Tran Hoang Minh Tuan bought an apartment in Binh Thanh District for VND7.2 billion (US$283,400), and is renting it out for VND18 million per month for a 3% yield, or even lower than bank deposit interest rates that are now at 5-6%.
He also rents out two other apartments, including through Airbnb, but neither have delivered the expected profits. He plans to sell all three next year and invest the proceeds in other asset classes.
Viet Quoc, a real estate investor in District 3, says his apartment rental yield used to be 7-8% annually but now only those bought before 2018 are profitable. One such is a 70-square-meter apartment he bought for VND3.1 billion that fetches VND13 million per month.
Similar units he bought after 2022 cost VND5 billion on average while their monthly rents are just VND14.5 million, or less than 3.5% yield.
Phuong Lan invested in a VND1.9 billion apartment in Thu Duc City, but it rents for only VND6 million per month. She says keeping the money in a bank will generate higher returns even before factoring in maintenance costs.
“Many people now see [apartment] rental as only a temporary solution while waiting for buyers.”
Data from real estate trading platform Batdongsan shows that the rental yields on apartments in HCMC has dropped from 4.6% last year to just 3.8-4% this year.
In comparison, yields are 6% in Indonesia and Thailand and 5% in the Philippines and Malaysia.
Property consultancy CBRE Vietnam says HCMC yields fell from 7-7.5% in 2015-16 to 5-6.5% in 2017-19 before hitting a record low of 2.5-4% in 2020-21 during the COVID-19 pandemic.
Dinh Minh Tuan, southern regional director of Batdongsan, says the widening gap between rents and prices has made apartment rentals a less attractive investment.
Over the last five years apartment prices in the country have increased by 59% while monthly rents have only risen by 10-15%.
Apartment prices in HCMC have increased by 17% this year, while rents have only risen by 3-10%.
The rental market has also struggled with low demand since the pandemic as tourism has only recently recovered and the economy continues to face many difficulties.
Duong Thanh Ha, sales director at Realty Home, a consultancy specializing in apartment rentals in HCMC, notes that more than 70% of apartments for rent in the city are temporary businesses.
The owners are only renting out their properties to cover maintenance costs while they wait to sell once the market picks up, she adds.
Experts say that while apartments may trail rooms and boarding houses in rental yields, they are still a profitable investment for those planning to sell eventually.
Tuan of Batdongsan says the total return on apartments, when factoring in both price appreciation and rents, is currently 12.5-17% a year.
“This rate of return is still appealing for those who want to build assets while earning rental incomes on the side.”
