It’s Time to Shift Focus from Land to Apartments: Investors are Now Hunting for this Segment

The real estate market is constantly evolving, and investors need to stay ahead of the game. While land used to be a prime investment option, it has been experiencing a prolonged slump for the past year. Prices have plummeted, with many areas recording significant losses. However, there is one segment that is currently in high demand – apartments in condominiums.

The Decline of Land Investments

According to a recent report by the Vietnam Real Estate Brokers Association (VARS), the land market is no longer in a “hot” state like before. Land prices have dropped by 30-40% and are still difficult to sell. However, it is important to note that these price reductions are relative to the peak prices and have not yet reached their true value.

In the past two years, the real estate market has experienced a slowdown, and land has been the most heavily affected. Investors have lost interest, and the demand for immediate occupancy is low. Furthermore, the amended Real Estate Business Law, effective from January 1, 2025, prohibits land subdivision in certain areas, making land investments even more challenging.

“In the short term, tightening land subdivision might reduce the attractiveness of land investments and push land prices even higher. However, in the long run, it will help develop a transparent and sustainable market, preventing speculation and wastage of land resources,” says Mr. Le Hoang Chau, Chairman of the Ho Chi Minh City Real Estate Association (HoREA).

The Rising Demand for Industrial Apartment Condominiums

In contrast to the declining land market, apartment prices have been consistently rising since 2023 and show no signs of cooling down. In fact, prices have surged immediately after the Lunar New Year. The Ministry of Construction’s report highlights that apartment prices at the end of 2023 remained exceptionally high, marking the 19th consecutive quarter of continuous price increases. The scarcity of supply will likely keep the upward trend going.

Observations show that apartment prices in Ho Chi Minh City and Hanoi have increased by 50-100% over the past 3-5 years, reaching levels of 2-5 billion VND for a 2-bedroom apartment and 6-10 billion VND for a 3-bedroom apartment. The rising costs have made apartment investments less attractive, despite the increase in rental prices.

As the prices of apartments in Hanoi and Ho Chi Minh City continue to soar, investors are turning their attention to industrial apartment condominiums. This trend initially emerged in newly developed condominium areas like Binh Duong and Long An, but it has now shifted to the northern region, including Bac Ninh, Bac Giang, Vinh Phuc, and Thai Nguyen.

In 2018, Mr. Nguyen Hai in Hanoi was introduced to an investment opportunity in an apartment project in Binh Duong with prices averaging over 20 million VND per square meter, around 1.3-1.5 billion VND for a 2-bedroom apartment. At that time, he hesitated to invest, believing that it would take another 5-10 years for the provincial apartment segment to mature. However, just two years later, the rental occupancy rate for the condominium complex reached over 90%. The prices of the apartments also increased by 50% compared to the initial sales price, driven by high rental demand and young people looking to purchase apartments for living purposes.

According to Ms. Nguyen Thu Hang, Director of Research at Savills, the development of industrial zones has led to an increasing demand for housing from foreign experts and workers in these areas. Foreign experts tend to prefer high-end apartment segments with full amenities rather than living in individual houses. A survey of the apartment segment in major industrial areas in Northern Vietnam shows positive signs, with limited supply and continuous price increases.

For example, in Bac Ninh, the Vinhomes Bac Ninh project (at the intersection of Tran Hung Dao and Ly Thai To) offers rental prices of 10 million VND per month for a 1-bedroom apartment, 15 million VND per month for a 2-bedroom apartment, and 20 million VND per month for a 3-bedroom apartment. These rental prices have increased by approximately 30% compared to 2021. In Thai Nguyen, the Tecco Elite City project offers rental prices of 10 million VND per month for a 2-bedroom apartment, with apartment prices ranging from 1.3 billion VND. This translates to an annual rental yield of around 8-9%. Moreover, these apartments have also witnessed a 15-20% increase in value since their initial launch in 2021.

With average prices ranging from 1.5-2.5 billion VND per unit, industrial apartment condominiums in developing provinces have become an attractive investment option for many. A recent example is the VIC Grand Square project in Viet Tri, which attracted a significant number of potential buyers, including those who already owned property in Phu Tho province and were looking to invest in additional rental apartments. Investors from Hanoi are also seeking opportunities in these industrial provinces.

“The wave of real estate investments near industrial zones is on the brink of a massive boom due to the increasing industrial development and FDI attraction in Vietnam. New areas such as Thai Nguyen and Phu Tho will witness a range of infrastructure, logistics, and commercial developments, creating lucrative investment opportunities for savvy investors,” says Mr. Vu Cuong Quyet, CEO of Dat Xanh Miền Bắc.

In conclusion, it is time for investors to shift their focus from land to the booming apartment market. Industrial apartment condominiums present a promising opportunity due to the growing demand driven by industrial development and foreign investment inflow. With their rising popularity and potential for high rental yields, these apartments have become an attractive choice for investors looking to secure profitable investments.

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