Last update: 17:03 | 12/06/2017
Experts have warned about a slowdown in the luxury apartment sector in Ho Chi Minh City as rental prices are dropping because of excessive supply.
Apartments were bought in recent years as speculative investments when there was a shortage of higher-quality properties available. But now there is ample supply. Rent boards for luxury apartments can be seen everywhere in District 2, District 4 and District 7.
The rental fees for an apartment in Masteri Thao Dien Residence range from VND9m (USD396) to VND30m a month. Cuong, a real estate broker, said he was having hundreds of apartment for rent and for sale.
"The best price for a two-bedroom apartment is USD600. Bigger apartments will cost more but the prices have dropped a lot compared to several months ago," he said.
Hoang Thu, a resident in HCM City, said she had bought six apartments for VND2.2bn (USD97,000) each. She plans to rent them out at USD500 per month. If the prices continue to decline, she has no option but to accept the reality.
Tran Khanh Quang, head of Viet An Hoa Real Estate Company, said sales in the past two years had been good with 50,000 apartments sold but most of them were affordable houses. Meanwhile, people had bought expensive apartments in the city centre mainly to earn from, especially the apartments in Binh Thach District or District 2.
Two years ago, an apartment cost VND2bn (USD88,000) and could be rented out for VND12m (USD528) a month, generating a profitability ratio of 0.6%. But now a VND4.5bn apartment can only be rented out for VND16m so the profitability ratio was 0.3%.
"If the profitability ratio drops to below 0.4%, investors will lower the prices as the supply exceeds the demand. It means the luxury apartment sector will no be longer attractive," he said.
Nguyen Hong Hai, deputy director of Okamura Sanyo Properties, also agreed that supply was exceeding demand after too many investments in the past two years.