Rental apartments will continue to be a safe investment in 2023.

In recent years, the rental apartments market has been affected by changes caused by the Covid-19 epidemic. However, things are gradually stabilizing, sending positive signals to those who intend to invest in this field.

A challenging year for the rental industry

In 2021, prolonged Covid-19 outbreaks will affect all economic sectors, including real estate, mainly when social distancing measures must be implemented.

Because of the "bottoming out" of social demand during the pandemic, rental real estate is under more pressure than ever. The vacancy rate of retail space, townhouses, service apartments, and motels for rent has increased as people return to their hometowns to avoid the epidemic or check out due to irregular income and inability to pay.

However, despite the market's general gloom, the serviced apartment type is expected to have many bright spots when it comes to ensuring both occupancy rate and rental factor.

Ms. Do Thi Thu Hang, Senior Director, Research and Consulting Department of Savills Hanoi, explained that the rental apartment market capacity was stable year on year, partly due to a large number of serviced apartments. Because a fixed number of foreign experts remain in Vietnam to work, the demand for long-term apartments for rent continues to rise.

According to CBRE, more than 6,000 serviced apartments are expected to go on the market in the fourth quarter of 2021, bringing the total new supply to around 13,000 units. The serviced apartment market is expected to recover due to the vaccination implementation process, and a positive signal of foreign investment (FDI) inflows into Vietnam.

The recovery of the short-term rental business

The pandemic has affected the resort-short-stay segment. Still, the market is recovering as the epidemic is gradually being controlled. The rally is expected to continue through the remaining months of 2022. By 2023, short-term rentals are expected to re-establish a more advantageous position than long-term rentals.

Short-term rentals directly related to travel. This means that as people travel increases, the demand for short-term accommodation areas increases. This can help operators increase rents and drive higher returns on investment, allowing for higher daily rates and boosting return on investment.

Increased demand in secondary markets

According to Think Realty real estate experts, rental markets in suburban and rural areas may grow in 2023.

As a result, the Covid-19 pandemic has changed the way many people choose where to live. Working remotely became popular, prompting many people to leave the city and return to their hometowns. This could increase the visibility of the secondary real estate market in 2023, facilitating the development of the rental sector.

Importantly, secondary market rental property portfolios frequently have lower costs, making them accessible to new investors.

The rise in fractional rental property investment

Experts predict fractional investing will become popular in 2023. Indeed, experts believe that technology will influence and create this investment trend.

Real estate crowdfunding platforms such as Fundrise, Realty Mogul, and Crowdstreet have allowed small-scale investors to own a small portion of the residential, commercial, and industrial real estate alongside the developer's additional investment.

This rental property investment strategy provides numerous advantages, including low capital investment and passive income generation. As real estate technology advances, retail investment is expected to increase in 2023 and beyond.

Technological advancement

Finally, experts believe new technology trends in rental real estate investment in 2023 are inevitable. High technology will remain a key driver in all aspects of the industry and at all stages of the investor's journey, from identifying profitable investment opportunities to purchasing property to increasing income to leasing and managing rental properties.

Short-term rental - a new trend in the real estate rental market after the pandemic.

This new wave blurs the distinctions between the hotel and residential segments, resulting in developments built from the ground up to serve dual functions.

On the one hand, they cater to buyers looking for a getaway. On the other hand, this trend enables investors or homeowners to earn passive income when the property is not in use.

Jason Fudin, the CEO and founder of Miami, US-based short-term rental company WhyHotel, believes the telework trend will change how we approach the real estate market with a global youth system.

"Since the pandemic's outbreak, there has been an increase in demand for short-term lodging." "During the epidemic's peak, our apartment-style hotels outperformed traditional guests, even when occupancy reached more than 85%," Mr. Fudin said.

"Consumers want short-term accommodation that combines apartments and hotels, especially when they can work from anywhere." People, for example, travel for work and stay for pleasure, particularly in Miami, New York, and Nashville. As a result, they seek apartment-style amenities as well as hotel-like services to enjoy that lifestyle," he adds.

Passive income

According to Nicholas Perez, vice president of a well-known real estate corporation in the United States, flexible living allows people to earn money while having fun doing nothing. That is what short-term rentals are capable of.

"Many locals, particularly a new generation of young people on the move, as well as foreign buyers, have taken advantage of the opportunity to own a property in one of the region's most popular neighborhoods." Downtown Miami is America's fastest-growing city.

"Some will choose to live here, while others will see it as an opportunity to enter the booming short-term rental business without the challenge of managing these properties independently," Mr. Perez emphasized.

According to Harvey Hernandez, CEO of Newgard Development Group, a North American real estate developer, remote working motivates people to travel more. This creates unprecedented freedom to experience different lifestyles in many places.

"This freedom allows people to use their homes to their advantage when they travel or explore other places for short periods of time rather than leaving them useless."

The introduction of short-term property management and rental agencies has enabled many people to travel while also earning money, encouraging many people, particularly young people, to enter the short-term rental market.

Hernandez said yes when asked if some short-term tenants wanted to stay longer. He has seen an increase in short-term rental stays, as evidenced by "huge demand" for 30 days or more stays.

More clearly designed additional changes and developments in the future will help lift the short-term rental market to a new level, bringing a massive pie and attracting both investors and tenants.

Final thought

Covid-19 only has a short-term impact on the rental market. In the long run, this is still the "goose that lays golden eggs" for investors, bringing profits equal to bank deposit interest rates and keeping assets from depreciating.

Before the Covid-19 outbreak, the rental market in major cities was expanding horizontally and vertically, becoming more diverse, with rental prices increasing yearly. According to experts, this epidemic only temporarily impacts the rental market; in the long run, this is still a profitable investment trend, providing investors with a safe and secure source of income.