VNRE - Vietnam’s serviced apartment segment still holds great potential, even when compared to other housing segments, a recent conference on the subject heard.
In the face of the entire real estate industry’s recession due to macroeconomic difficulties, the segment is facing many challenges, said Marc Townsend, managing director of CBRE Vietnam at the "Vietnam Serviced Apartment Investment Conference 2011”.
“They include falling rents and fewer tenants due to the worsening economic situation, as well as stiff competition from individuals buying apartments for sublease,” he said.
However, the serviced apartment segment has a great chance to grow as the inflow of foreign direct investment (FDI) returns as the local economy recovers, the rapid urbanization process in major cities continues, the growth of Vietnamese manufacturing industries holds steady, and the number of international travelers to Vietnam continues to rise.
There are many other factors that could boost the future development of the segment, including the growth of investors’ appetite for operating assets and the lack of existing products.
There are only 3,595 existing serviced apartment units in Ho Chi Minh City, while the number of work permits for foreigners in the city last year jumped to 6,700, excluding ‘grey’ expats, or those working without permits, Townsend added.
According to CBRE, HCMC still leads the country in the number of serviced apartments available with 3,595 units, followed by Hanoi with 2,300 units, and Da Nang with only 146 units.
CBRE believes that the number of serviced apartments on offer is too low to meet the needs of the foreigners and the nearly 81,000 overseas Vietnamese who work in Vietnam.
In the future, the number of foreigners working in Vietnam will rise, leading to increased demand for serviced apartments, but the existing supply is too limited for this expected upturn in demand, as are the plans to develop this potential market.
Ben Thanh Luxury project, one of only two projects in the center of HCMC where apartment buyers will be granted permanent ownership, will be invested and transferred into high-end hotels for lease, a form of investment in serviced apartments, said Nguyen Cao Tri, Chairman of Ben Thanh Real Estate Investment Joint Stock Co.
The capital recovery period is six years if investment is shifted into serviced apartments, a temporary solution while the real estate market is frozen, he added.