Should I invest in an apartment for rent?

According to PropertyGuru's Consumer Sentiment and Trends (CSS) report, rising house prices and a difficult economic situation are expected to increase the rental trend in the first half of 2024.

Of these, apartments are the type of real estate that most tenants are interested in (43%), followed by private houses (18%) and boarding houses (18%). Only a small portion (9%) are interested in townhouses for rent.

Mr. Le Bao Long, Strategic Director of PropertyGuru Vietnam, commented that for investors with a long-term vision, apartments for rent are still an attractive investment channel because of their high average profit rate (combined price increase over time and rental profit), around 12.5%/year. This is a better and more stable profit rate compared to many other investment channels such as stocks, gold, foreign currency, land, savings, etc.

“Access to apartments is becoming increasingly difficult as income growth cannot keep up with housing price growth. In the future, primary apartment projects will have high prices because investors have to optimize profits when costs are pushed up, which partly explains the current trend of many young families renting houses,” Mr. Long analyzed.

Mr. Tran Quang Trung, Director of Business Development at OneHousing, also said that in Hanoi, the average selling price of primary apartments increases by 10-15% per year. On the contrary, due to poor liquidity, investors' capital is still "stuck" in land, resort real estate or low-rise houses.

"In my opinion, this is the time to invest in real estate that can be used for living or rented at a good price and wait for the price to increase," said Mr. Trung.

Mr. Trung pointed out that currently, the market is shifting investors, instead of being loyal to low-rise products, with the same amount of money, they switch to buying 10 mid- to high-end apartments.

Simply because with the same investment capital, a villa can be rented for 50-60 million VND/month and there is no cash flow mobility. Meanwhile, with 10 apartments, investors can earn 15-18 million VND/apartment, the total rental income is up to 180 million VND/month. Of course, the price of mid-range and high-end apartments will also increase gradually over time.

According to Dr. Pham Anh Khoi, Director of the Dat Xanh Services Institute for Economic, Financial and Real Estate Research, apartments are increasingly popular, accounting for 74% of total products sold, up 10% over the same period last year. This shows that the demand for real housing and products with the ability to exploit stable cash flow is increasing.

In addition, real estate investment channels continue to receive great attention from investors, with 33% choosing to prioritize investment, surpassing gold (30%). This trend is driven by low home loan interest rates throughout 2023 and the first half of 2024.

“The overall absorption rate of the whole market has improved significantly, increasing nearly 2.5 times compared to the same period in 2023. The absorption rate has gradually increased over the quarters. The demand for renting apartments in central areas and satellite cities is still on the rise, showing the recovery and development of the real estate market,” Mr. Khoi emphasized.

Mr. Nguyen Van Dinh, Chairman of the Vietnam Real Estate Brokers Association, commented that 2023 is a difficult year, speculative investment, buying and selling for profit will no longer be in the priority list. Instead, products with long-term commercial exploitation value, achieving a profit margin of 4.9 - 5% or more will be prioritized.

The higher the commercial profitability of a property, the more it will determine the absorption rate of that product. Investment cash flow will be directed towards products that can be exploited for rent such as apartments, townhouses and factories for rent. This real estate group is easy to access loans and is safe in the context of an unbalanced market.