Top range apartments pull expats

Foreigners living and working in Vietnam are driving up demand for high quality apartments

John was happy to find a well-furnished apartment for living and working. Yet the apartment does not belong to a serviced apartment building built to lease exclusively to expatriates. Trung Hoa-Nhan Chinh is actually a housing complex developed by local contractor Vinaconex to sell to Vietnamese.
It used to be painstaking for expatriates like John to find a locally built quality apartment, but developers have recently begun capitalising on a real estate boom to build high-rise complexes to sell to an increasing number of affluent locals. Many of these complexes are of good quality and Vietnamese owners buy them to lease to foreigners.
John is not the only foreigner who chose Trung Hoa-Nhan Chinh to live in. The complex, which is about seven kilometers from Hanoi’s downtown area, has become a community not only for well-off Vietnamese, but also a lot of foreigners, especially Koreans.
Closer to West Lake, the newly completed first phase of the Indonesian-bankrolled Ciputra International City is drawing more foreigners to lease spacious villas and apartments. A 120-square metre apartment that can be resold for about $100,000 at market price is being let for $800 a month.
More expatriates are looking for properties to lease in Ciputra as its developers hope to complete 2,000 villas, 50 high-rises and the country’s biggest shopping mall within the next few years. The United Nations International School has been set up in Ciputra for foreign children there.
Down in Ho Chi Minh City, Phu My Hung residential complex has become a favourite address for expatriates. Alongside the Waterfront, a high-end serviced villa complex built for lease to foreigners, many of Vietnamese owners there are leasing their properties to Koreans, Taiwanese and Singaporeans.
Khaisilk, a restaurant operator and silk cloth trader, has bought a number of apartments and villas at Phu My Hung and leased them to expatriates, who can find Franco-Vietnamese Hospital, some international schools, a golf course, a spacious playground and in the future, a shopping mall and cinemas nearby.
Newly developed residential developments such as Phu My Hung and Ciputra are a relief for expatriates who find it difficult to rent a serviced apartment in the downtown area. Rental levels at new developments range from $600 to $1,500, much lower than the rate a serviced apartment charges.
The tight serviced apartment market, with low vacancy and high rentals, are actually forcing expatriates to look for accommodation in high-quality residential developments originally built to sell to Vietnamese.
According to market updates by real estate consultant company Chesterton Petty Vietnam, about 96 per cent of Hanoi’s 1,400 serviced apartments have been leased out at an average price of $20 per square metre a month. In Ho Chi Minh City, only 8 per cent of 2,000 serviced apartments were vacant by the end of the third quarter.
“It is now difficult to look for a serviced apartment in Sedona Suites or Hanoi Towers,” said Nguyen Xuan Dao, managing director of Vietnam Property, a real estate marketing and management consultant company. “Almost all buildings are full.”
Rising foreign investment, which is expected to reach $6 billion this year compared to $4.5 billion last year, and the level of official development assistance, which remains at more than $3 billion a year, are drawing more foreigners to Vietnam.
John said developers were asking a lot for serviced apartments now, adding that they are “making hay while the sun shines.”
The serviced apartment market has become tighter over the last few years due to increasing demand and small supply. Ho Chi Minh City recently saw the opening of LTT Court, HBT Court, Nguyen Du Park Villas and Saigon Residences, but all of them are small projects with about 40 units each. A new supply in Hanoi is much smaller, with about 35 apartments at the Sofitel Plaza as the only noteworthy relief to a tight market.
Expatriates in Hanoi can breathe a sigh of relief by the end of next year with three new serviced apartment buildings coming on the market: the 190-unit Pacific Place, 80-unit Skyline Building and the DMC office and apartment building opposite the Daewoo Hotel.
Until then, expatriates can expect to lease apartments from Vietnamese who have already bought luxury properties to invest in. Vietnamese buyers are paying $1,000 to $2,400 per square metre at luxurious developments such the Manor, the Lancaster, Pasteur Court, Avalon or Saigon Pearl.
Dao from Vietnam Property said monthly rental rates at these apartments could be between $800 to $1,500 a unit, lower than the levels of the existing serviced apartment buildings as new projects often have a mixture of both Vietnamese and foreign residents.
“Many Vietnamese are not used to living in a luxury environment and they could drive down the value of buildings in the eyes of foreigners,” said Dao.
New local-built projects will change the market but John always thought serviced apartments were a good investment.
“This will still be true in the future because as Vietnam develops and joins the WTO, the number of expatriates will increase and therefore demand will increase,” he said.
Chesterton Petty Vietnam also predicted that occupancy rate would remain more than 90 per cent despite new buildings.