Ho Chi Minh City real estate market is increasingly differentiated

Although the real estate market is recovering, the differentiation is becoming more and more obvious. While speculative products lacking exploitation value have not yet shown much improvement, products that can generate immediate cash flow have recorded positive transactions.

Although the real estate market is recovering, the differentiation is becoming more and more obvious. While speculative products lacking exploitation value have not yet shown much improvement, products that can generate immediate cash flow have recorded positive transactions.

Once a "player" specializing in swing trading, but when the market changed, Mr. Hoang Minh, a real estate investor in Ho Chi Minh City, changed his strategy.

Mr. Minh said that when the market was bustling, he only needed to deposit an apartment or a plot of land in the first phase of the sale to be able to sell it at a higher price immediately after and earn a high profit. But when the market slowed down, things were no longer easy. The plot of land in the suburbs he had previously bought was blocked from liquidity. The number of buyers decreased sharply, while those who needed to sell were forced to reduce prices deeply. This investor realized that if he continued his speculative strategy, he could fall into a situation of "oversupply" like many other investors.

After much consideration, he decided to change his strategy. Instead of focusing only on products with "surfing" elements, he started looking for assets that could be exploited immediately to create a stable cash flow.

Late last year, Mr. Minh chose to buy a 1-bedroom apartment in District 7 (HCMC) for 2.5 billion VND. This is a completed project with a large residential community and is rented by many foreign experts. After completing the interior decoration, he quickly rented it out for 13 million VND/month.

According to Mr. Minh, to preserve capital, investing in any real estate is not absolutely safe, but it is necessary to choose "defensive" segments. That is, the real estate can both wait for price increases in 3-5 years and bring stable cash flow in the short term.

A recent report by the Vietnam Association of Realtors (VARS) also pointed out that more than 5 years ago, apartments were considered by many to be a type of “consumer asset” and difficult to compare with other real estate segments. But now, the supply-demand balance is increasingly tilted towards demand, apartment prices are entering a long-term increase cycle, far exceeding many other segments.

Apartment prices are constantly increasing and establishing a new level, causing apartment rental prices to also tend to "climb", with an average increase of 10 - 20% in 2024. In the city center, there are almost no apartments with rental prices under 10 million VND/month, the common rental price of 1-bedroom apartments is 10 - 15 million VND/month, 2-bedroom apartments are 15 - 20 million VND/month.

In addition to the impact of high rental demand, the constantly increasing apartment prices also directly affect the pricing strategy of landlords. When housing prices increase, landlords are forced to raise rental prices to ensure profits and balance investment cash flow.

However, in reality, the profit margin from renting apartments is getting lower and lower because rental prices cannot keep up with the increase in housing prices. The rental price increase rate is only about half of the housing price in 2024, on the basis that the profit margin from renting apartments in Vietnam is only below 4%, commonly below 2%, lower than saving.

In the context of not having many primary sources, secondary apartment transfer activities in the market are taking place actively. Data from Dat Xanh Services Research Institute shows that the new supply is mostly the next phase of existing projects, so the market recorded a difference in transfer prices of 10 - 20% compared to secondary projects. Many high-end projects that have just been handed over also have transfer prices increasing by 15 - 25%.

Mr. Tran Hien Phuong, General Director of Seaholdings, acknowledged that cash flow has begun to return to the market, but the way it operates will be much different than before. Customers are now picky, they often choose projects with proper legal procedures; or with secondary projects, they only accept to buy when the apartment has a pink book, is completed, has full committed utilities and services, and can be exploited immediately.

According to Mr. Phuong, the market is differentiated by region. In some places, although prices have dropped sharply, liquidity is still poor, but in places with real demand, prices have recovered quickly. This shows that the market's operating mechanism is starting to be based on real demand, instead of speculation.

Although the real estate market is recovering, the differentiation is becoming more and more obvious. While speculative products lacking exploitation value have not yet shown much improvement, products that can generate immediate cash flow have recorded positive transactions.

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