Rising Rent Prices Prompt Young Adults to Purchase Homes on Installments

Rent prices for apartments and houses have been steadily increasing, leading many young adults to consider an option they may not have previously thought about – buying a home on installment. This trend is driven by a combination of favorable market conditions and attractive policies from developers.

Rent Prices on the Rise

A survey conducted on Batdongsan.com.vn, a popular real estate website, shows that the average rent for a one-bedroom apartment in the Thủ Đức and HCM City areas is currently around 8-9 million VND per month ($344-$387 USD) for a 40-square-meter unit. For studio apartments with an area of approximately 35 square meters, the average rent ranges from 5-7 million VND per month ($215-$301 USD). As you move closer to the city center, the rent prices increase even further.

In the neighboring area of Dĩ An (Bình Dương), apartments with areas of 60-80 square meters are being rented for around 8-13 million VND per month ($344-$559 USD) depending on size and furnishings. In fact, it has become difficult to find available apartments for rent due to the high demand.

Investing in Homeownership

Recognizing the increasing demand for rental properties, many young adults between the ages of 28 and 35, who have stable incomes, are taking advantage of favorable installment plans offered by developers to purchase their own homes. This allows them to generate rental income while also building long-term assets.

The rapid growth in apartment prices has made it challenging for many to afford homeownership, leading to a surge in the demand for rental properties. This has created a stable customer base for investors who choose to buy apartments for rental purposes.

According to data from the Vietnam Association of Realtors (VARS), apartment prices in Hanoi increased by 16% at the end of 2023 compared to the beginning of the year. Similarly, in Ho Chi Minh City, prices have entered a growth cycle since the third quarter of 2023. Many apartment projects have seen price increases of up to 40% compared to the peak of the pandemic and 20% compared to mid-2022.

Renting as a Popular Choice

As the cost of owning a home continues to rise, more families are opting to rent instead. According to PropertyGuru’s Consumer Sentiment Study (CSS), high house prices combined with economic difficulties have led to an increased interest in renting properties. Condominiums are the most sought-after type of rental property (43%), followed by private houses (18%) and apartments (18%). Only a small portion (9%) are interested in renting townhouses.

In this context, many young adults with stable incomes are choosing to shift their focus to homeownership by making use of reasonable installment plans offered by developers. This is particularly evident in affordable housing projects on the outskirts of Ho Chi Minh City, where the majority of homebuyers are young adults. Some apartment projects with prices ranging from 1.4 to nearly 2 billion VND per unit ($60,000-$86,000 USD) are mainly targeted towards young customers, accounting for 60-70% of buyers.

For example, the recently introduced Phú Đông SkyOne project in Dĩ An has attracted significant interest from young buyers. The units, priced from 1.4 to 1.8 billion VND ($60,000-$77,000 USD), make up 75% of the total number of units in the project. The projected rental demand for these units is expected to reach around 40% due to their proximity to industrial zones, attracting professionals, engineers, and high-ranking personnel who require long-term accommodations. Furthermore, the lower price range makes these units more accessible for buyers, sellers, and renters alike.

Investment Opportunities

Savills experts believe that this is a favorable time to invest in rental properties. Over the next 3-5 years, the supply of apartments in central Ho Chi Minh City will remain scarce due to limited land resources and legal obstacles. This scarcity will allow investors to sell their properties at a higher price after a period of renting. The return on investment for rental properties remains stable, providing a consistent rental income.

According to Đinh Minh Tuấn, director of Batdongsan.com.vn in Southern Vietnam, the rental yield for investment properties in Ho Chi Minh City increased to 4.6% in 2023, showing improvement over 2022. With rent prices expected to increase by 4-6% in the first few months of 2024, the rental yield is predicted to reach 4.9% – similar to pre-pandemic levels. Consequently, the demand for investment in the apartment market is expected to rebound.

Nguyễn Văn Đính, Chairman of the Vietnam Association of Realtors, highlights that the perception of apartments as non-profitable assets has been shattered. Investing in apartments for rental purposes has become a popular trend in large cities, as it provides a steady monthly income and the potential for price appreciation.

The real estate market has become more promising as business activities continue to recover, leading to increased demand for housing in major urban areas. With stable incomes, young adults now have the opportunity to choose apartments with reasonable and secure installment plans.

As the market evolves, several major developers have begun offering innovative policies to help young buyers purchase homes with installment payments equivalent to rental costs. By guaranteeing a maximum interest rate, homebuyers can avoid the risks associated with fluctuating interest rates, making homeownership more accessible.

In conclusion, rising rent prices have motivated many young adults to explore homeownership through installment plans. Investing in rental properties allows them to generate income while also building long-term assets. With the real estate market showing promising signs, young adults with stable incomes are taking advantage of reasonable installment plans to fulfill their dreams of homeownership.