Want to invest need at least 1.5 billion dong?

While many real estate segments remain sluggish, apartments in Hanoi are witnessing continuous price increases, maintaining a 13% annual growth rate. The average rental price for apartments in Hanoi increased by 4.5% over the past year.

According to Mr. Tran Quang Trung, Business Development Director of OneHousing, investing in rental apartments in Hanoi remains an attractive investment channel at this time.

Apartment for rent with huge profit potential, investment required at least 15 billion VND (image 1) — Mr. Tran Quang Trung, Business Development Director of OneHousing. (Photo: ML)

With falling bank interest rates and various policies promoting recovery, the real estate market is beginning to receive a return of capital. Investors are placing a significant portion of their capital in rental properties. In your opinion, what are the reasons to believe that this investment channel will yield long-term profits?

- According to the 2019 census data, the population of Hanoi is projected to increase by an average of approximately 200,000 people annually, equivalent to the population of a large district. The majority of these people rent houses, creating a high demand for rental housing in Hanoi. Also as of 2019, Vietnam had nearly 120,000 foreign workers, and this number is growing at an average rate of 17% per year.

The average apartment rental price in Hanoi is around 10 million VND/month, an average increase of 4.5% compared to the same period last year. This clearly indicates a bright outlook for the apartment segment, as supply is currently less than demand.

Apartments are currently experiencing good rental demand; however, there is still a view that buying an apartment is a depreciating asset that will gradually lose value in the future. Do you agree with this view?

- An investor in rental apartments is concerned with two issues: firstly, whether the capital value will increase in the future, and secondly, what the rental income will be like. Regarding price and price appreciation potential of rental apartments, Hanoi apartments have the highest rental yield among all real estate segments.

In Hanoi, the return on investment from renting apartments in 2022 was 4.4%, 1.7 times higher than the rental yield of street-front houses. In the western part of Hanoi, rental yields ranged from 5% to 6%.

With this rate of return, apartment owners avoid the inflation rate of around 4-4.5% per year that would occur if they held cash, and also profit from the percentage increase in capital value in the future. For example, in Hanoi, from 2018 to 2022, apartment prices increased by an average of 13% per year.

Based on your observations, which areas in Hanoi currently have good rental potential? What are the reasons?

- The western area is attracting a large number of tenants, notably buildings within Vinhomes Smart City, with a rental yield of approximately 5.5%, higher than the market average (around 4.4%). This indicates that the rental income from this large urban area is higher than other projects in the region.

The Western region's strong growth is due to several factors. Firstly, the government is approving all agencies and ministries related to the Western region. The US Embassy complex, with an investment of $1.2 billion on Pham Van Bach Street, also commenced construction in April 2023. In the future, representative offices of units related to the US will be concentrated in this area.

In the western area, some of the most sought-after projects in the rental segment are located here. Many foreign tenants are willing to spend $1,000-$2,000 on accommodation, which wouldn't be a major issue.

Typically, areas with a high concentration of foreign tenants tend to have better rental rates, which in turn drives up property prices in that area. And when rental prices increase, the value of real estate in that location also increases; that's the logic of residential real estate.

Apartment for rent with huge profit potential, investment required at least 15 billion VND (image 2) — To invest in rental apartments, customers should also have a minimum down payment of 1.5 billion VND or more. (Photo: CP)

Investors have varying financial capabilities. In your opinion, which type of apartment is easiest to rent out? How much capital does an investor need to invest in a rental apartment?

- Studio apartments and one-bedroom apartments are suitable for young single people, while one-bedroom plus and two-bedroom apartments are ideal for families with young children. For the more affluent, such as senior professionals, counselors, or CEOs who bring their families to work, villas and penthouses are a more suitable option. To invest in rental apartments, clients should have a minimum down payment of 1.5 billion VND or more. The required down payment will vary depending on the apartment's value and the amount of interior furnishings invested.

Among various forms of real estate investment, such as short-term speculation or long-term holding, why is investing for rental income the most suitable option at this time, sir?

- I believe this is still just a matter of customer expectations at different times. A smart investor knows that instead of putting all their eggs in one basket, they should diversify their investments. They should have long-term real estate investment products so that in the future they only profit from capital appreciation. But with this type of investment, the investor must buy real estate at a good price with clear legal documentation.

As for those who own several rental properties that generate monthly income, they have very clear goals, such as: using the money for their children's education, or for daily expenses in retirement, or for travel ... There are also those who have a very systematic investment mindset, such as building a series of apartments in multiple projects; each project with about 3-5 units to generate a monthly income of up to 300-500 million VND.

In real estate investment, it ultimately comes down to asset value. Only properties that generate cash flow are truly valuable. Therefore, it doesn't matter how much you own; what matters is how your property generates cash flow.

Thank you for the conversation!

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