Rental trends will continue to increase

According to Nguoi Lao Dong, after a year of economic challenges in general and the real estate market in particular, for many people, renting a house has become a mandatory option and is no longer an option.

The report on real estate consumer trends and psychology (CSS) of Batdongsan.com.vn has just been published, giving the above opinion.

According to this report, in the second half of 2023, among the three common reasons for people wanting to rent a house, "prioritizing flexibility" accounts for 38%, "not wanting to buy a house because the price is not reasonable" accounts for 29% and "not having enough money to buy a house" accounts for 26%.

Based on the survey, the report also forecasts trends and consumer psychology of real estate. Accordingly, in the first half of 2024, "not having enough money to buy a house" will continue to be the leading reason why people choose to rent a house, accounting for 33%. Meanwhile, the motivation to rent a house because of "prioritizing flexibility" will decrease, to only 27%.

The survey shows that the trend of renting houses due to financial constraints is expected to increase in the first half of 2024. Of which, apartments are the type of real estate that most renters are interested in (43%), followed by private houses (18%) and boarding houses (18%). Only a small number (9%) are interested in townhouses for rent.

Mr. Le Bao Long, Strategy Director of Batdongsan.com.vn, said that most Vietnamese people are only willing to spend 10% - 30% of their income on rent each month.

According to Mr. Long, currently, the average rental price for boarding houses in Hanoi and Ho Chi Minh City is 3.5 - 4.8 million VND/month, while the rental price for apartments is 12.5 - 13 million VND/month. This means that for a person/household to have enough money to rent a house, their total monthly income must be from 15 - 20 million VND if choosing a boarding house and 30 - 40 million VND if renting an apartment. This is not a low income level for the majority of Vietnamese people. Therefore, the high rental price level is an obstacle for people.

According to Kinh te & Do thi , when high apartment prices make home ownership increasingly difficult for the majority of people, renting is the choice of many families. Although loan interest rates, including home loans, have decreased. However, home loans and monthly repayments are still a burden for many families when people are not really confident in their future job and income situation due to the fluctuating economic situation.

According to VARS, house rentals will continue to increase strongly, thanks to the large increase in the number of foreign experts coming to Vietnam through FDI projects. Especially in the context of many changes in consumption trends. When the Millennial-Z generation, accounting for 47% of Vietnam's population, focuses more on lifestyle, living environment, and utility systems to improve the quality of life. Most of them will choose to live in apartments with full amenities and a better living environment - something that residential land with similar prices cannot have. Renting a house is also the priority choice of this generation.

Rental demand is still on an upward trend while available supply is lacking due to the continuous decline in housing supply, especially apartments, causing rental prices to increase. VARS data shows that the supply of new apartments in all segments in the first half of 2022 reached over 22,700 units, less than half compared to the same period in 2021. More than half of the apartments being traded (bought, sold, rented) on the market are apartments from previously offered projects.

Rental price of restored apartment

According to Tien Phong , according to a report by Savills World Research, similarly, with regional markets, the increasing trend of rental demand for serviced apartments has been recorded in Hanoi and Ho Chi Minh City. The return of foreign experts and the growth of FDI are factors promoting the positive development of serviced apartments in these two markets.

In Ho Chi Minh City, Savills noted that supply will increase to 8,200 units by the end of 2023 thanks to growth in Grade B and C. Of which, 27 new projects will supply 840 units. 85% are studios and one-bedroom apartments from Grade C projects.

Apartment rental prices of all classes increased year-on-year thanks to good recovery in demand. Specifically, rental prices of class C had the highest year-on-year increase of 8%, followed by class B at 5% and class A at 3%. Full-year occupancy in 2023 in Ho Chi Minh City reached 82%, up 6% compared to the same period last year.

In Hanoi, the apartment rental segment in the fourth quarter of 2023 remains stable. In the last quarter of 2023, the market recorded a supply of 6,078 units from 63 projects. However, on a year-on-year basis, supply increased by 2% due to the entry of two Grade A projects, Lancaster Luminaire and L7 West Lake, in the second half of 2023.

Occupancy and rents have also recorded good recovery. Savills research shows that in the fourth quarter of 2023, the occupancy rate of serviced apartments in Hanoi reached 83%. The average rent reached VND580,000/m2/month, up 1% year-on-year.

In terms of prospects, the market is expected to have 3,821 units in the future. In 2024, there are expected to be two projects including Parkroyal Serviced Suites with 261 units and Fusion Suites with 193 units. In 2025, 1,905 units of Tay Ho View Complex will enter the market, increasing the Grade A supply by 61% compared to 2023. Tay Ho will account for 63% of the future supply with 2,423 units.

Mr. Matthew Powell, Director of Savills Hanoi, commented: “Demand for serviced apartments has returned in 2024 compared to 2023 thanks to the increase in foreign experts coming to Vietnam through FDI projects. In the future, FDI capital from large projects along with continuously improved connecting infrastructure will have an even more positive impact on demand.”

Analyzing the rental demand for serviced apartments, Ms. Trinh Huynh Mai - Deputy Director of Commercial Leasing Department of Savills Hanoi said that foreign experts have high requirements for apartment quality, location, accompanying management services, security, safety and other amenities. Therefore, most of the serviced apartment management units are reputable brands.

In the Hanoi market, international operators will account for 87% of future supply with 3,309 units from 9 projects. Seven domestic operators are expected to supply 521 units from 7 projects. Furthermore, Hanoi tenants tend to stay in the central area and commute to surrounding industrial areas for work. Therefore, continued infrastructure development will benefit serviced apartments.

“In the context of recovering capacity but limited supply, this segment is expected to continue to be a potential investment with attractive profitability. However, to attract tenants, investors need to ensure factors such as location, quality of life, accompanying care services and legal regulations on renting houses to foreigners,” said Ms. Mai.

Dao Vu (T/h)