FDI positively impacts the rental housing market

According to the Savills World Research Report published 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, the high demand will also lead to a 5.9% increase in rental prices in 2023. It is predicted that in 2024, Hong Kong will continue to be the world's most expensive market for luxury housing rentals based on rental prices per square meter.

Real estate - FDI positively impacts the rental housing market — FDI capital from large projects and infrastructure improvements are expected to have positive impacts on future demand for rental housing market in Vietnam.

Similar to the markets in the region, the increasing trend of rental demand for serviced apartments was also 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 Q4/2023, 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 serviced apartment development. However, on a yearly basis, supply increased by 2% due to the entry of 2 Grade A projects Lancaster Luminaire and L7 West Lake in H2/2023.

Occupancy and rents have also shown good recovery. Savills research shows that in the fourth quarter of 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 the growth of 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 2023 occupancy 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, an increase of 70% year-on-year. Hanoi is in the top 5 FDI attractions 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 group of tenants.

Real estate - FDI has a positive impact on the rental housing market (Figure 2). — 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 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 type 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 of 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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