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Whats with these ridiculous rental prices?
I think agents advertising apartments for $650 per month in places like Thang Long International Village, must be taking the mickey! I went to see these apartments for a friend and honestly is not worth even $400. Its cheaper to rent a house on Phuket Island in Thailand...go figure.
answered about 15 months ago by alpha
I’m with you Steve. In the last year or so, we’ve all seen a dramatic increase in rental prices. Some of it is just agents looking to cash in on the uninformed, but there seems to be a bit more to it as well. Property in Hanoi is much more than the commodity that many of us tend to think of it as. Owning land in Vietnam is an intense priority. There have been many periods where there was no fluid real estate market. The current one is in its (relatively) early days. For a long time, being a respectable Vietnamese family has meant the ability to pass on a parcel of land to a subsequent generation. This landed status has always been the key to future financial (and basic quality life) assurance. We’re currently dealing with a situation where the substantial numbers of overseas Vietnamese returning with funds that drive up overall market prices is coinciding with a massive generation of young families who are looking for their first home. Add to that the influx of people from neighboring provinces and you get a housing boom. Were all of these individuals solely concerned with finding a spot for themselves and their kids, you’d see an increase in overall rates that was proportional to the number of families seeking available plots. However, speculators are not oblivious to this apparent demand. They began buying up lots solely for the purpose of selling or renting. This has driven up rates but also accelerated the commodification. That’s the irony of what we’re seeing. Most Vietnamese who are in a position to avoid it are extremely adverse to the idea of renting a living space (businesses are different), but they’re also keen to turn a buck on those who will do so. And, by trying to invest in a resource whose value is determined by factors beyond market dynamics, they’ve inadvertently drawn its value back into pure market perspective. Many bought land hoping to be able to sell it at a profit in a year or two, and now realize that if they can’t sell it at that rate, the only rents that make the numbers work are HIGH. Previously, they may have never intended to rent it at all. This will survive as long as the post-WTO-inclusion foreign influx (coupled with the continued Vietnamese urbanization) continues and supports at least some of these rents. As soon as that falters, it will likely have ripple effects on the actual buying price of properties where speculation was the prime mover. That’s just the amateur opinion of someone who’s dealt with real estate in Hanoi as a renter and a buyer in both residential and business matters. At first, it never seems to make sense. But, with a little time watching how locals deal with it and consider it, there’s a desperate rationality to it all.
answered about 15 months ago by grubby
In my (rather uninformed) opinion it comes down to supply and demand. The demand for rental housing in Hanoi has increased due to WTO accession, while the supply is constricted by the red tape and paperwork necessary to prepare a property for rental to foreigners. The agent bottleneck probably doesn't help - owners are forced to use expensive housing agents to access the foreign renters, and as a result raise their prices to compensate. I hear also that agents get a percentage of a month's rent, so higher rents are in their interest too. I think there is probably some additional pressure on supply from the influx of vietnamese from the countryside, but mostly they're not competing for the same spaces.
answered about 15 months ago by Mike
Easy to point to WTO etc., but from my experience after renting various places over the past 10 years not a lot has changed, we still have the greedy house owners who would rather see their place empty than accept something below their expectations. I have known places to be empty for years, and in my house hunting over the years it is not uncommon to view 20 places that have obviously not been occupied for extended periods. In my humble opinion this will change with a more transparent rental market, which we do not have at the moment in Ha Noi, and something that would not be in the interests of the housing agents.
answered about 15 months ago by saad
Hanoi can't be compared with Phuket. Even it is more expensive in real estate than LA or Tokyo. What I did is found a so so place in the hoan kiem area and spent time and enjoyed that cultural streams. In Thanglong or in Ciputra, most of the people are earning diplomatecally or NGOs or from foreign companies. hence they can afford.
answered about 15 months ago by Steve
Far enough Alpha, however this is what I do not get "if they can’t sell it at that rate, the only rents that make the numbers work are HIGH." I have seen houses not get occupancy for well over a year for the sake of $50, and perhaps this is an exception. Still $6000 per year on rental is nothing to sneeze at considering the cost of living.
The only one's I've seen do that are people who own the land outright, and did not get it through speculation. That is, they've owned it for a while. For them, they have far less of a pressing need to rent it quickly. They see where speculators may be taking the market and can hold out for what seems like a "respectable" rate (which is solely where they stand in a comparative sense to others who try to rent similar spaces). For them, again, it's not simply a commodity. It's something that their identity is intimately tied to. Once speculative ventures make up far more of the available rental spaces, and they do not get the rates they're currently fishing for, long term (non-indebted) owners will have lower benchmarks to emulate. I agree that agents are greedy, but only in a narrow time frame. They don't benefit much from turning down reasonable offers to let a place sit vacant for six months. They'd much rather see quick turnover. Unless the landlord is specifically saying they are firm on a given price, I'm betting that they'd be willing to deal, get bodies in houses, and move on to the next commission. Many agents fear, more than anything else, that someone else is going to place a given rental space and steal their commission. I think they are the most inclined to view them as a simple commodity, so I doubt that they are the sole (or primary) source of the rate increases. Many of them are fishing with a high initial rate, but if they have flexibility, they would be the first to utilize it. Add to this the intense competition among agents, and I just don't see them inclined to hold out all that long. I'm also not convinced that current land or rental rates would sufficiently correlate with increased demand from foreigners without taking into account the influx of non-native Hanoian Vietnamese (who are disproportionately likely to rent over local Vietnamese) and speculators who thought they'd get rich by cashing in on a boom that was already over-inflated. Sure, Nha Que don't directly compete with us on rental spaces very often, but it would be a great exaggeration to say that they don't directionally effect the movement in our rental rates as they pour into town. I'm guessing that once land is viewed primarily as a place you pay to live and less as a the place your family legacy will unfold (and fund itself from), then we'll see a correction. Again, it seems like the speculators who thought they'd cash in on the latter sentiment have inadvertently hastened the former. The sweet $150 a month flats might be a thing of the past, but those who buy cheap on the defaulting speculators will probably see the sense of keeping a $300-$400 a month flat filled consistently. I get the sense that this is just a speculation fueled optimism rooted in the fact that property has never been traded this freely at any point in the history of the city.
Ok Alpha, all very logical in a mature market, but I have had the same experience as Steve over a 10 year period. As a business person in Ha Noi I am astounded on a daily basis with the lack of what I would consider a clear rationale in business dealings. In some cases I head south to HCMC to get what I want.... in the long run a lot less hassle and more open in their business dealings, and far more reliable. I am currently transporting up from HCMC three items that I could probably get in Ha Noi. My conclusion on the real estate market.... greedy house owners who have no idea of an open market, and would rather have their place empty than accept lower than their usually unrealistic expectations.
Maybe I haven't been very clear. I don't believe that the housing/rental market in Hanoi is either mature or irrational. It's a market that is undergoing a maturation process. The previous perspective viewed land as far more than a simple commodity. This inflated land prices in its own right, but the subsequent speculation sent it toward untenable levels. When those investments falter, I have a feeling that they won't simply drop back to where the previous perspective would have taken the market. Rather, I think the speculation itself will have shrunk the time frame with which landlords consider a property's "performance". In the recent past (and still now to some extent), families thought of a piece of land as a multi-generational investment...like three or four generations. I think all this flux and speculation is moving that sense of perspective closer to what most of us are familiar with as real estate. My sense is that the recent jump in rental rates all across town has more to do with this than simple greed or lack of business acumen. They're caught between to evaluative systems, and things will shake out at a more reasonable and consistent place fairly soon. Maybe we're talking about two different things. I'm not talking about why one specific landlord or agent may quote one particular price, but rather, why we've seen such a dramatic jump in the last year or year and a half. I don't think that greed is sufficient as a causal explanation in this situation, because I don't think greed has changed much in the last year or two. It's always been there, like it has been everywhere. Due to the rapid change in the market (due to speculation as much as anything), there's probably a significant information lag in how a landlord casually evaluates their place's value. They anecdotally compare prices with a previous period where the supply/demand ratio had yet to be effected by the tons of people who thought it looked like a good idea to get in that market....and thus change the ratio. It's a classic fallacy of composition. It'll settle down eventually, but not as low as it was before and below the outrageous quotes we see currently. Greed in all that seems like a constant, not a variable.
