• Vietnam Rental Yields: A Complete Overview

    Posted on Leave a comment

    Do you plan to buy property in Vietnam?
    Click here to get in touch with an experienced agent

    Vietnam is not only one of the fastest-growing countries in Asia, but it offers exceptionally high rental yields.

    In 2015, Vietnam opened up to foreign investors and many expats and entrepreneurs have entered since. As the Vietnamese become wealthier and foreigners find local housing comparably cheap, yields can sometimes stretch up to double digits.

    In this article, I explain what rental yield is, why it’s important for you as an investor, and how high the average rental yield is in the most popular Vietnamese cities.

    What is rental yield?

    The rental yield can be expressed as both gross rental yield and net rental yield. In short, rental yield is the return on investment in percent (%) when comparing the current value of the property to the rental income.

    The gross rental yield doesn’t take any maintenance fees, management fees, mortgage costs, insurance, or taxes into consideration. Let’s take an example:

    • Monthly rental income: USD 1,000
    • The current value of the property: USD 150,000

    Gross rental yield = 1,000 x 12 months / 150,000 x 100 = 6.67%

    However, the net rental yield is more accurate as you include relevant costs when holding the property. Let’s compare the net rental yield with the gross rental yield, using the same example:

    • Monthly rental income: USD 1,000
    • Maintenance fees: – USD 100
    • Management fee: – USD 100
    • Mortgage payments: – USD 100
    • The current value of the property: USD 150,000

    Net rental yield: (USD 1,000 – USD 300) x 12 months / USD 150,000 = 5.6%

    As you can see from the examples above, the net rental yield is lower.

    Why are rental yields important for investors?

    The rental yield will ultimately determine what your return on investment will be when renting the property to tenants. This is important for buyers who plan to keep their units as investment vehicles and rent them on a short-term or a long-term basis.

    This is convenient as you often don’t even have to visit Vietnam but can earn passive rental incomes. For some people, the price appreciation might be more important, but generally speaking, both are of importance.

    Interestingly, districts in Ho Chi Minh City might have a different appeal to buyers.

    District 7, for example, is one of the most developed districts with plenty of property projects. If you buy a unit here, the price tag will most likely be higher and you can earn instant high rental income from expats and local professionals.

    If you invest in District 9, on the other hand, prices might appreciate more (in %) in the coming years as it’s comparably underdeveloped. It can be harder to find tenants here as well, the chances of finding tenants and earn high rental incomes instantly might not be as high.

    vietnam-rental-yields

    What are guaranteed rental yields?

    Guaranteed rental yields are offered by developers who want to encourage investors to buy units in specific projects. Sometimes, guaranteed rental yields can reach up to 10%-15% over several years, but you have to be careful as the offers can be too good to be true.

    Besides, developers can offer guaranteed rental yields if the property market is saturated and they have difficulties finding buyers. Once the period of guaranteed rental incomes end, you will compete with other buyers in the market, the yields can then drop significantly.

    Do due diligence and work with a reputable agent to minimize the risks of experiencing any pitfalls later.

    Rental Yields in Vietnamese Cities

    To get you a better overview of the rental yields in Vietnam, we have analyzed the three most popular cities where foreigners tend to buy real estate. Keep in mind that rental yields fluctuate so you must talk to your agent for up-to-date market information.

    Let’s start and review the rental yields in the commercial hub of Vietnam.

    Ho Chi Minh City

    Ho Chi Minh City, also referred to as Saigon among locals has become a property hot spot among investors. Here, yields can reach up to 6%-8%, especially if you target foreign-dense areas, like District 2 and District 7.

    Looking at previous reports from Savills, Hanoi’s gross rental yield averaged at 7.8% while Ho Chi Minh’s averaged at 5.8%. One of the main reasons why yields are higher in Hanoi is that prices haven’t increased as much as in Ho Chi Minh.

    That said, Ho Chi Minh offers plenty of investment opportunities to buyers who seek high rental yields. This is particularly the case as Ho Chi Minh will have its new Metro system finished in, hopefully, the near future.

    Hanoi also has one on its way and both Metro lines will inevitably have positive impacts on the real estate markets.

    If you look at one of Ho Chi Minh’s real estate projects in District 9, Metro Star, prices start from as little as USD 1,500 per square meter. And it will be connected with the new Metro line 1, stretching al the way to District 1.

    According to CBRE, the biggest commercial real estate companies in the world, property located with a 10-minutes walking distance from the metro stations will see price increases of 10% to 20% when the new Metro is finalized.

    Projects and estimated rental yields in Ho Chi Minh City

    Below you can find a list of projects and estimated gross rental yields. The estimations are provided by one of the biggest franchised real estate companies in the world:

    • Metro Star (District 9): 6% – 8%
    • Sunshine City Saigon (District 7): 5%
    • The Marq (District 1): 4%
    • The Grand Manhattan (District 1): 4%

    The Marq and The Grand Manhattan are both luxury projects located in the most expensive district, District 1. Thus, the rental yields aren’t as high here.

    If you want to know more about these and other projects for sale, you can read our separate article: Property for Sale in Ho Chi Minh City.

    Da Nang & Hoi An

    Da Nang becomes increasingly popular thanks to it’s hybrid of being both a functioning economy and a beach resort. Real estate prices are lower compared to Ho Chi Minh and it’s located with proximity to the UNESCO World Heritage site, Hoi An, but also to Hue.

    Da Nang has some of Vietnam’s best beaches and new developments can be seen from Da Nang to Hoi An, a ride that takes around 20 minutes.

    According to Dotproperrty.com.vn, the gross rental yield is 6.7% in Da Nang, which is indeed not a bad number. Numbeo, on the other hand, claims that rental yields averages at 8.40% in the city center.

    Sure, sometimes we have to take data from Numbeo with a pinch of salt, but at least it’s an indication.

    Projects and estimated rental yields in Da Nang

    • Malibu MGM (Hoi An): 16% guaranteed the first 2 years
    • TMS Luxury Condotel (Da Nang): 10% guaranteed for 10 years
    • Wyndham Soleil Da Nang Condos: 9% guaranteed (unknown for how many years)

    To read more about these and other projects for sale in Da Nang I recommend you check this article.

    Hanoi

    Hanoi is popular among buyers from Hong Kong and China, thanks to its Northern strategic location in Vietnam. Flying to Hanoi won’t take you more than 2 hours from Hong Kong and 5 hours from Shanghai.

    As mentioned above, Hanoi has the highest rental yields in Vietnam, according to reports from Savills. The take-up-rate might not be as high compared to Ho Chi Minh, but it’s worth having a look at this city if you want high rental returns.

    The Western districts of Hanoi, like Tu Liem and Cau Giay, become increasingly popular as the city center has become crowded with office buildings, residential buildings, and embassies.

    While Savills claims that yields averaged at 7.8% in Hanoi, other sources claim that gross rental yields average at 4% to 7%.

  • Want to buy property in Vietnam?

    Fill out the form to get in touch with a verified real estate agency specialized in Vietnam property


    Disclaimer: The content on this website is provided for general information about buying property in Asia, developments, agencies, regulations, taxes, and other related topics. However, we don't guarantee that we keep the content up to date or that it's free from error. We do make mistakes from time to time. We never provide legal advice of any sort.
  • Leave a Reply

    Your email address will not be published. Required fields are marked *

    [FREE PDF]
    [FREE PDF]
    [FREE PDF]
    [FREE PDF]