Local real estate investors are not eager to build apartments for rent due to a shortage of the government’s supportive policy, leaving foreign companies reining the segment for years.
Surveys from the real estate market consultancy CB Richard Ellis Vietnam show most apartment leaseholders in Hanoi are foreigners.
Only around 2,000 apartments were rent out in the first three months of the year, which is much lower than the sales of houses, villas and even offices for rent. Analysts said despite the limited number of apartments for rent, their rental was incredible high that even medium- and high-come earners cannot afford.
Another property market consultancy Savills Vietnam said in a report that the average apartment rental increased 4 percent year-on-year to US$27.5 per square meter monthly.
The monthly rental of an A-class apartment ranges from $34 per square meter to $39, which sees leaseholders of a 50-square-meter apartment have to pay a monthly rental of about VND30 million ($1,500).
The amount of apartments for lease makes only 19 percent out of the total number of accommodations for rent in Ho Chi Minh City, while the amount in the capital city of Hanoi is even lower.
“In developed countries, the rate of people living in houses and apartments for rent is very high, with Korea’s 30 percent and Swiss’ 60 percent. Different from them, locals in Vietnam are not interested in that kind of living accommodations,” said Nguyen Manh Ha, head of the Housing and Real Estate Management Department.
Analysts noticed that investors were not eager to invest in projects on apartments for rent as there is no supportive policy. Bureaucracy for investment licenses also makes investors shun apartments for rent.
“When property investors have vacant lands, they will be willing to opt for building commercial houses, which have significantly higher return rate than apartments for lease,” a real estate broker told Dau Tu Tai Chinh Newspaper.
“Therefore foreign property companies with strong financial base and professional management capability have dominated the leased apartment segment for years.”
Expert recommended the government should exempt land usage taxes for leased apartment projects and provides builders with preferential lending rate.
“Local people should switch their mindset of owning a house at any cost to renting a house. But picking a leased house is a very tough task. Apartments for rent are quite popular in big cities, but most leaseholders and landlords usually enter an unofficial agreement,” said Nguyen Tran Nam, deputy minister of construction.
Early in March, the State Bank of Vietnam had ordered all lenders to limit credit to non-production sectors at 22 percent of total loans by June 30, and at 16 percent by the end of the year.
Following the central bank’s policy, lenders have tightened lending for real estate and stock market transactions and raised interest rates to as high as 22 percent per annum to these sectors.
