Serviced-apartments-market-in-Hanoi-waiting-for-the-FDI-inflows

Serviced apartments market in Hanoi – Vietnam waiting for the FDI inflows

The supply of serviced apartments in Hanoi has surpassed the 5,000-unit mark, but the rental prospect is still limited, expecting a lot of FDI inflows and foreign experts to Vietnam.

Serviced apartments market in Hanoi waiting for a boost from the FDI inflows.

If the serviced apartment supplies sluggish in the last 4 years, from 4,000 units in 2016 to about 4,700 – 4,800 units in the years 2017 – 2019, the year 2020 is the breakthrough of the supply in this segment with 5,380 units, an increase of 17% compared to 2019.

According to Savills Vietnam, for the whole of 2020, the average serviced apartment price in Hanoi is 25 USD/m2/month, down 5% compared to 2019. The rental price movement is also in line with the occupancy and development of this segment. Specifically, the rents of Grade A and Grade C serviced apartments both increased, while that of Grade B serviced apartments decreased slightly.

The common difficulties of Covid-19 caused the average occupancy in the fourth quarter of 2020 to reach only 67%, a decrease of 2 percentage QoQ. While Grade A serviced occupancy recorded an increase of 5 QoQ, Grade B occupancy decreased 13 ppts q-o-q as newly launched projects recorded low occupancy.

Mr. Tran Van Xuyen, the representative of Hanoi Real Estate Co., Ltd., said that if in 2018 and 2019, the serviced apartment market develops rapidly, but in 2020, the serviced apartment market had frozen.

The history of serviced apartment rental search and transaction through the information channel of Hanoi Real Estate Company Limited is mainly from European customers. However, due to the negative impact of Covid-19, foreign tenants do not come to Vietnam, the serviced apartment market has slowed down and the rate of tenants in 2020 is very small, mainly from high-end delivery specialists.

Representatives of Hanoi Real Estate assessed that in the second half of 2020, the serviced apartment market in Hanoi will heat up, but not significantly.

The prospects are still unpredictable

Market research data of Savills Vietnam shows that brand management units are operating 44% of the total number of units from 18 projects. In which, 9 Grade A brand management units provide 93% of total branded units. Grade B and Grade C still limit the presence of international operators.

In the fourth quarter of 2020, Accor Hotel Business Group (France) launched Novotel Hanoi Thai Ha Hotel, located in the center of Dong Da district, with a scale of 338 rooms, including studios, serviced apartments, Premium suite rooms, aimed at foreign visitors.

Also in the fourth quarter, the Hanoi serviced apartment market welcomed new investors from Thailand. Specifically, Onyx Hospitality Group has launched the Saffron Collection brand for the first time in Hanoi as well as in Vietnam by putting into operation The Five Residences Hanoi Project – an apartment complex for domestic and foreign professionals, personnel with 122 rooms with diverse areas from 63 m2 to 123 m2.

According to Mr. Matthew Powell, Director of the Hanoi and Da Nang offices of Savills Vietnam, cooperation between domestic investors and foreign brand managers is rising, ensuring the operations optimized for large projects. He said that the wave of serviced apartment supply will rising after a year delay by Covid-19 and tenants are expected to increase in 2021 thanks to the heat from the industrial park market.

According to the Foreign Investment Department, the newly registered FDI capital in Hanoi in 2020 is approximately 711.8 million USD, equivalent to 52% of the investment in 2019. Most of the FDI inflows into Hanoi come from Asian countries, of which Singapore and Taiwan are the two countries and territories that registered the largest investment in Hanoi. “Contributing 97% of FDI inflows, expatriates working in Asian companies continue to be expected to be the main source of tenants,” said Powell.

Regarding the serviced apartment supply in Hanoi in 2021, Mr. Powell said that the future supply will reach 2,186 units, from a total of 16 projects, of which 80% will come from projects in Tay Ho district and 20% in Nam Tu Liem, Ba Dinh and Dong Da districts.

Regarding the rental segment, according to the representative of Hanoi Real Estate Company Limited, with the impact of Covid-19, the serviced apartment market is unlikely to have big changes. The serviced apartment market outlook is highly dependent on the Covid-19 situation in the world, while the effects of Covid-19 are forecast to last 2-3 years.

ASL LAW is the top tier Real Estate law firm in Vietnam for. If you need any advice, please contact us for further information or collaboration.

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