Reasons for high apartment rental prices

Apartment rental price trend is increasing

According to Nhan Dan newspaper , apartment rental prices are increasing. Accordingly, apartment rental prices in Hanoi have recently tended to increase, especially in districts near or in the center.

The common increase is about 1-3 million VND/apartment/month, equivalent to an increase of 10-30% compared to early 2022. The dream of settling down has become distant when real estate prices have skyrocketed. Now, the price of rental apartments has also increased while income has decreased in recent times, putting even more pressure on low-income workers.

According to Cong Ly , in June 2023, the rental price of some apartments on Nguyen Tuan and Nguyen Huy Tuong streets (Thanh Xuan, Hanoi) increased from 9-10 million VND/month to 11-13 million VND/month (a 3-bedroom apartment costs up to 16 million VND). In apartments such as The Pride and Anland Nam Cuong (Ha Dong, Hanoi), Gamuda (Hoang Mai, Hanoi), the rental price increased from 1-3 million VND/apartment/month.

Real Estate - Reasons for high apartment rental prices — Apartment rental prices are still rising. Illustration photo from the internet

According to information from Cafebiz , recently, at some apartment projects in Ho Chi Minh City such as Akari City (Vo Van Kiet Street, Binh Tan District, Ho Chi Minh City); Flora Mizuki cluster (Binh Chanh, Ho Chi Minh City), the apartment rental situation is quite good. With rental prices from 8 - 14 million VND/month for apartments with an area of 56 - 80m2, many people are asking to rent. In particular, newly handed over apartment complexes receive more rental interest than clusters that have been handed over for a long time.

Similarly, Phu Dong Premier apartment complex (Di An, Binh Duong ) handed over in 2020, currently has a rental price of 11 million VND/apartment/month (fully furnished) and there are almost no products left to rent. According to the sales department of this unit, recently the demand for apartment rentals has increased significantly. The current rental price is about 10% higher than last year. Real customers prioritize looking for apartments near the center, easy to travel.

At the Fiato City apartment project (Nhon Trach, Dong Nai ) being introduced to the market, it is currently receiving a large number of customers asking to buy for investment in renting or accumulating assets. Meanwhile, in the previous phase, projects in the area were mainly for investment in buying and selling or surfing.

It is noted that many high-end apartment projects for rent in District 1, Binh Thanh, District 4 and District 2 (old) have adjusted their rental prices since the end of 2022. Specifically, apartments for rent in Binh Thanh District such as Vinhome Central Park, Sunwah Pearl, City Garden, Saigon Pearl... have rental prices of about 17-30 million VND/m2/apartment with 1-3 bedrooms.

With luxury apartments for rent in District 4 such as The Tresor, Riva Park, The Gold View… the rental price ranges from 16-40 million VND/month.

Along with that, some mid-range projects also increased rental prices. Apartments for rent in Thu Duc City such as D'Russo, Precia, Centana, Sun Avenua... in March 2022 had rental prices from 7-15 million VND/month, but now they have been adjusted to the lowest level from 8.5-18 million VND/month. Some affordable projects with rental prices from 5-8 million VND/month have also been adjusted to increase to 6.5-10 million VND/month for apartments with an area of 48-60m2.

Rising selling prices cause rental prices to rise

According to Cong Ly , the reason why apartment rental prices are constantly climbing, according to experts, is because house prices are constantly increasing, so renting is the solution chosen by many people.

Mr. Dinh Minh Tuan, Director of a real estate trading website in the Southern region, analyzed that many customers do not have enough money to buy a house so they will rent, or some groups rent and then sublet to serve domestic tourism.

In addition, according to this expert, some units will reduce their working model in 2022, and return to the market in 2023, renting small areas of 50-70m2 in the centers to work.

On the other hand, Mr. Tuan said that the increasing urbanization trend, the large number of immigrants to the city center led to an increase in the demand for renting apartments and boarding houses; the rental market became more vibrant than before.

In fact, in the context of skyrocketing housing prices, the dream of owning a home for low-income workers is increasingly distant. Rental apartments have become the only "salvation", but now rental prices are also constantly escalating, causing heavy pressure.

In that context, many experts believe that the Government and localities need to quickly find solutions to remove and "untie" businesses to promote the affordable housing segment. Along with projects for sale, there needs to be solutions to increase the number of rental houses that meet standards in both quality and price.

According to Cafebiz , the liquidity of the real estate market is weak, housing prices are high and interest rates for home loans are increasing, forcing many people to switch to renting. Many investors are also switching to investing in apartments for rent. High demand leads to an increase in apartment rental prices.

According to data from Batdongsan.com.vn, 49% of brokers consider apartments for sale/rent as the most potential type of real estate in 2023. In the first month of 2023, the average rental price of apartments in Ho Chi Minh City increased by 8% compared to the same period in 2022. Currently, the average rental price is about 13 million VND/month. In particular, 2-bedroom apartments are notable for meeting a diverse customer base from households to single people with good incomes, foreign experts, business managers, etc.

According to Vietnamplus , experts from Cushman & Wakefield Vietnam (C&W) commented that the apartment market in Hanoi is currently moving towards real estate demand.

Long-term investors also have a great demand for the mid-range apartment segment. Projects with more flexible payment schedules, located in developed urban areas, with rich facilities and amenities, will attract more attention from buyers.

According to C&W's forecast, in the period from Q4/2022 to 2025, the future supply is expected to reach about 103,000 units. Projects such as Dong Anh Smart City, An Lac Green Symphony and the remaining unsold units of Vinhomes Smart City, Vinhomes Ocean Park are expected to dominate the expected future supply.

There are also some trends in the market, typically the social housing segment is forecast to focus on development to meet the great demand of workers, laborers, and low-income people. Specifically, there will be about 1,215 million m2 of social housing projects in Hanoi provided by 2025.

Payment methods will also be easier as many investors offer high discounts for quick payments (from 9-13%) or attractive incentive programs are launched to "stimulate" the market.

Dao Vu (T/h)

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