Apartment rental yields in HCM City have declined slightly due to excessive supply, property consultancies said.

In a report on the real-estate market in the second and third quarters, CBRE reported that the ratio is down in some areas since rents are below landlords’ expectations.

Duong Thuy Dung, senior director at CBRE Viet Nam, told Viet Nam News that the downtrend in yields started at the beginning of this year after a huge number of condos were handed over to buyers.

Furthermore, some condos do not have the quality their developers had promised, another reason for falling rentals, according to Dung.

From 7-7.5 per cent they have now fallen to 6-6.5 per cent though some high-quality places in District 2 and elsewhere still fetch 7 per cent.

She said while condo prices had not decreased, many landlords cut their rents to quickly find tenants amid the increasing competition.

She said the 6-6.5 per cent rate would continue in the near future.

Savills Vietnam also said yields had fallen, but put the current rate at an even lower 4-6 per cent.

Vo Thi Khanh Trang, head of research at Savills Vietnam, told Viet Nam News that condos were the main competition for serviced apartments.

Condos in districts like 2, 4 and 7 with comprehensive amenities and services are the most attractive areas for renters, according to Trang.

A report by Savills says there has been a huge supply of condos in 2015-18, with grade A and B condos increasing by 68 per cent a year.

Speaking about the trend in the near future, the report says until 2020 there will continue to be a huge supply of apartments.

But the market is still potential thanks to HCM City’s stable economy and huge foreign interest, it says.

According to Jones Lang LaSalle the high-end rental segment is more popular in the city thanks to the location, construction quality and amenities of apartments in it.

The number of high-end apartments put for rent as of the third quarter of this year was 27,255, it said.

Stephen Wyatt, country head of JLL, said 30-35 per cent of them could be buy-to-let deals.

In the year to date the market saw the entry of 5,320 new units in 10 high-end projects in districts 1, 2, 4, Binh Thanh, and Phu Nhuan. ​

The average rent for these are expected to reach US$122 per square metre per annum ($10.1 per month) by the end of this year.

In 2019-21 a downward trend on a chain-linked basis is expected in line with the increased competition from the vast supply, especially as large projects with a monotonous design do not seem to attract expats while demand from local renters in the high-end segment is low, according to Wyatt.

The rental market is likely to plateau or even soften, with longer vacancy times, due to the considerably increasing supply.

Rental growth will also be negative in degraded and/or increasingly inferior older properties.

But the completion of ongoing projects with better locations and higher quality are expected to offset this downward trend. — VNS