House owners prepare to increase rent after Tet

By Nguyen Tieu   January 21, 2024 | 04:29 am PT
Many apartment and townhouse owners are planning to adjust rental rates by 15-20% after the Lunar New Year holiday.

Owning a 53-sq.m condo apartment on Thong Nhat Street in Ho Chi Minh City’s Go Vap District, Linh, 48, said she is considering raising the rent from VND6 million (US$245) to VND7.5 million per month after this Tet, which will fall on the second week of February.

She believes the increase is reasonable because she has kept the rent unchanged for nearly two years.

However, she is also open to negotiating with tenants.

"I still have to wait and see what the tenants decide. In a worst-case scenario, if they refuse the increase, I'll have to spend extra money finding new tenants," said Linh.

Another landlord, Xuan, who owns a house on Nguyen Thi Nho Street in District 10, plans to raise the monthly rent from VND9.5 million to VND11 million starting from the new lunar month on Feb. 10.

She hasn't increased the rent since 2021, and is hoping her tenant will accept the adjustment.

She said the new rental price is not high compared to the market price, and it's not an unreasonable increase since she has kept the price stable for years.

"Everyone is worried about losing tenants, but renting out the house is our family’s main source of income, so raising the rent is necessary," she said.

Townhouses for rent on Le Loi Street in HCMCs District 1. Photo by VnExpress/Quynh Tran

Townhouses for rent on Le Loi Street in HCMC's District 1. Photo by VnExpress/Quynh Tran

Phuoc Hoa, who rents premises on Le Dai Hanh Street in District 11 to sell leather shoes, has been left uneasy after learning about the landlord’s intention to increase the rent by 15% to around VND4 million per month after Tet.

Hoa said his business is currently stable but still, it was not as good as in previous years and spending more on renting the premises will put extra pressure on small businesses like his.

"I am negotiating with the landlord to see if we can reduce the increase a bit, as we don't know if the economy will improve this year. Relocating the business means we'll have to redo many things, and it's not cheap at all," he said.

In another case, Quan, an IT engineer currently living in District 7, has just received a notice of a VND1 million increase in rent from March.

He is negotiating with the landlord to either keep the current price until mid-year or accept a slight increase. At the same time, he is looking around to see if he could find other options within his budget in case the negotiation fails.

"Given the ongoing economic difficulties, I hope the landlord can maintain the rent until the end of this year. If not, I'll have to consider ending the contract," he said.

The challenging economic situation has led to a less active rental market for apartments and townhouses in 2023. Rental demand has also sharply declined for most types of properties.

According to a survey by the online real estate brokerage company Rever, in the third quarter of 2023, the demand for renting apartments in HCMC's inner city areas such as District 3, District 4, and Binh Thanh District dropped by 33%, 37%, and 11% respectively.

Suburban districts with abundant supplies of rental apartments like Thu Duc City and District 7 also saw decreases of 21%, 24%, and 35% compared to the end of 2022.

Regarding rental prices, according to Rever, apartment prices in inner-city districts remained relatively stable last year, while suburban areas saw a 5-10% decrease in some projects.

Data from Batdongsan, a property buy and sell website, shows that by the end of 2023, there was a decline in rental property searches, including a 24% drop for condo apartments, 30% for houses, 32% for room rentals, and 31% for shops and stalls compared to February 2023. However, property rental prices have still increased by 6% over the past year.

In terms of return on investment, property owners who rent out their properties are not making significantly higher profits.

For apartments, in 2023, the average selling price of apartments in HCMC was around VND45.5 million per square meter, but rental prices for apartments have not grown proportionally, according to the website.

Explaining the trend of rising rental prices, Dinh Minh Tuan, director of Batdongsan in the south, said that normally after Tet, prices tend to rise, not only for rent but also for most essential goods and services.

This period is when many people are willing to accept price adjustments.

Additionally, a new business cycle would start after Tet, and many businesses choose to launch and open new offices and stores at the beginning of a new lunar year, which means the rental demand usually increases during this period, he said.

Moreover, after the government tightens regulations on fire safety for rental properties, there may be a decrease in the supply of accommodations that meet those safety requirements.

Tuan predicts that in the first few months of 2024, apartment rental prices in HCMC could increase by 4-6%, and the rental yield could return to around 4.9%.

However, the increase will not be significant because landlords must be mindful of tenants' budgets to avoid losing them, he said.

Trinh Thi Kim Lien, sales director at real estate brokerage Dat Xanh Services, said last year recorded a shift in consumer behavior, with more people choosing to rent rather than buy property due to the sluggish economy, limited housing supply, and high property prices. This shift has led to increased demand for rentals.

However, there is still differentiation among rental property types. Low-end housing and worker accommodations remain unoccupied, and landlords had difficulties looking for tenants, while rental apartments in the mid-range segment and higher continue to maintain good business.

Properties located closer to city centers, offices, schools, and supermarkets are in high demand and can command higher rental rates, she said.

"In the context of skyrocketing real estate prices, the dream of owning a home is becoming increasingly out of reach for low-income individuals and laborers. Renting a house has become the only option, but if rental prices also increase significantly, it will put more pressure on them," she said.

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