Hanoi Apartment Rental Market Sees Sharp Yield Decline, Disillusioning Landlords
Hanoi’s apartment rental market is experiencing a significant downturn in rental incomes, leaving property owners who financed their purchases with mortgages facing considerable financial strain. Many investors, who had anticipated steady rental income to offset their loan repayments and generate profit, are now finding themselves in a precarious position as rental yields plummet.
Thu Trang, a 36-year-old Hanoi resident, exemplifies this trend. Last year, she secured a VND2 billion (approximately US$76,100) bank loan to purchase a three-bedroom apartment in Gia Lam. The property itself cost VND4.8 billion. Her initial projection was to lease the apartment for around VND15 million per month, a sum she believed would comfortably cover her mortgage payments with a substantial portion left as profit. However, reality has fallen short of her expectations.
Incomes from leasing apartments in Hanoi have fallen to low levels, discouraging people who have mortgages to pay.
Trang faced a month-long vacancy before finally securing a tenant. The agreed-upon rent, however, was significantly lower than anticipated, settling at VND11.5 million per month. This leaves her with a monthly shortfall, as she states, “Each month I still have to pay the bank VND5–6 million.” Consequently, Trang is contemplating selling her apartment once the property market shows signs of recovery.
Another landlord, who goes by the name Tuan, owns a 67-square-meter apartment. He reports that rental rates for units of his size have remained stagnant for the past year, hovering between VND7–8 million per month. This stagnation is particularly concerning given that apartment prices in the same category have seen a considerable increase of 20–30% over the same period. Tuan calculates his current profit margin to be a mere “around 2.8–3%.”
These anecdotal accounts highlight a broader disillusionment among landlords in Hanoi. A significant number of these investors had leveraged financial instruments, taking out bank loans to acquire apartments during a period of rapidly escalating property prices. Their strategy hinged on the expectation that rental incomes would rise in tandem with property values.
Shrinking Yields Amidst Rising Prices
Data from real estate services firm CBRE corroborates the landlords’ concerns. The firm reports that the average rental yield for apartments in the Vietnamese capital has dropped to between 3% and 3.4%. This represents a notable decline from the more than 5.1% yield observed in 2023.
Online property listing platform Batdongsan echoes these findings. Nguyen Quoc Anh, the deputy chief executive of Batdongsan, observes a consistent trend of falling rental yields despite ongoing increases in apartment prices. Currently, apartment prices are ranging from VND80–90 million per square meter, marking an approximate 30–40% surge from the previous year. In stark contrast, rental rates have only climbed by a modest 8–10%, and in many locations, they have plateaued entirely.
Anh forecasts a continued downward trend for rental yields. He attributes this projection to a combination of factors, including an abundant supply of new properties, which are predominantly concentrated in the high-end segment, and persistently elevated prices in the secondary property market.
The Investor Landscape: From Short-Term Gains to Long-Term Accumulation
Nguyen Van Dinh, chairman of the Vietnam Association of Realtors, provides further context, stating that apartment rental yields in major Vietnamese cities are typically around 3%, and in some instances, fall below 2%. He notes that the disparity between significant capital investment – often VND5–6 billion – and declining rental returns has led to disillusionment among many inexperienced investors.
However, Dinh points out that apartments remain an attractive proposition for experienced investors with substantial capital. These investors are primarily focused on long-term asset accumulation, viewing rental income as a secondary source of revenue rather than the primary driver of their investment strategy. Their main objective is capital appreciation.
Apartment buildings in south Hanoi. Photo by VnExpress/Ngoc Thanh
Future Market Pressures and Investment Considerations
The outlook for Hanoi’s rental market suggests continued pressure in the coming years. Projections indicate that between 2026 and 2028, tens of thousands of new apartments are expected to become ready for handover. This influx of new supply is anticipated to further intensify competition in the rental market, particularly in suburban areas.
CBRE forecasts that the market will see an annual addition of over 33,000 new apartments during this period. This development underscores the need for caution among new investors.
CBRE advises that in the current environment of abundant supply coupled with high property prices, new investors must meticulously evaluate investment efficiency, cash flow projections, and potential liquidity risks. The firm recommends a strategic shift away from rapid buy-and-sell tactics towards medium- and long-term investment approaches. Furthermore, it emphasizes the importance of careful project selection to mitigate risks and ensure sustainable returns in the evolving Hanoi real estate landscape.
