The increasing trend in demand for serviced apartments is recorded in both Hanoi and Ho Chi Minh City, according to a newly published report by Savills Vietnam.
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Rent prices for all grades of serviced apartments have increased.
In Ho Chi Minh City, according to Savills’ findings, the supply increased to 8,200 units by the end of 2023 due to the growth of Grade B and C. Among them, 27 new projects contribute 840 units, of which 85% are studios and one-bedroom apartments from Grade C projects.
Rent prices for all grades of serviced apartments have increased year-on-year due to a strong recovery in demand. Specifically, Grade C recorded the highest YoY increase at 8%, followed by Grade B at 5% and Grade A at 3%. The occupancy rate for the whole year of 2023 in Ho Chi Minh City reached 82%, up 6 percentage points YoY.
In Hanoi, the performance of the serviced apartment sector for rent in Q4-2023 remained stable. In the last quarter of 2023, the market recorded a supply of 6,078 units from 63 projects, down 1% QoQ due to the halt in the development of serviced apartments at Dolphin Plaza (Grade B). However, on an annual basis, the supply increased 2% due to the entrance of 2 Grade A projects, Lancaster Luminaire and L7 West Lake, in the second half of 2023.
The occupancy rate and rent prices have simultaneously shown a good recovery. Savills’ research showed that in Q4-2023, the occupancy rate of serviced apartments in Hanoi reached 83%, up 2 percentage points QoQ and YoY. The average rent price reached VND 580,000 per m2 per month, stable QoQ and up 1% YoY.
In terms of prospects, the market is expected to have an additional 3,821 units in the future. In 2024, there are 2 anticipated projects, including Parkroyal Serviced Suites (Grade B) with 261 units and Fusion Suites (Grade B) with 193 units.
In 2025, 1,905 units from Tay Ho View Complex will join the market, increasing the supply of Grade A by 61% compared to 2023. Tay Ho will account for 63% of the future supply with 2,423 units. This will be a popular area for foreigners due to its amenities such as dining, entertainment, international schools, hospitals, and parks.
The competition in the serviced apartment market is fierce.
Regarding the profit from renting serviced apartments, Ms. Duong Thuy Dung, Senior Director of CBRE Vietnam, recently analyzed that currently, the expected profit for the segment of serviced apartments brings investors from 6-6.5% per year. However, few investors achieve a profit rate of 6.5% per year due to the increasing competition in the rental market and the clear differentiation of tenants.
However, Mr. Tran Quang Trung, Business Development Director of OneHousing, noted that the profit from renting apartments is still more promising than that from townhouses.
In Hanoi, CBRE’s calculations show that the rental profit for apartments in 2022 is 4.4%, 1.7 times the yield for retail properties. In the western part of Hanoi, rental profit is fluctuating between 5-6%.
Regarding the future, Mr. Matthew Powell, Director of Savills Hanoi, stated: “The 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 coupled with continuously improving infrastructure connectivity will have a more positive impact on demand.”
In 2023, the Statistics Department of Hanoi City announced that FDI registered in Hanoi reached the highest level in the past three years at $2.9 billion, up 70% YoY. Hanoi is among the top 5 leading FDI attraction points in the country.
The largest increase was seen in capital contribution and share purchase activities, with an increase of 248% YoY and accounting for the largest proportion with $2.1 billion, equivalent to 75% of total FDI capital into Hanoi. Among them, Japan accounts for 60% of the total registered investment capital in Hanoi’s industrial parks, making Japan a potential tenant group.
The Ministry of Planning and Investment has just released a report on the situation of attracting foreign investment (FDI) in Vietnam in the first 2 months of 2024. As of February 20, 2024, the total registered capital for new grants, adjustments, and capital contributions for purchasing shares and capital contributions reached over $4.29 billion, up 38.6% compared to the same period in 2023. With these optimistic FDI figures, the serviced apartment market is expected to continue to thrive in the near future.
Ngoc Diep
