In particular, in the first two months of 2024, the price of apartment rentals has not shown any signs of “cooling down,” causing a lot of financial pressure for people renting houses in the capital when landlords suddenly increase rental prices. Not only does this drive away the “dream of owning a home” for many people, but the high rental prices also make it difficult for those in need to afford and maintain their livelihoods in difficult employment and income conditions.
Tan Tay Do apartment is located in the new urban area in Dan Phuong district, Hanoi, with 6 high-rise buildings of 25 floors each. Photo: Anh Tuan/TTXVN
Renting Worries
Ms. Thu Giang, who is from Vinh Phuc province and came to Hanoi to study, shares an apartment with a friend in a condominium in Cau Giay district and laments the high rental prices, which have increased from 6 million to 8.5 million VND/month, making it impossible for her to afford the rent. She had to resort to living in the school dormitory to alleviate the burden on her family.
Ms. Tran Hong Ha, who is from Hai Duong province, also shared that she and her husband have been renting an apartment in the new urban area of Duong Noi (Ha Dong district) for over a year now. The apartment is about 60m2 in size, with a rental price of 7 million VND/month and a 12-month lease. At the beginning of this year, when they were preparing to sign a new lease, the landlord announced an additional rental increase of 1 million VND starting from March.
“I have two young children in primary school, and our income is just enough to cover their education and daily expenses. Now that the rent has increased, I feel a heavy financial burden right from the beginning of the year. This means that my previous worries about an increase in rental prices have become a reality,” Ms. Ha sighed.
According to Ms. Ha, to avoid the landlord constantly demanding rent increases, in this lease agreement, she tried to negotiate with the landlord to extend the contract period to 2 years and had to pay the rent on a quarterly basis instead of monthly.
Next to the students’ apartments, Mr. Thuyet (an employee of Hanoi Water Company) said that his family had planned to borrow money from relatives to buy a “mini apartment” at risk of fire and explosion, which was not safe, so they had to look for a commercial condominium to rent, even though the rental price was higher than Mr. Thuyet’s monthly salary.
Rental prices in the office segment have also shown signs of increase. Mr. Minh Tuan (Director of a software company) is struggling to negotiate a lower rental price with the landlord for the apartment he is renting in Me Tri Thuong (Nam Tu Liem district) because the housing prices continuously increased by 15-20 million VND/month in the last 6 months of last year. “I am struggling to figure out how to pay the rent and the salaries of my employees, starting from the early days of entering this profession,” Mr. Tuan said.
Sharing the same difficult situation, Ms. My (owner of a hair salon in Thanh Xuan) revealed that 2 months before the Lunar New Year in 2024, when the lease was about to expire, the landlord announced an increase in the rent from 7 million VND to 10 million VND/month. This made it extremely difficult for her to maintain her business. “Because the number of customers in the apartment has stabilized, and most of them are regular customers, moving to another place would be a difficult decision for me, and I couldn’t find any other solutions, so I have to continue to survive here,” Ms. My said.
Low supply, high demand
The residential property market in Hanoi is still facing challenges due to limited supply and an imbalance between supply and demand, especially in the affordable housing segment.
Notably, in the fourth quarter of 2023, new supply reached its lowest level in the past 10 years for both low-rise and high-rise segments. This has led to a continuous increase in prices in all segments, from resettlement housing to middle and high-end apartments. Most transactions occur in the secondary market, where people buy and sell apartments that have been in use for many years.
Some projects, such as Dang Xa Urban Area (Gia Lam district), Nguyen Chanh (Cau Giay district), An Binh City – Giao Luu City, Ecohome (Dong Nghac, Bac Tu Liem district), Golden Palace Me Tri and Florence (Nam Tu Liem district), Golden Park (Cau Giay district), Foreign Affairs Compound Area (Bac Tu Liem district), Phuong Dong Green Park (Hoang Mai district), Gemek I (Hanoi Hoai Duc district), Eco Green (Thanh Tri district), continue to see price increases and show no signs of respite, making it a challenging year for tenants in the capital.
A survey conducted after the Lunar New Year in various districts revealed that apartment rentals have set a new price floor, which is about 5-10% higher than in 2023.
For example, at the Vinhomes Smart City project (Nam Tu Liem district), the rental price for a small fully furnished 1-bedroom apartment has increased by an additional 1-1.5 million VND/month (now at 7-8 million VND/unit/month; 2-bedroom apartments with 2 bathrooms have increased to 10-12 million VND/month. Similarly, at Legacy, Thanh Xuan Complex (Thanh Xuan district); The Nine, Central Field, D’Capitale, Discovery Complex, Mipec Rubik, Nam Trung Yen (Cau Giay district); Discovery Central, Vinhomes Metropolis (Ba Dinh district)…, apartment rentals have uniformly increased by 1-2 million VND/month compared to the fourth quarter of 2023.
The “hot” situation in the Hanoi condominium market has greatly affected low-income workers with an average salary of 7-8 million VND/month. Affordable housing for the people is extremely difficult when the pace of income growth cannot keep up with the pace of housing price increases.
According to experts, the reason for the continuous increase in apartment rentals is due to the rising house prices, causing more people to choose to rent instead. Some groups rent out apartments and then sublet them for domestic tourism. On the other hand, the trend of urbanization is increasing, resulting in an increase in the demand for condominiums and rental housing.
From a business perspective, for investors with a long-term vision, rental apartments are still an attractive investment channel because they offer relatively high average returns (combining price increases over time and rental income), at around 12.5% per year. This is a good and stable return compared to many other investment channels such as stocks, gold, foreign currencies, real estate, and savings deposits…
According to experts, in the future, low-end condominium projects will have higher prices because developers need to optimize profits when costs rise. This partly explains why many young families are currently choosing to rent homes. Therefore, the best way to lower housing prices now is to increase the supply.
In the opinion of businesses, the supply-demand imbalance lies in the difficulties in the legal system. Many administrative procedures are still cumbersome, and some mechanisms and policies are not yet synchronized, thereby hindering the “release” of the real estate market.
“State management agencies and local authorities must resolve legal obstacles to accelerate the implementation progress. In addition, strong credit policies supporting businesses and people in need are also necessary,” suggested a representative of a construction company that has developed many social housing projects in Hanoi.
Ms. Duong Thuy Dung – Senior Director of CBRE Vietnam, shared that prices can decrease when the market increases the supply of medium and affordable apartments, reducing the proportion of high-end apartment supply, and promoting transactions and liquidity through interest rate tools is necessary.
Recently, at the conference on the implementation of the missions in 2024 of the Construction Department of Hanoi, Deputy Minister of Construction Nguyen Van Sinh proposed that Hanoi actively participate in completing the guidance decrees for the Housing Law and Real Estate Business Law; pay attention to the housing development management task, especially removing difficulties and obstacles for real estate and housing projects in the area.
“Regarding the investment in social housing development, with a very high task assigned by the Prime Minister in 2024 (130,000 apartments), the Department of Construction of Hanoi must review the licensed social housing projects that have been started to make them more feasible and active; promote 28 approved investment projects to select investors for early construction…,” emphasized Deputy Minister of Construction Nguyen Van Sinh.
In this context, according to experts, the Government and local authorities need to quickly find solutions to remove constraints and “release” businesses to promote the affordable housing segment. In addition to projects for sale, solutions are needed to increase the number of quality and affordable rental housing.
As a locality with hundreds of residential projects and urban areas, the supply of housing to meet the housing needs of Hanoi’s residents is still very limited and does not match each target group, especially those with low incomes. To overcome difficulties in the real estate market, Hanoi is actively implementing a series of solutions to promote stable development.
It is expected that by 2025, Hanoi will construct 1.25 million m2 of social housing and by 2030, another 5.5 million m2, to meet the housing needs of priority groups. In addition, Hanoi will focus on removing obstacles for hundreds of “suspended” projects; proactively inspect and strictly handle cases of legal violations in real estate and housing projects throughout the area.
Notably, from now until December 31, 2025, the Hanoi People’s Committee has authorized the Hanoi Department of Construction to appraise the selling price, lease purchase, and social rental of real estate projects invested with funding sources outside the State budget; at the same time, it authorized the transfer of the entire or a part of real estate projects that have been decided to be invested by the provincial People’s Committee; authorized the transfer of the entire or a part of real estate projects that have been decided to be invested by the Prime Minister.
