Written by Dustin Trung Nguyen, Head of IQI Vietnam
VIETNAM REAL ESTATE MARKET OVERVIEW
Residential Market
Ho Chi Minh City (HCMC) has banned apartment owners from leasing their properties for short durations as part of efforts to curb unauthorized Airbnb-like services.
Only licensed businesses offering tourism services will now be allowed to lease properties for short-term stays, although the authorities have not clearly defined what constitutes a “short” duration.
With the rapid increase in apartment towers across Vietnam’s largest city, many owners have turned to short-term rentals, using platforms like Airbnb and social media to connect with customers. However, most of these rental incomes remain untaxed.
The popularity of Airbnb-style rentals has led to conflicts between short-term tenants and long-term residents, who often complain about noise disturbances late at night and cleanliness issues.
Rising Property Prices and Affordability Challenges
Soaring property prices have left many young people unable to rent or buy homes.
According to property analyst Le Quoc Kien, young people whose parents own homes in Hanoi and HCMC often have no choice but to live with their families to save money. With average salaries ranging from VND 10-15 million, homeownership has become a distant dream.
A recent Global Property Guide report ranked Hanoi as the 11th most expensive city in Asia for renting.
- The average rent for a two-bedroom unit in Hanoi has reached US$715, surpassing rental rates in Kuala Lumpur, Jakarta, and Mumbai.
A Vietnam Association of Realtors (VARS) bulletin highlights that house prices continue to outpace income growth, making homeownership increasingly unaffordable.
- VARS estimates that to buy an average apartment in Hanoi, a household would need to earn VND 45-210 million per month, equivalent to 2.3 to 10 times the actual incomes of most people.
- Nguyen Van Dinh, chairman of VARS, attributes rising prices to a supply shortage, as developers continue to cater mainly to high-income buyers and speculators, leaving low- and middle-income buyers with limited options.
A report by the Ministry of Construction stated that apartment prices in HCMC increased by 20-30% in 2024.
Affordable housing, which was once priced under VND 30 million per square meter, now starts at VND 45 million.
A small apartment in Thu Duc City is now priced at nearly VND 2.5 billion.
Commercial Market
Hanoi’s Shophouses Struggle Amid E-Commerce Boom
Many shophouses in downtown Hanoi have been left vacant as shop owners struggle to keep their businesses afloat due to the rise of e-commerce.
- Thu Phuong, a former shop owner in Hanoi, recently vacated her 70-square-meter fashion store in Cau Giay District, after closing two other outlets earlier this year.
- While revenues from her three stores used to be sufficient to cover rent, declining sales forced her to end her lease contracts. She is now shifting her business online and looking for a smaller store inside alleys to reduce costs.
Declining Demand for Physical Retail Spaces
|Hanoi’s once-bustling commercial streets are seeing an increasing number of vacant outlets, as landlords struggle to find tenants:
Kim Ma Street, known for its fashion stores and restaurants, now has over 40 closed storefronts.
Nguyen Thai Hoc Street is experiencing similar vacancy trends.
The Changing Landscape of Retail Investments
- Duc Huy, a property broker with five years of experience, noted that the number of available shophouses has risen by 15-20% compared to last year.
- A five-floor house on Kim Ma has remained vacant since August, despite rent prices being lowered by 10% compared to two years ago, now at VND 50 million (US$1,960) per month.
Shifting Consumer Preferences & Market Adjustments
- In previous years, landlords could demand high rents, and tenants were willing to pay. However, that is no longer the case.
- Nguyen Chi Thanh, vice chairman of the Vietnam Association of Realtors, stated that shophouses face major challenges, as consumers increasingly prefer shopping in malls or online.
- Many businesses are redirecting investments away from physical locations and focusing on online marketing, which attracts more customers with lower overhead costs.
- Some analysts also highlight that Hanoi’s shophouses often lack sufficient parking spaces, making them less convenient for customers compared to malls.
Declining Profitability of Shophouse Rentals
- Dinh Minh Tuan, business director at listing platform Batdongsan, observed that the profitability of shophouse rentals has been declining due to shifting consumer behavior and increasing online sales competition.