Shift in Investment Demand within the Real Estate Sector
At the seminar “Cash-Home Real Estate: Apartment Segment Leading Hanoi Market in 2024,” experts affirmed that residential real estate does not generate cash flow. Investing in rental properties, especially those rented by foreigners at higher rates, and then renting elsewhere to live in, creates a continuous cash flow and is the choice of many investors.
This shift in behavior from buying apartments for living or waiting for price appreciation to buying for rental income is driven by the market’s actual demand.
According to Savills World Research, the serviced apartment market in Vietnam, particularly in Hanoi, Ho Chi Minh City, and Danang, is booming due to the increasing demand from young singles, students, and foreign experts.
Statistics from Hanoi’s Labor, Invalids, and Social Affairs Department reveal that in 2023, they approved the labor demand for foreigners for 11,195 organizations and enterprises, with 14,024 expected job positions. This increase in the number of foreign experts in Hanoi has created a solid demand for serviced apartments, contributing to the positive growth of the rental apartment segment.
The market’s heat and the growing demand for serviced apartments directly impact rental prices. In the first quarter of 2024, the average rent reached VND 579,000 per sqm per month, a 4% increase compared to the same period last year, while remaining stable quarter-on-quarter. Notably, the studio apartment (01 bedroom) segment hit a record high with an average rent of USD 688 per month.
Foreign experts tend to choose serviced apartments managed by international operators as they meet their requirements for amenities and service quality. Additionally, location is a crucial factor in their apartment selection, as they prioritize convenience in commuting and working.
Trend of Choosing Tourist-Serviced Apartments
Experts believe that the rental apartment segment that generates cash flow already exists in the market and will grow rapidly in the coming years. According to statistics, in Singapore, over 70% of real estate generates cash flow, while in Vietnam, this ratio is only 15%.
Investors have two choices in the cash flow real estate segment: traditional apartments or tourist-serviced apartment projects. Each type has its advantages and disadvantages.
In the current market, tourist-serviced apartments can offer a wide range of amenities for the accommodation business. This type of development is usually well-invested, from design to high-end furniture and integrated modern technology. The system of utilities in serviced apartments is also carefully invested, ranging from security and healthcare to home services such as airport transfers and housekeeping.
Moreover, due to differences in legal status and land use duration, serviced apartment prices are usually 20% lower than those of regular apartments, despite higher investment costs. The diverse range of customers for serviced apartments, from foreign tourists to businessmen and experts, results in higher rental prices and occupancy rates.
The Ninety Complex – A tourist apartment project with hotel standards expected to operate in Q2 2024.
Well-Located Products Enhance Profit Margin
According to experts, investing in cash flow-generating apartments offers dual profits: stable income from rentals and asset price appreciation. Market observations show that centrally located apartments with good transportation links and professional management systems are more attractive to investors due to their high liquidity and strong rental demand.
Additionally, in inner-city areas, especially in central locations where supply is limited, there is potential for future price increases.
With its superior advantages and strong growth potential, this type of cash flow-generating apartment is becoming a sustainable and profitable investment channel, promising to be a “golden goose” for investors in the new market context.
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