Serviced apartment rental prices continue to increase

In a recent market report, Savills said that rental prices for all serviced apartment classes in the two major cities increased year-on-year. In Ho Chi Minh City, the highest increase was for class C at 8%, followed by class B at 5% and class A at 3%. The average rental price for serviced apartments reached VND516,000 per square meter per month, up 3% year-on-year. However, this increase was still 11% lower than in 2019.

Serviced apartment sales also recorded a positive recovery. In 2023, the number of units sold reached 504, of which class C accounted for the highest, concentrated in District 1 and Binh Thanh District. The annual occupancy rate reached 82%, up 6% year-on-year.

In Hanoi, serviced apartment rental prices in 2023 reached VND580,000 per square meter per month, up 1% year-on-year. Occupancy rate reached 83%, of which Grade A had the largest growth of 4% quarter-on-quarter.

Avison Young's data also shows that the serviced apartment market in 2023 will be more positive than in 2022. The average rent and occupancy rate in Ho Chi Minh City and Hanoi will continue to increase. In which, the rent for Grade A serviced apartments ranges from 1,633 to 7,200 USD (about 40-176 million VND per apartment). In Hanoi, the monthly rent for Grade A apartments ranges from 1,551 to 7,550 USD per apartment (about 38-185 million VND per apartment).

According to Avison Young, most serviced apartment tenants in the two cities sign one-year leases, with some signing contracts for as long as three years. Tenants can save up to 30% on leases of one year or more, helping serviced apartment projects maintain stable occupancy rates. Due to strong demand, convenient locations, and lower prices than larger apartments, studio and two-bedroom apartments currently have the highest occupancy rates.

Mr. Neil MacGregor, General Director of Savills Vietnam, said that demand for serviced apartments will return strongly in 2023 compared to 2022 thanks to the increase in foreign experts from FDI projects and upgraded infrastructure.

In Ho Chi Minh City, total FDI capital in 2023 reached 5.9 billion USD, up 49% year-on-year and ranked first in the country. Last year, the city had more than 16,000 licensed foreign workers, the highest in the country and 92% higher than the second place, Hanoi. In the context of economic recovery, foreign experts returning, accommodation demand is expected to grow steadily.

In Hanoi, registered FDI capital reached a three-year high of US$2.9 billion, up 70% year-on-year. The city aims to develop many industrial parks and clusters while improving infrastructure to attract foreign investors, contributing to boosting accommodation demand from foreign experts.

Avison Young experts believe that to anticipate high-tech FDI projects, serviced apartment investors can seek opportunities to expand locations near industrial parks and city gateways, prioritizing areas with developed transport infrastructure.

Despite the recovery in occupancy and rents, the supply of serviced apartments is expected to be limited in the future. By 2025, the Ho Chi Minh City market is expected to have only 600 units from 9 projects. Of these, 5 projects with 260 units are expected to reopen this year after renovation. In Hanoi, Tay Ho district will account for 63% of future supply. This year, the city is expected to have 450 more serviced apartments, concentrated in grades A and B.