Apartment prices are rising, should I rent or buy?

Savings, apartment rental

Mr. Nguyen Thanh Tung - a real estate investor in Hanoi said, suppose a customer has 3 billion VND in idle money, instead of buying an apartment, the customer saves and rents an apartment. With a savings amount of 3 billion, the interest rate for 12-month bank savings ranges from 7 - 8% depending on the bank, the expected annual income is about 220 - 240 million VND, equivalent to about 20 million VND/month.

Meanwhile, the rent for an affordable apartment with an area of ​​about 80 - 90m²Currently, the price is 10 - 12 million VND/month, while the price for mid-range and high-end apartments is about 15 - 20 million VND/month, equal to the savings interest rate.

However, it should be noted that, in the rental calculation, the initial capital instead of buying is chosen to deposit in the bank, so where does the monthly rental of 20 million VND come from when the entire amount is deposited in the bank with annual interest. Besides, while the savings interest rate can remain the same for many years, even decrease, the rental price will usually increase annually. So after about 2-3 years, the bank interest may not be enough to pay the rent.

Customers should choose to rent or buy an apartment depending on their financial ability. Illustrative photo

Not to mention, renting a house does not provide you with all the amenities of a purchased house and you will also have to face the constant need to move to find a new place to live, with all the accompanying expenses.

However, if your finances are not enough to buy an apartment, the best option is still to rent. The advantage of renting an apartment is that in case the apartment does not suit your living criteria, you will be flexible to change to another more suitable apartment. The apartment rental price is also easy to choose to suit your financial ability.

What are the benefits of buying an apartment?

For those with good finances, according to Mr. Tung, they should buy an apartment to "settle down". Assuming that with 3 billion VND, customers can buy an apartment of about 80 - 90m2.²In Hanoi, apartment prices may not increase evenly every year, but if calculated over a 5-10 year period, they can increase by 20-30% compared to the time of purchase.

Therefore, apartments are not only for living but also a profitable asset for the owner. However, one of the issues that home buyers and investors need to consider when buying an apartment is the liquidity of this segment. Liquidity of apartments in general, especially the high-end apartment segment, is slowing down in the first 10 months of 2022 and this situation is expected to last until 2023.

Buying and selling immediately to make quick profits from apartment investments in a few months or quarters is difficult to do in a real estate market that is showing signs of slowing down.

Investors may even risk losing capital if they sell off their properties early. After receiving the property for a few years and then selling or renting it out for profit, home buyers or investors will face less liquidity risk. The important thing is that the apartment complex has a full range of amenities and services as well as a stable community of residents.

Therefore, whether to rent or buy an apartment depends on each person's financial ability, usage needs and investment plans.