The situation of rental real estate market in 2021
The rental real estate market in 2021 is severely affected by the prolonged waves of Covid-19 epidemic. In the first 2 quarters in 2021, real estate market stands at the quietest milestone of the decade. Although the rental price of townhouses, apartments, serviced apartments,… drop sharply, the number of customers is still absolutely low. The decline in rent has lasted from 2020 to present and has not shown any signs of stopping.
The situation of house facade for rent
Townhouse used to be the most successful symbol of rental real estate market for decades. Yet, this type is currently facing a double crisis when the wave of business premises return are unprecedentedly strong. Due to the impact of epidemics becoming more and more complicated, the house façade rents are plummeted by 40-50%. Many business premises have been vacated in the past 18 months.
Since May, most of business premises for rent are townhouses with facades adjusted down by 20-30%, short-term application during the lockdown. The business situation was severely affected, which causes the wave of premises return to spread. Busy business areas significantly damaged by Covid-19 must be mentioned such as Nguyen Hue Street in District 1, Binh Thanh Food Street, Fashion Street in District 5 and Phu Nhuan,… All are quiet and gloomy.
The situation of apartment for rent
The rental apartment market also faces to challenges towards decreasing rents and low hiring demands. The number of tenants asking for rent reduction or apartment return is quite high because of the new epidemic period (the 4th time). Prices of apartment for rent in HCMC from common to middle, high-end segments are recorded a decrease of 35-40% compared to before the pandemic. The efficiency of apartment rent on cost price also plummets, reaching an average of 5-6% before 2020 but just 3-4% for now.
Towards serviced apartments for rent, this market is also the gloomiest within the past half of decade. From early 2020 to June 2021, many business points of this type have to close the shop, even convert the apartment model to overcome difficulties. Specifically, the segment of branded serviced apartments has dozens of buildings that have to be closed or converted. The rental price has been steadily decreasing. Currently, it has decreased by 20-30%. The sharp drop in prices shows that the market is heavily affected by the outbreak of the epidemic and has unpredictable movements.
Meanwhile, many models of unbranded short-term serviced apartments via online platforms have tumbled in the past 16-18 months. Room rental rates are down 40-70% compared to 2019.
The general situation
In fact, the decline in rental prices of real estate types has appeared since March 2020 and lasted in several waves in the first Covid year. However, the epidemic waves in 2021 have dealt the rental real estate market blows and pushed it into a “frozen” state. The forth epidemic wave has caused longer events and spread more widely in community. These make rental property owners to trade off ideal profit margins by sharply reducing rents to over difficulties.
The pandemic has caused individual tenants (renting houses), institutional tenants (renting business premises) and consumers, experience customers (renting serviced apartments) to cut spending, tighten their belts and even give up the need to rent (returning houses, premises).
The wave of premises, apartments for rent return has taken place massively. This situation has pushed rental real estate owners who are using credit to default. Shortage of cash flow occurs and the owners must sell assets in the middle of the pandemic to remove difficulties. The reason is that there is no cash flow to pay interest and also impossible to negotiate with the bank.
Conclusion
To sum up, the heyday of rental real estate market has gone over and the “frozen” period has begun since 2020. The epidemic is drastically dividing the rental market, re-selecting property owners and also tenants. The owners who do investment relying on rental cash flow to pay interest are forced to withdraw the market. Only a group of property owners with strong and stable financial potential can remains.
Tenants cut costs to a minimum. The high-priced façade location is no longer a preferred choice. In addition, online shopping behavior changes business strategies of many enterprises. These factors predict that the price of rental real estate market will have a significant adjustment. The situation is only stable when the vaccination campaign gains a positive effect. After that, the recovery phase will begin.
Dennis
