HCMC – While the commercial housing segment is struggling with a sea of troubles, the home-for-rent segment is faring well on high demand.
Many investors think they would earn little from this market segment. However, the rental housing segment is generating trillions of dong in earnings a year.
There have been no accurate statistics on the number of homes for rent in HCMC, partly because this segment involves not only professional corporate players but also a lot of private home owners.
The serviced apartment segment has released quarterly reports, though. This type of service is mainly supplied by foreign firms and most of their customers are foreigners working and living in Vietnam.
The total number of serviced apartments, from low- to high-end, in the city is now about 4,390 units, with monthly rents averaging out at VND500,000 per square meter, say market research firms.
Assuming that a two-bedroom apartment covers some 60 square meters, the total area of serviced apartments is about 260,000 square meters, which can generate total rentals of VND130 billion a month, or VND1.56 trillion a year.
Despite the increasing supply and competition, the serviced apartment segment has boasted high annual occupancy, some 70-80%. At this rate, suppliers are sharing total revenue of an estimated VND1.2 trillion per year.
Most of the serviced apartment buildings in HCMC are managed by foreign brands like Ascott, InterContinental and Norfolk. Recently, Frasers Hospitality of Singapore has entered the market through the Capri by Fraser project with about 175 units in Phu My Hung town, District 7.
SSG Group is one of the few local firms participating in this segment with its Saigon Airport Plaza project located near Tan Son Nhat International Airport. In this apartment and office complex, the project owner sets aside 84 apartments for a monthly rent of VND25-29 million, or US$1,200-1,400, per unit.
Having observed the market for many years, Vo Quoc Phuong Trang, head of the residential leasing department at CBRE Vietnam, said economic woes made foreign tenants tighten their spending, but the demand in this segment had not declined much.
Not only competing with the projects in the same segment, many serviced apartment buildings also compete with hotels by offering a daily rent payment format. For example, Capri by Fraser offers a rent of VND1.6 million (US$75) per night, while Saigon Airport Plaza quotes the rate at VND1.4 million (US$70).
The home-for-rent market consists of not only serviced apartments, but also villas, townhouses and commercial apartments leased by citizens.
They are competing directly with the serviced apartment operators, with rents ranging from VND12 million to VND30 million per unit (US$600-1,500). Tenants are not only foreigners, but also Vietnamese.
There could hardly be any accurate statistics on the number of apartments leased by private owners.
Phu My Hung is one of the areas attracting many foreign expats. Among 25,000 people living in this urban area, there are around 12,000 foreigners, according to Phu My Hung Corporation.
There are also Korean and Japanese communities in the existing residential areas in the city. This means a large number of townhouses and private apartments are being leased out to those tenants.
Then, it is no wonder why several commercial projects have launched apartment leasing programs to lure buyers, even pledging that they will pay home owners if there are no tenants.
For instance, Him Lam Land Co. has promised that it will rent the apartments its customers purchase at the Him Lam Riverside project in District 7 in the first two years with monthly rent of up to VND24 million. Meanwhile, in the eastern part of the city, some projects like Saigon Pearl, The Estella, The Vista and Xi Riverview Palace have found buyers who want to lease out rather than stay at their apartments.
Le Thanh Co. is carrying out a project in Tan Binh District with apartments for rent targeting office workers. Tenants will have to pay VND350 million within 30 months to be entitled to stay in the apartments for 49 years.
CT Group also intends to develop a rental apartment project in Tan Binh District.
Unlike commercial homes, apartments for rent have an extended payment duration. However, this segment warrants a steady income stream, especially when the commercial housing market is grappling with poor sales.