Paradox of investing in a shophouse worth tens of billions of dong, now renting it out for 10 million dong/month

For more than 2 years now, Mr. Nguyen Van Nhat (from Gia Lam - Hanoi ) has rented a shophouse in the VShip Bac Ninh project (Tu Son - Bac Ninh) to run a pho restaurant. According to Mr. Nhat, the rental price is 10 million VND/month, paid every 3 months, if paid for the whole year, the landlord will support the electricity and water bills. The shophouse rented by Mr. Nhat is located right on the main road of the project, with a total value of 12 billion VND. According to Mr. Nhat, before renting, the landlord had basically completed 2 out of 4 floors. The amount spent on completion is not less than 300 million, so the rental price of 10 million VND/month is very cheap.

Although it is located in a prime location, due to the lack of customers, the revenue of the pho restaurant is low, Mr. Nhat is planning to move the restaurant to another location. And Mr. Nhat predicts that the rental price of this shophouse will most likely have to be lowered if there are new customers because at this time, any business is difficult.

Once considered the most profitable segment, shophouses are now making many real estate investors miserable. Because the current revenue is just a "grain of sand" compared to the tens of billions of dong that had to be spent.

Many shophouse projects are "waiting" for tenants. (Illustration photo)

Mr. Tran Duc Dung, owner of a shophouse in a famous project in Hoang Mai district - Hanoi, said that in 2019, he invested nearly 20 billion VND to buy a shophouse. At that time, his capital was only 10 billion VND, he completed procedures to borrow the remaining amount from the bank. According to calculations, Mr. Dung will rent out the shophouse and use the rental money to support paying bank interest. The rental price is 20 million VND/month, he only needs to pay a little more to have enough money to pay interest. However, for more than a year now, after the old tenant returned the house, Mr. Dung has not found a new tenant at the expected price. " Most of them only pay 10 million VND/month. It would be a waste to leave the house like that, so he had to rent it out, but thinking about the cheap rental price is really bitter, " said Mr. Dung.

Currently, Mr. Dung has no feasible solution to solve this "tricky" problem. " The rental price is only 1/3 of the interest rate I have to pay every month. If I sell the shophouse at this time, I will have to suffer a loss of up to 20%. Either way will cause great damage ," he lamented.

Ms. Nguyen Duyen, a shophouse investor in Ha Dong district, Hanoi, also shared that during COVID-19, she fully supported the rent for tenants. “ They are in the spa and beauty industry, so I understand the difficulties during the pandemic. For a long time, their store stopped operating, and I was willing to waive the rent for the whole year. However, recently, customers continued to demand a reduction in rent due to business difficulties. Previously, it was 15 million VND, but now they want it to be reduced to 10 million VND. Most investors have to borrow from banks. The current interest rate has "cooled down" a bit, but the total interest rate is still high. Every investor has to bear the interest until their backs break, but the rent is not even enough to pay half of it, ” Ms. Duyen said.

However, both Mr. Dung and Ms. Duyen admitted that they were lucky that their shophouse was still available for rent. Although the rent was cheap, they still had some cash flow to support paying bank interest. Meanwhile, in the market, there are currently many shophouse projects that have been completed but are still left empty, meaning tens of billions of dong are idle.

Ms. Pham Vinh (Hai Ba Trung District, Hanoi) revealed that her shophouse located in Yen So Park is currently closed. “ Before the epidemic, there were businesses renting it as a warehouse. However, since the epidemic, very few customers have come to ask to rent. The rental price they offer is also very cheap, so my husband and I have left it unused until now ,” Ms. Vinh shared.

A survey by VTC News reporters also shows that the current shophouse segment in Hanoi is being offered for rent by many real estate sites at prices ranging from 8-10 million VND/month. Meanwhile, the purchase price of these shophouses at the time when the market was bustling ranged from 10-15 billion VND/unit.

In addition to the adjacent shophouses, the shophouses at the base of apartment buildings or shopping malls are also in a state of sluggishness. Shophouse owners, although waiting for tenants, eventually had to give up because the rent was too cheap, leaving them empty waiting for the market to recover.

"Cheap" rental prices of shophouses on real estate websites.

Mr. Truong Nam, a real estate broker in Hanoi, said that the period of outstanding growth of shophouses has passed, and now it is the period of decline of this once most profitable segment. “ 3-5 years ago, shophouse prices increased rapidly, but now they are falling rapidly. This is in line with the general trend of the real estate market. In addition, due to the difficult economic situation, many businesses on large, deserted streets have returned their premises. Shophouses that are already "unsold" are even more difficult to rent.

In addition, part of the reason comes from the fact that many real estate projects build too many shophouses while demand does not correspond to supply, leading to the situation that this segment is sluggish and has a much lower price than other real estate segments ," Mr. Nam explained.

Dao Bich

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