Ha Noi's serviced apartment market thrives in Q3/2024 supported by strong FDI growth

• Ha Noi's serviced apartment market maintained steady demand, supported by abundant foreign direct investment (FDI) and the expansion of industrial zones. 

• Demand for serviced apartments from neighbouring provinces has increased; however, limited supply in these areas keeps Ha Noi as a preferred choice for many foreign experts. 

According to Savills Q3/2024 report, rental and occupancy rates for serviced apartments remained stable and showed year-on-year (YoY) growth. The average occupancy rate stood at 83%, a slight increase of 2 percentage points compared to the previous year. As of Q3/2024, the average rent for serviced apartments in Ha Noi reached 588,000 VND / m2/month, reflecting a 2% decrease quarter-on-quarter (QoQ), primarily due to a 4% drop in Grade A and a 2% drop in Grade C, but still showing a modest 2% increase YoY. 

Grade A supply in the serviced apartment segment remained concentrated in Tay Ho, while Hai Ba Trung, Gia Lam, and Long Bien districts primarily offered Grade B supply. 

Matthew Powell, Director of Savills Ha Noi, explained: “Robust foreign direct investment and the expansion of industrial zones have attracted a significant number of foreign experts to Viet Nam, thus generating stable demand for serviced apartments.” 

Many companies are diversifying their supply chains or completely relocating production chains from China due to the increasing labour and production costs in the country, which have eroded its competitive edge. 

In this context, Viet Nam has emerged as an attractive destination, thanks to its strategic location in Southeast Asia. Additionally, Viet Nam's competitive labour costs, with an average monthly income in the manufacturing sector at US$329, place it among the lowest in the region. Compared to neighbouring countries, this figure is only higher than Indonesia's and approximately 3.4 times lower than China’s.

Furthermore, the Vietnamese government has continuously introduced corporate income tax incentives to enhance the country's appeal to foreign investors.  

According to the General Statistics Office, as of August 2024, total FDI into Viet Nam reached USD 20.5 billion, marking a 7% increase year-on-year. Realised FDI amounted to US$14.2 billion, an 8% rise compared to last year, the highest level in the past five years. Specifically, in Ha Noi, FDI reached US$1.5 billion, a sharp 71% increase compared to the previous year, with 178 new projects granted licenses. 

Beyond Ha Noi, neighbouring northern provinces such as Bac Ninh, Phu Tho, Bac Giang, and Thai Nguyen have also attracted substantial FDI inflows, leading to increased housing demand as more foreign experts arrive. For example, according to the Ministry of Planning and Investment, as of September 2024, Bac Ninh led the way with total registered investment of over US$4.5 billion, accounting for 18.2% of the nation's total investment, a 3.47-fold increase compared to the same period last year. 

Despite rising housing demand from foreign experts, the supply of serviced apartments in these provinces remains limited, and the quality of current projects has yet to meet high-end standards. As a result, “foreign experts still tend to choose Ha Noi as their place of residence due to easy access to a wide range of amenities and high-quality housing supply,” Mr Powell noted.

The development of infrastructure connecting Ha Noi with neighbouring provinces has also made it more convenient for foreign experts to access the city centre and travel to nearby regions. Notable projects include National Highway 1A, National Highway 18, and the Ha Noi - Thai Nguyen Expressway. 

With stable demand, the occupancy rate for serviced apartments in Q3/2024 remained at 83%, an increase of 2 percentage points YoY. 

To meet market demand, serviced apartment supply in the capital increased by 2% QoQ, with the new Grade A project, Swiss-Belresidences Ha Noi, adding 150 units. The total supply in this segment reached a total of 6,246 units. 

In 2024, Parkroyal Serviced Suites Ha Noi is expected to open with 126 units. An additional 2,372 units from four projects are set to enter the market in 2025, with the Tay Ho View Complex providing the largest addition to Grade A supply. The future supply of serviced apartments will be concentrated mainly in the Inner City and the western areas, with 83% located in the Inner City and 17% in the West. 

International operators continue to dominate the market, managing 87% of the upcoming serviced apartment supply under brands such as The Ascott, Lotte Group, Park Royal Serviced Suites Ha Noi, Shilla Hotel & Resort, Hilton, and Hyatt. The high service standards provided by these international management agents help sustain the appeal of serviced apartments.