and rent a house?

Ms. Hai Anh's daughter ( from Nam Dinh ) has just been accepted into a university in Hanoi and is preparing to enroll. Her family is considering whether to rent a house or buy an apartment for her.

According to Ms. Hai Anh, her family currently has 2 billion VND deposited in the bank. She and her husband are wondering whether they should continue saving and use the interest to rent a house for their child each month, or use the entire amount to buy an apartment.

With interest rates falling and apartment prices constantly rising, many parents are wondering whether it's a good idea to spend money buying an apartment for their child who has just been accepted into university at this time.

Speaking to VietNamNet reporters, Mr. Ngo Thanh Huan, CEO of FIDT JSC – a company specializing in investment planning and asset management in Vietnam – said that first and foremost, one must assess whether their current cash flow is in surplus or deficit; the cash flow related to their children's education; and the family's asset portfolio.

If your monthly income is 60 million VND, and your family expenses are 30 million VND, leaving you with 30 million VND, then renting an apartment for 7-8 million VND is perfectly normal.

But if your income is only 40 million VND/month, and your living expenses are 35 million VND, leaving you with only 5 million VND, that's not enough to pay rent.

With money readily available, many people wonder whether they should buy an apartment or save it and rent a place for their children to go to university?

According to Mr. Huan, if someone has 2 billion VND and decides to buy an apartment, should they borrow more money, given that interest rates at some major banks and foreign banks are currently fixed at 8-9% for 1-2 years? This is a very good interest rate for typical real estate.

"For most real estate segments in Vietnam, if you borrow to buy, you should borrow at an interest rate below 9%. With this interest rate, it's not necessary to use the entire 2 billion VND you have available," he said.

According to the analyst, apartments have the best appreciation potential in the first 3-5 years of ownership. From the 6th year onwards, apartment growth slows; by the 8th year, the price increase is only around 4%.

Apartments offer two sources of profit: price appreciation and rental yield. Rental yields range from 4-6%, with smaller apartments generally yielding higher returns. Only apartments priced under 3 billion VND achieve rental yields around 6%; while those priced above 3 billion VND achieve yields of approximately 4.5%.

In terms of value, according to Mr. Huan, apartments, when new, can appreciate in value by 6-9% in the first few years.

Thus, with a return of 6-9%, plus a rental yield of 4-5%, the average return on an apartment under 3 billion VND will range from 11-14% per year.

"If cash flow is stable and you have a moderately sized real estate portfolio, around 70%, then you can still buy more real estate, such as apartments."

"If you're going to buy, you should buy an apartment that's less than 3 years old since handover; anything over 6 years old is not recommended. In particular, prioritize apartments with a total value under 3 billion VND, and even better, under 2 billion VND. The reason is that the market has proven that the lower the value of the apartment, the better the liquidity and price growth, and the higher the rental yield," the FIDT expert added.

Based on that analysis, Mr. Huan believes that the return on investment for new apartments, around 11-14%, is significantly higher than savings interest rates.

According to his assessment, in 2024, deposit interest rates may decrease slightly or remain stable, while an increase is highly unlikely. Given the current interest rate levels, deposit interest rates are likely to fluctuate around 5.5 – 7.5% for a 12-month term.

Compared to the total profit generated from apartment rentals and price growth, Mr. Huan suggested that buying an apartment would be more suitable for the period of 2023-2024.

The ideal time to buy real estate for actual living needs, such as an apartment, is the end of 2023 – a "golden opportunity".

In the case of Ms. Hai Anh, whose family currently has 2 billion VND, experts suggest that buying an apartment in this price range, either newly handed over or 1-2 years old, would be better than putting the money in a savings account.

“A 2 billion VND apartment yields a 6% rental return, equivalent to bank deposit interest; not to mention the potential for price appreciation of 6-9% annually. Furthermore, this year marks the 'bottom' for apartment prices, so further reductions are impossible. Market analysis reports indicate that in 2023, only apartments priced above 70 million VND/m2 or with a total value exceeding 6 billion VND will see price decreases.”

"As for apartments priced under 3 billion VND, the price will absolutely not decrease, except for those that are over 8 years old. New apartments, even those with lower values, will all increase in price. Therefore, when the market recovers, this group of apartments will increase in price even further," Mr. Huan said.

According to him, current investment trends and performance both suggest that buying an apartment is a better option than putting money in a savings account to earn interest and then renting.

Based on the expert's analysis, Ms. Hai Anh and other parents with similar concerns can consider their financial situation, cash flow, assets, asset structure, etc., to make an informed decision.

With 500 million VND, should you buy gold or deposit it in a bank savings account? Which is more profitable? With deposit interest rates continuously falling, many people with 500 million VND in idle funds are wondering whether they should still deposit it in a savings account or withdraw some of it to buy gold at this time.

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