Short-term leasing could be a long-term trend in Hanoi, HCMC
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Thanh’s apartments in Ho Chi Minh City have been behaving like hotels for more than a year now.
Individuals and groups of tourists stay at his serviced apartments for a few days before they leave for another destination in the country, and the apartment is open almost immediately for new guests.
Thanh, who did not want his surname revealed, has invested in three apartments in HCMC, and all of them can be booked by anyone on Airbnb, an online service that connects tourists with hosts offering accommodation in a room, or rooms, or an apartment or villa, typically for short stays.
The large supply of apartments in major cities like Hanoi and Ho Chi Minh City has spurred investors who have spotted an opportunity to earn higher incomes through short-term leases rather than long-term rental contracts.
In addition, the driving force shifting consumer attention to Airbnb in Vietnam is a willingness to experience something new and affordable when it comes to rented accommodation, said accounting and consulting firm Grant Thornton.
According to a Nielsen report, 76 percent of respondents in Vietnam like using shared products or services, compared to 66 percent of consumers globally.
The total number of Airbnb listings in Vietnam has surged exponentially since the service was officially launched in Vietnam in 2015.
There were only 6,500 listings in 2016, but last year, this rose almost 2.5 times to 16,000, according to accounting and consulting firm Grant Thornton.
The apartment rental market has changed remarkably in the last 12-18 months, with more owners moving from traditional rental services to listing their apartments on Airbnb or similar online housing services, said Tran Anh Khoa, a renting agent in HCMC.
This transition is happening as owners realize short-term rentals can earn 15-20 percent higher revenues than long-term leases, Khoa said.
A 50-square-meter serviced apartment in HCMC’s District 2 can earn its owner $700-800 a month in a long-term contract, but this revenue can go up to $1,000 a month if it is leased short-term with an occupancy rate of 80 percent a month, he said.
Apartment owners like this model, especially real estate speculators who want to earn money while waiting to sell their apartments, Khoa added.
“This way, owners don’t get tangled in contractual obligations with tenants when they want to sell the apartment,” he noted.
“According to a Nielsen report, 76 percent of respondents in Vietnam like using shared products or services, compared to 66 percent of consumers globally.”
Growing trend
Airbnb and similar services are favored by single or small groups of guests as they offer cheaper prices compared to a hotel room or a fully-serviced apartment, said Stephen Wyatt, country head of real estate firm Jones Lang LaSalle Vietnam.
The supply of apartments in Vietnam has been growing in recent years, especially in HCMC, with an additional 129,000 apartments coming on line by 2020, according to real estate service provider Savills Vietnam.
The “oversupply” will likely lower the profitability of long-term rental apartments, Wyatt said.
So short-term leasing of these apartments is a positive trend as their sales show signs of slowing down, he added.
Pham Thi Thanh Huyen entered the apartment-sharing business a year ago to earn extra income apart from her office job.
The 24-year-old paid a total of VND400 million ($17,200) to do up the interiors of two apartments in Hanoi which she rents for VND6 million each a month.
One of her apartments has had an occupancy rate of almost 100 percent every month, and the other, over 70 percent. Together, she earns a net profit of VND10 million a month by subletting them for short periods.
She was confident: “If your apartment is in a good location, it won’t be long before guests start to pour in.”
In 2017, Vietnam welcomed nearly 13 million international visitors. In the first half of 2018, the number was nearly 7.9 million, a 27 percent increase over the same period last year, according to VNAT.
Tourism is expected to contribute 10 percent to Vietnam’s gross domestic product by 2020 when the country hopes to welcome up to 20 million foreign visitors and earn $35 billion in tourism revenues. Vietnam has set a target of receiving 15-17 million foreign arrivals this year.
Questions & Answers
Q.Why are apartment owners in Vietnam moving towards short-term leases instead of traditional long-term rentals?
Why are apartment owners in Vietnam moving towards short-term leases instead of traditional long-term rentals?
Owners are shifting to short-term leases as they can generate 15-20 percent higher revenues than long-term contracts. This model also allows real estate speculators to earn income while avoiding long contractual obligations when they wish to sell.
Q.What factors are driving the popularity of services like Airbnb in Vietnam?
What factors are driving the popularity of services like Airbnb in Vietnam?
The large supply of apartments, especially in major cities, encourages investors to seek higher incomes through short-term leases. Also, consumers are willing to experience new and affordable rented accommodation options.
Q.How has the number of Airbnb listings in Vietnam changed since the service launched?
How has the number of Airbnb listings in Vietnam changed since the service launched?
Since its launch in 2015, the total number of Airbnb listings in Vietnam has surged significantly. In 2016 there were 6,500 listings, which rose to 16,000 last year.
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