Apartment prices hit new peak, 'heating up' rental market in Ho Chi Minh City

Rental housing heats up due to lack of cheap supply

The May 2024 market report recently released by DKRA Group shows that in Ho Chi Minh City and neighboring provinces, there are 6 projects opening for sale, including 2 new projects and 4 projects in the next phase of opening, providing 1,327 units to the market. Compared to the previous month, the new supply decreased by 17% but increased 3.4 times compared to the same period in 2023.

Notably, 78% of the new supply is concentrated in Ho Chi Minh City, mainly in the luxury segment and in the East. In addition, the primary selling price of apartments also increased with the highest price of new supply recorded in Ho Chi Minh City reaching VND493 million/m2, the lowest being VND52.6 million/m2.

New supply and selling price recorded in DKRA report

With high prices and new supply continuing to focus on the luxury segment, the market has difficulty meeting the demand for housing, which is mainly concentrated in the affordable and mid-range segments. This is also a factor that has a significant impact on the rental market in Ho Chi Minh City, as many people decide to rent in central areas due to financial constraints.

In addition, the floating interest rate for home loans according to the market is still quite high, making many middle-income people almost afraid to borrow to buy a house and unable to choose a suitable product. Although many investors have introduced many support policies such as principal grace period, 0% interest rate up to 36 months, installment payment for 15 years... but still cannot solve the market demand because the house price is anchored high.

According to the Real Estate Consumer Psychology Report of Batdongsan.com.vn, the demand for renting apartments has been increasing sharply in recent years. The main reason why many young people have shifted from trying to save up to buy a house to renting a long-term house is partly due to the pressure of rising house prices in recent years. This trend is concentrated in the apartment type, accounting for 43%, followed by private houses and boarding houses (both accounting for 18%).

“If in the second half of 2023, the factor of not having enough money to buy a house accounted for 26% of the reasons for renting, then in the first half of 2024, not having enough money to buy a house became the main reason why people chose to rent a house, accounting for 33%,” said Mr. Nguyen Quoc Anh, Deputy General Director of Batdongsan.com.vn.

Data from this unit also shows that in the first 4 months of the year, the demand for renting apartments in Ho Chi Minh City recovered positively and almost grew steadily over the months. Specifically, in the first quarter of 2024, the number of searches for renting apartments in Ho Chi Minh City increased by 29%, and for boarding houses increased by 33% over the same period. In particular, the demand for renting apartments in Binh Thanh, Tan Phu, Binh Tan and District 7 increased sharply by an average of 41-55% compared to the previous quarter.

Apartment rental prices in some projects have increased sharply recently.

With the increasing demand, the rental price of apartments, serviced apartments or boarding houses has increased significantly. Actual records show that in some apartment projects in areas far from the center such as Binh Chanh, the rental price has reached 9-15 million VND/month for a 2-bedroom apartment from 50-80m2, an increase of nearly 20% compared to before. Some areas closer to the center such as Binh Thanh district, the rental price of apartments also fluctuates from 20-40 million VND/month for a 2-bedroom apartment, fully furnished.

Similar to serviced apartments, some buildings in District 7 are offering studios or duplexes for rent at prices ranging from 6-8 million VND/month, while the living area is only 25-40m2 depending on the design.

Apartment profit margins remain attractive

Although rental prices and demand are both increasing, the profit margin of apartment buildings in Ho Chi Minh City is still lower than that of Hanoi and neighboring localities such as Binh Duong and Long An . In addition, in the first period of 2024, the profit margin of this type has decreased quite sharply compared to the same period last year. Specifically, data from Batdongsan.com.vn shows that the profit margin of apartment investment in Ho Chi Minh City is 3.9%, much lower than the level of 4.5% in the first quarter of 2023.

The reason is the difference between the selling price and the rental price of apartments. While the selling price increases rapidly, with an increase of 3-5% per quarter, the rental price only increases from 5-10% per year. Especially when the Ho Chi Minh City market also records a large amount of new supply in the luxury and high-end segment, increasing the average selling price in the whole market.

However, many experts believe that apartments are still a stable investment channel during a period of market fluctuations. Especially at the present time, when the real estate market has not yet overcome its difficulties, many investors launching attractive policies such as 1-2 year rental commitment or sub-leasing support... is also an advantage to help investors increase their profit margin while waiting for the asset to increase in price.

Mr. Le Bao Long, Strategic Director of PropertyGuru Vietnam, said that in the long term, apartments for rent are still an attractive investment channel because they have a high average profit rate (combined price increase over time and rental profit), averaging about 12.5%/year. This is a better and more stable profit rate compared to many other investment channels such as stocks, gold, foreign currency, land, savings, etc.

Source: https://www.congluan.vn/gia-can-ho-chung-cu-lien-tuc-lap-dinh-lam-tang-nhet-thi-truong-cho-thue-tai-tp-hcm-post298719.html