In a striking shift within the real estate market in Vietnam, affordable apartments have seen a significant price surge, defying expectations set by higher-end properties. This transformation, noted in multiple analyses, suggests a changing landscape for investors and renters alike.
Hoang Minh, a seasoned real estate investor based in Ho Chi Minh City, has had to revise his investment strategies in light of the evolving market conditions. "Just a few years ago, it was common to make a profit by simply placing a deposit on an apartment or land plot during the initial sales phase. But now, land plots in suburban areas are facing liquidity challenges," Minh explains.
To mitigate the risk of being overwhelmed by unsold properties, Minh has diversified his focus, pivoting away from speculative investments. Instead, he's now honing in on real estate assets that promise immediate cash flow. At the close of 2024, he acquired a one-bedroom apartment in District 7 for 2.5 billion VND and swiftly rented it out for 13 million VND per month. This decision illustrates a broader trend of investors seeking more secure returns amid market fluctuations.
The Vietnam Association of Real Estate Brokers (VARS) recently reported a remarkable turnaround concerning public perception of apartment investments. Historically deemed "liabilities," affordable apartments have started to reclaim their value, with the balance of supply and demand increasingly tilted toward these properties. The imminent increase in demand has allowed prices to rise, dwarfing those of other real estate segments.
As of 2024, the average rental rates across central urban areas are undergoing a renaissance, with increases of 10% to 20% observed. In bustling districts of Ho Chi Minh City, it's becoming increasingly difficult to find apartments renting for less than 10 million VND per month. The going rates now typically see one-bedroom apartments fetching between 10 and 15 million VND, while two-bedroom units command rental prices of 15 to 20 million VND.
However, the rapid escalation in apartment prices is also leading to larger economic implications. Notably, the rate of increase in rental prices is lagging, with rates rising only about half as fast as the overall price of housing. With many landlords forced to adjust rental rates upward to maintain profitability, the average profit margin from renting apartments in Vietnam has fallen to below 4%, with many hitting lows of under 2%. For many property owners, these returns are significantly lower than traditional savings interest rates.
This curious dynamic is resulting in a bustling market for secondary apartment transfers, as buyers search for better opportunities amidst a tighter primary supply. According to data from Dat Xanh Services, the current focus is on subsequent phases of pre-existing projects, with transfer prices differing by about 10% to 20% for these secondary units. Newly completed high-end projects are also seeing increases, with transfer prices escalating by 15% to 25%, reflecting current market demands.
Tran Hien Phuong, General Director of Seaholdings, notes that while there is a positive shift as cash flow returns to the market, buyer expectations have evolved considerably. Customers are now more scrutinizing than before, favoring projects that boast clear legal frameworks or completed establishments. Many investors now only consider secondary apartments if they come with proper documentation and are fully equipped with amenities.
Phuong continues, stating, "The market's liquidity varies by region. In some areas, despite significant price drops, transactions remain scarce. Meanwhile, in regions with genuine demand, prices are recovering quickly." This variability points towards a market increasingly focused on genuine needs rather than speculative investments.
As the local real estate scene continues to adapt, it reflects larger shifts in both socioeconomic patterns and investment habits in Vietnam. The future for affordable apartments now looks notably brighter compared to just a few years ago, echoing larger global trends in real estate.
With growing rents and escalating prices, investors like Minh are adjusting swiftly—proving that adaptability may be key in navigating the complexities of today's real estate market in Vietnam. As the landscape evolves, the growing prominence of affordable housing may provide a promising avenue for both renters and investors moving forward.
