Jan 3, 2013

Vietnam - Serviced condos face tougher competition

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HCMC – Owners of serviced apartment buildings in the near future will have to face a much fiercer competition in attracting tenants as many commercial condo projects are shifting to offering the same housing service.

Despite the stability compared to other segments, serviced flats will soon have to share customers with apartments that have been or will be leased out by secondary investors and project owners.

For instance, the high-class Estella apartment project in Cat Lai Intersection in HCMC’s District 2 now is completing 60 condos for lease in the coming time. Singaporean property company Keppel Land has developed this housing project with 719 apartments and offers the flats at between VND32 million and VND42 million a square meter, but it has been able to sell about 70% of the project’s total apartments.

The developer has fixed the leasing price at some VND24 million or US$1,200 a month for a two-bedroom flat and around VND55 million or US$2,700 for a larger condo. The target customers are not only individuals but also enterprises hiring large volumes of condos for their staff members.

Besides leasing out apartments, the project owner has also applied the lease-to-hold model, allowing tenants to purchase the flats later with their leasing amount deducted accordingly.

Monitoring the market’s moves, real estate services provider Cushman & Wakefield noticed that developers have tended to shift from using to leasing out the homes given the dreary apartment market now.

The city’s serviced home supply now has about 3,300 flats, with more than half of them in central districts. Nearly 70% of the apartments are being managed by foreign companies such as Sedona, the Ascott, IHG and Norfolk Group.

The offered price of grade-A apartments averages out at roughly VND637,000 or US$31 a square meter and that of grade-B condos is VND470,000 or US$23 a square meter a month.

Cushman & Wakefield forecasts the competition between serviced flats and condos bought for leasing services will continue, adding this will pull rents down this year as a result.

Dinh Dung - The Saigon Times Daily

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