HCMC leasing market sees plunging demand as workers leave

Long owns a number of houses for rent near Linh Trung Industrial Park in HCMC's Thu Duc City, but over half of them are currently vacant as workers left.

"I have lowered rents and even allowed delayed payment from some tenants, but many have left for southern provinces without any idea when they would return."

This is the first time the landlord has ever seen such a high vacancy rate.

Hong, who owns houses for rent in Tan Phu District, have nearly 10 units vacant.

Revenues from rent have dropped by half from pre-pandemic level, which lays more pressure on her duties to pay her bank loans.

"I can only lower rents but cannot give 100 percent discount as I have a financial burden of my own," she said, adding that 50 percent of the construction price tag comes from bank loans.

Shophouses in the city are also facing a similar challenge, as some landlords struggle to find tenants even with a 50 percent discount, after Ho Chi Minh City saw tens of thousands of workers leaving after the social distancing period due to unemployment and plunging income.

In the city of 13 million, apartment rents have dropped by 20-40 percent in some areas, but vacancy is still high, according to some landlords.

Vacancy among serviced apartments, which are typically leased to expats and high-income businesspeople, are around 30 percent.

This has cut into landlords’ income by 40-50 percent.

Phan Cong Chanh, CEO of real estate developer Phu Vinh, said investing in property for rent is facing difficulties due to Covid-19 impacts.

Before the pandemic, this type of asset was considered safe thanks to frequent and stable revenues and the possibility of rising property prices, he said.

But the fourth Covid-19 wave has left landlords at risk, showing they need to better manage their investment to avoid losses, he said, adding landlords should only borrow at most 30 percent of their total investment from banks.

Trang Minh Ha, chairman of real estate developer North Stars Asia, said demand is now at a record low, and it would take a long time for the market to recover.