Apartment rental market cools down

After a period of hot growth, the apartment rental market in Ho Chi Minh City has begun to cool down.

According to a survey by market research companies, in the first months of 2023, the real estate market in Ho Chi Minh City is still in a state of lack of liquidity, along with the economy facing many difficulties. In this context, many people choose cost-saving solutions, so the apartment rental market is also facing difficulties. Many tenants accept to give up rooms in the central area - where costs are expensive and large apartments with high rents - to move to the suburbs, or switch to smaller apartments, or even rent rooms to save costs.

In fact, from the second quarter of 2023, many businesses and tenants have chosen to change their accommodation to save costs. Others are unable to "stay" in the central area of Ho Chi Minh City in the context of economic difficulties, businesses have cut staff and returned rented rooms. This makes landlords struggle to find new tenants.

Ms. Hang (owner of an apartment for rent at the Cityland Park Hills project, Go Vap district, Ho Chi Minh City) said: "My apartment has an area of 110 square meters with 3 bedrooms and is rented to an old tenant for 18 million VND/month. However, a month ago, the tenant suddenly announced that he would vacate the house, forcing me to find a new tenant. After a whole month of announcing that the apartment was for rent but still could not find a tenant, I was forced to reduce the price to 16 million VND/month with the hope of not leaving the house empty for too long."

Real estate market research report data from Batdongsan.com.vn shows that in the first months of 2023, the demand for renting apartments in Ho Chi Minh City tends to decrease after a period of continuous increase at the end of 2022. Specifically, the number of searches for renting apartments in inner-city areas such as districts 3, 4 and Binh Thanh recorded a decrease of 33%, 37% and 11% respectively. Suburban districts with abundant supply of apartments for rent such as districts 2, 7 and district 9 also tended to decrease sharply by 21%, 24% and 35% respectively compared to the end of 2022.

Not only has rental demand decreased, the increase in apartment rental prices in Ho Chi Minh City has also slowed down. Apartment rental prices in some districts: Binh Thanh, 3, 7 and District 9 remain the same, even decreasing slightly in some large apartments. Apartment rental prices in District 2 alone recorded a decrease of nearly 10% compared to the previous quarter and District 4 was the only area with apartment rental prices increasing in the last quarter, an increase of 6% compared to the fourth quarter of 2022.

However, the rental profit of apartments in Ho Chi Minh City is still on the path of recovery. Accordingly, the profit margin of investment in apartments for rent in Ho Chi Minh City in the first quarter of 2023 was recorded at 4.4%, an increase of nearly 0.3% compared to the rental profit level in 2022. It is expected that from now until the end of 2023, the rental profit margin of apartments in Ho Chi Minh City will gradually recover and will reach the level of 2020 (about 4.9%).

According to economic experts, the apartment rental market in Ho Chi Minh City has shown clear signs of recovery after the impact of the Covid-19 pandemic, with the return of foreign visitors coming to travel , work or work. Specifically, compared to 2022, apartment rental prices in District 2 increased by 15%, while rental prices in District 1, Binh Thanh and District 7 increased by about 10%. However, the average apartment rental price in Ho Chi Minh City in general is still lower than the pre-pandemic level in 2019, partly due to the impact of the economic situation.

Mr. Dinh Minh Tuan - Director of Batdongsan.com.vn Southern Region believes that in 2023, real estate buyers, especially those buying apartments, will not only focus on price and discount factors but also consider more the commercial exploitation of assets - real estate. It is forecasted that in the fourth quarter of 2023, the profit margin for apartment rentals in Ho Chi Minh City will return to 4.7% - 4.9% as before the pandemic. Thanks to that, the demand for investment in this apartment segment will also increase again, pulling liquidity out of the gloomy situation in the near future.

"Investment cash flow in 2023 will be directed towards products that can be exploited for rent such as apartments, townhouses and factories for rent. This real estate group has easy access to loans and is safe in the context of the real estate market not really balanced. In the last months of 2023, apartment rental prices in Ho Chi Minh City may increase by 4-6%, accordingly, the rental profit margin will also increase" - Mr. Dinh Minh Tuan commented.

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