According to the Savills World Research Report released in February 2024, housing rental prices in 2023 in global economic centers such as Singapore and Hong Kong (China) will increase significantly compared to other markets.
Singapore is set to see the highest rental growth in the Asia-Pacific region in 2023, with an increase of 12.3%. In Hong Kong, rising demand will drive rental growth of 5.9% in 2023. It is predicted that in 2024, Hong Kong will continue to be the world's most expensive market for luxury housing rentals on a per square meter basis.
FDI capital from large projects and infrastructure improvements are expected to have positive impacts on future demand for rental housing in Vietnam.
Similar to other markets in the region, the increasing demand for serviced apartments has been recorded in Hanoi and Ho Chi Minh City. The return of foreign experts and the growth of FDI are factors promoting the positive development of serviced apartments in these two markets.
In Hanoi, the performance of the apartment rental segment in Q4/2023 remains 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 Dolphin Plaza project (Grade B) ceasing the development of serviced apartments. However, on a year-on-year basis, supply increased by 2% due to the entry of 2 Grade A projects Lancaster Luminaire and L7 West Lake in the second half of 2023.
Occupancy and rents have also shown good recovery. Savills research shows that in Q4 2023, the occupancy rate of serviced apartments in Hanoi reached 83%, up 2 percentage points quarter-on-quarter and year-on-year. The average rent reached VND580,000/m2/month, stable quarter-on-quarter and up 1% year-on-year.
In Ho Chi Minh City, Savills noted that supply increased to 8,200 units by the end of 2023 thanks to growth in Grade B and C. Of which, 27 new projects provided 840 units; 85% were studios and one-bedroom apartments from Grade C projects. Rents of all grades increased year-on-year thanks to good recovery in demand, specifically, Grade C rents had the highest year-on-year increase of 8%, followed by Grade B at 5% and Grade A at 3%. Full-year occupancy in 2023 in Ho Chi Minh City reached 82%, up 6 percentage points year-on-year.
In 2023, the Hanoi Statistics Office said that registered FDI capital in Hanoi reached the highest level in the past three years with 2.9 billion USD, up 70% year-on-year. Hanoi is in the top 5 FDI attraction destinations in the country. Capital contribution and share purchase activities had the largest increase, reaching 248% year-on-year and accounted for the largest proportion with 2.1 billion USD, equivalent to 75% of total FDI capital in Hanoi. Of which, Japan accounted for 60% of total registered investment capital in Hanoi's industrial parks, making Japan a potential tenant group.
Ms. Trinh Huynh Mai, Deputy Director, Commercial Leasing Department, Savills Hanoi
Analyzing the rental demand for serviced apartments, Ms. Trinh Huynh Mai, Deputy Director, Commercial Leasing Department, Savills Hanoi said: “Foreign experts have high requirements for apartment quality, location, accompanying management services, especially security, safety and other amenities. Therefore, most serviced apartment management units are reputable brands. In the Hanoi market, international operators will account for 87% of future supply with 3,309 units from nine projects, seven domestic operators are expected to provide 521 units from seven projects. Moreover, tenants in Hanoi tend to choose to live in the central area and move to surrounding industrial areas for work. Therefore, continued infrastructure development will help serviced apartments benefit.”
“In the context of recovering capacity but limited supply, this segment is expected to continue to be a potential investment with attractive profitability. However, to attract tenants, investors need to ensure factors such as location, quality of life, accompanying care services and legal regulations on renting houses to foreigners,” Ms. Mai commented.
Mr. Matthew Powell, Director of Savills Hanoi, commented: “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 along with continuously improved connecting infrastructure will have an even more positive impact on demand.”
Minh Vy
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