Less affected by negative factors, apartment type maintains high profit margin for many years

Profit margin up to 12.5%

According to the market report for the third quarter of 2023 recently released by Batdongsan.com.vn, the demand for buying apartments continued to increase by 1% and for renting apartments increased by 6% compared to the previous quarter. Of which, apartments priced at 2 - 4 billion VND were the most searched.

According to Batdongsan.com.vn, the market in the third quarter of 2023 once again showed that apartments are the segment least affected by the negative impacts of the market in the past year because this type serves real housing needs.

At the same time, interest in apartments has shown signs of recovery, with demand for buying apartments increasing by 1% and for renting apartments increasing by 6% compared to the previous quarter. Of which, apartments priced from 2 to 4 billion VND are the most sought after.

less affected by negative factors, the type of housing has maintained high profit margins for many years, figure 1 — Apartment buildings meet market demand well and are less negatively impacted.

In 2023, apartment prices did not change much, increasing by 1-5% in Hanoi and almost unchanged in Ho Chi Minh City. However, in the long term from 2015 to present, the apartment price increase index in these two big cities has exceeded the income growth rate of people. After 8 years, apartment prices in Ho Chi Minh City and Hanoi increased by 82% and 56% respectively, while the income of people in urban areas increased by only 39%.

Mr. Le Bao Long, Strategy Director of Batdongsan.com.vn commented: “Buying an apartment is becoming increasingly difficult for people when the rate of income growth cannot keep up with the rate of house price growth. In the future, primary apartment projects will also have high prices because investors have to optimize profits when costs are pushed up.”

This expert also said that according to Batdongsan.com.vn's report on real estate consumer psychology, in the context of high housing prices, people are turning to renting or looking for ways to borrow to buy a house. However, at present, many buyers have not yet taken out a loan to buy because they are still concerned about interest rates.

Because the price of apartments is constantly increasing and the demand for buying and renting this type of property is always high, the average profit rate when investing in apartments is up to 12.5%/year (combining the price increase and rental profit). This is a better and more stable profit rate than other types of investment such as stocks, gold, foreign currency, land, and savings.

Low-rise real estate is differentiated by area.

Since the beginning of the year, the low-rise real estate market nationwide has been sluggish with a decline in transactions. A report by Batdongsan.com.vn also shows that 57% of brokers participating in the survey said that transactions of low-rise real estate products decreased by more than 50%, 28% commented that transactions decreased by 10% - 50%.

Talking about this type, Mr. Dinh Minh Tuan - Director of Batdongsan.com.vn in the Southern region commented: "Price is the biggest barrier for buyers at the present time because low-rise real estate types are priced much higher than the average income of people and products with high value are difficult to borrow to buy. The average selling price of townhouses in the third quarter of 2023 is 333 million VND/m2 in Hanoi, and 209 million VND/m2 in Ho Chi Minh City".

This expert also believes that each low-rise real estate segment has a different trend and recovery potential. Specifically, townhouses are still sluggish because tourism and retail activities have not grown strongly due to the impact of the macro economy and the post-COVID-19 pandemic.

less affected by negative factors, the type of housing has maintained high profit margins for many years, figure 2 — The townhouse market has been quiet since the COVID-19 pandemic

Data from Batdongsan.com.vn also shows that the level of interest in townhouses in central urban areas has remained almost flat, while in coastal tourist provinces in the Central, North and South regions it has decreased by 11%, 22% and 41% respectively compared to Q1/2021.

Meanwhile, townhouses and villas in suburban urban areas have quite a lot of potential thanks to the future infrastructure network supporting the trend of expanding urban areas to the outskirts and neighboring areas. Data from Batdongsan.com.vn also shows that many suburban urban areas have witnessed good price increases for villas and townhouses in recent years, for example, Starlake Urban Area, Ciputra, Mailand Hanoi City, Vinhomes Riverside, ParkCity, Ecopark (Hanoi) with an increase of over 20%, 30% per year; or Swan Bay Urban Area, Eco Village Saigon River, Mizuki Park (HCMC) all increased in price by over 20% per year.

For private houses, the level of interest and asking prices remain stable in Hanoi, as this type of property serves real housing needs, so demand is still maintained. In the third quarter of 2023, asking prices for private houses in many districts such as Tay Ho, Hai Ba Trung, Dong Da, Hoang Mai, and Ha Dong still increased by 4% - 9% compared to the same period in 2022.

Interest levels also increased slightly by 2% - 3% in some districts of Hanoi. In Ho Chi Minh City, asking prices and interest levels for private homes are on a downward trend, but the decrease is not more than 10% compared to the third quarter of 2022.

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