by TRUONG DANG 01/04/2023, 02:38

Four trends to drive the Hanoi apartment market

According to Tran Quang Trung, Business Development Director at OneHousing, the high-end apartment segment is being reshaped by a new class of residents who prefer a comfortable lifestyle with many amenities and communities with similar tastes.

 In the long term, the apartment market will be a potential investment channel, especially in the East and West areas of Hanoi.

Rather than relying on speculation or land banking, investors are now preferring real estate that generates consistent cash flow and can be used for multiple purposes. The arrival of international visitors is forming a new rental price level in the Hanoi market.

Young adults flock to high-end apartments

Young people are now a significant force in the high-end apartment market. In the past, decisions to purchase a home were frequently based on parental advice and experience. Young people today have many experiences with luxury apartments as a result of studying abroad or traveling.

According to OneHousing's Center for Market Research and Customer Understanding of the Real Estate Industry, young people always expect a comfortable, convenient, safe life and a community of like-minded individuals, even if financial potential is insufficient. For a civilized and modern living experience, most young people prefer apartments with car parking and prioritize operational and utility services.

The "all in one" utility is valued by young families for easy weekend getaways close to the apartment building. This demographic will be served by "15-minute megacities," in which all daily needs can be met within a 15-minute travel radius. This demand will drive the future development of high-end real estate in major cities.

Because of easy access to information and trends, today's youth have an investment mindset from a young age.

They do not want to spend all their money on buying a house, even if they have more than 3 billion VND in hand. Instead, they want to have a luxury apartment to live in and a car. A reasonable solution is to spend 20-30% of their own capital to buy a house and pay monthly interest at a moderate level to have cash flow for other investments.

For qualified and educated individuals, their income will increase over time, at least 8-10% per year. In fact, house prices are also increasing rapidly, making it challenging to accumulate enough money to pay for a home in the future. Waiting too long can lead to paying a much higher price due to the current "price chase" market. A trend in Korea, where young people are giving up on buying a house due to high prices, is a reality that could happen in Vietnam.

Stable cash flow investment trumps surfing and speculation

To make a profitable investment in today's market, it's critical to prioritize factors that generate consistent cash flow over speculating or taking risks.

To accomplish this, investors should concentrate on the "three yeses": having a good legal status for easy transfer, being located in a rapidly developing residential community with high rental demand, and having a prime location with multiple utility services and professional management for future price increases.

Finding such real estate necessitates the involvement of investors with a good reputation and financial potential, as they require a large land fund for quality infrastructure and easy handover. Long-term success also necessitates legal compliance.

It is also critical to focus on the young and growing community, as they represent a new consumer class. To align with global trends, the quality of utilities and infrastructure should be at international standards, ensuring the property's value remains high and convenient for tenants. Furthermore, collaborating with large agencies on the project can help attract potential tenants and increase rental demand.

Multi-purpose investments: Limiting the risks

To reduce risk, investors today have several options, including simply purchasing a property to rent out, operating a serviced apartment or homestay business, leasing the property as a subsidiary, or even planning for their children's future property. High-end apartments are another viable option for achieving these objectives.

Investing in townhouses, for example, necessitates a large investment with low returns (around 2%). A townhouse in a city costs between 25 and 30 billion, but only earns about 50 million in rent per month.

Multi-purpose investors, on the other hand, can seize an opportunity by investing in luxury apartments instead. With the same amount of money, they can purchase 5 to 8 luxury apartments that rent for $15 to $20 million per month, generating three to four times the cash flow of townhouses.

Finally, investors are only interested in the returns on their investments. They anticipate a positive outcome after 5 years.

Foreign tourist boom spurs rise in rental prices

With traditional customers coming from Korea and Japan, the influx of foreign visitors is driving the formation of new rental prices in Hanoi's high-end apartment market. However, we have seen a surge of investment from Taiwan, Hong Kong, and even investors relocating from Ho Chi Minh City to Hanoi for investment purposes since the beginning of 2023.

This is primarily due to lower apartment prices in Hanoi compared to Ho Chi Minh City, with higher prices expected in the future.

Foreign customers' primary concerns are service standards and convenience. They have extensive experience in their respective high-end apartment markets and understand what constitutes a luxury apartment. As a result, when they visit Vietnam, they prefer to invest in reputable projects that follow a methodical investment strategy.

Due to the increased cost of capital and their preference for close-knit communities, foreign investors' involvement typically results in higher rental prices than other projects. As a result, the rental market receives consistent stimulus.