My child passed the university entrance exam and has 2 billion VND. Should I buy an apartment or save and rent a house?

Hai Anh's child (Nam Dinh) has just been admitted to a university in Hanoi and is preparing to enroll. Her family is considering whether to rent a house or buy an apartment for her child.

According to Ms. Hai Anh, the family currently has 2 billion VND in the bank. She and her husband are wondering whether they should continue to save, then use the interest to rent a house for their children every month, or should they use all that money to buy an apartment.

In the context of falling interest rates and constantly increasing apartment prices, whether or not to spend money to buy an apartment for a child who has just passed university entrance exams at this time is probably a concern of many parents.

Sharing with VietNamNet reporter, Mr. Ngo Thanh Huan, CEO of FIDT Joint Stock Company - a unit specializing in investment planning and asset management in Vietnam, said that first of all, we must see if our current cash flow is surplus or shortage; the cash flow during the child's education process and the family's asset portfolio.

If your monthly income is 60 million VND, your family expenses are 30 million VND, and you have 30 million VND left, then renting an apartment for 7-8 million VND is normal.

But if the income is only 40 million VND/month, living expenses are 35 million VND, the remaining 5 million VND is not enough to rent a house.

With money, many people wonder whether they should buy an apartment or save money and rent a house for their children to get into university?

According to Mr. Huan, if he decides to buy an apartment with 2 billion VND, should he borrow more or not, when the interest rates of some large banks and foreign banks are at 8-9% fixed for 1-2 years. This is a very good interest rate for normal real estate.

“For most real estate segments in Vietnam, if you borrow to buy, you should borrow at an interest rate below 9%. With this interest rate, it is not necessary to use all of the available VND2 billion,” he said.

The analyst said that apartments have the best price increase performance in the first 3-5 years of use. From the 6th year onwards, apartment growth slows down; after the 8th year, the price increase is only around 4%.

Apartments have two sources of profit, which are the price increase and rental yield. Rental yield ranges from 4-6%, the smaller the apartment, the higher the rental yield. Only apartments priced under 3 billion VND have rental yield of around 6%; and apartments priced over 3 billion VND have rental yield of around 4.5%.

Regarding value, according to Mr. Huan, when an apartment is new, it can increase in price by 6-9% in the first years.

Thus, with 6 - 9%, plus 4 - 5% rental yield, the average yield of an apartment under 3 billion VND will fluctuate from 11-14%/year.

“If cash flow is stable, with a moderate real estate portfolio, at 70%, you can still buy more real estate such as apartments.

If you buy, you should buy an apartment that has been used for less than 3 years since the handover date, and you should not buy one that has been used for more than 6 years. In particular, prioritize buying apartments with a total value of less than 3 billion VND, and even better, under 2 billion VND. The reason is that the market has proven that the smaller the apartment value, the better the liquidity and price growth, and the higher the rental yield," the FIDT expert added.

From that analysis, Mr. Huan said that the efficiency of new apartments around 11-14% is much higher than the savings interest rate.

According to his assessment, in 2024, the mobilization interest rate may decrease slightly or remain the same, but it is very difficult to increase. With the current interest rate level, the mobilization interest rate may fluctuate around 5.5 - 7.5% / 12-month term.

Compared to the total profit that the apartment brings from rental performance and price growth, Mr. Huan suggested that buying an apartment would be more suitable for the period 2023 - 2024.

The right time to buy real estate for real estate needs such as apartments is the end of 2023, which is the "golden time".

In the case of Ms. Hai Anh, whose family has 2 billion VND, experts say that if they decide to buy an apartment around this price range, newly handed over or handed over 1-2 years ago, it will be better than saving money.

“A 2 billion VND apartment, the rental yield of 6% is equal to the interest rate of bank deposits; not to mention the price increase of 6-9% per year. Moreover, this year is the “bottom” of apartment buildings, prices cannot be reduced any further. Market analysis reports show that in 2023, except for apartment segments priced over 70 million VND/m2 or total apartment value over 6 billion VND, prices will be reduced.

As for apartments priced under VND3 billion, the price will absolutely not decrease, except for apartments that are over 8 years old. New apartments with small values will all increase in price. Therefore, when the market recovers, this group of apartments will increase in price even more," said Mr. Huan.

According to him, current investment trends and performance, these two factors are showing that it is better to buy an apartment than to save money to earn interest and then rent a house.

From the expert's analysis, Ms. Hai Anh and parents with similar concerns can consider their financial picture, cash flow, assets, asset structure... to make appropriate decisions.

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