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Harsh Reality of Investing in Vietnam Shophouses

by Sang Achariya
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Nguyen Van Ngoc, a 50-year-old investor from the northern province of Bac Giang, has been struggling to sell a shophouse in Hanoi’s Ha Dong District for over a year.

Due to low rental income and high monthly loan payments, he is under immense financial pressure.

Despite offering a 20% discount on the purchase price of 23 billion dong (RM4.5mil) at the end of 2021, he has not been able to attract any potential buyers.

In recent years, investing in shophouses has been a popular trend in cities like Hanoi and Ho Chi Minh City. Many investors saw it as a lucrative opportunity to make a profit by buying a shophouse and reselling it at a higher price. However, the reality has been harsh for many, as they struggle to find tenants and face financial losses.

Another investor in Hanoi, who asked to be unnamed, in early 2022 purchased a shophouse located in the eastern part of Hanoi for 17 billion dong, hoping to resell it at a higher price.

However, the property has remained vacant for a year despite its location in a densely populated residential area. The investor is now willing to sell at a loss of 30%, but still hasn’t found a buyer.

The situation is similar in areas like To Huu Street in Ha Dong District and Nguyen Van Huyen Street in Cau Giay District, where numerous shophouse owners are struggling to find tenants.

Vo Hong Thang, deputy director of Research and Development at DKRA Group, said factors such as unfavourable locations, insufficient population density, lack of amenities, and underdeveloped infrastructure make it challenging to attract tenants.

High purchase prices and rental rates further deter potential tenants, causing financial losses for the owners, he said.

For many shophouse investors, the pressure of using financial leverage has forced them to sell at a loss, he added.

“Finding tenants in newly formed residential areas with low population density has also proven to be a challenge,” he noted.

Experts have also pointed out that shophouses are better suited for long-term investors who are willing to wait for the property value to increase.

Do Thi Thu Hang, senior director of property consultants Savills Hanoi, said developers have also played a role in the oversupply of shophouses, as they didn’t carefully plan and attract specific industries.

Between 2020 and 2022, shophouses became a popular investment option, with a large percentage of buyers being speculators looking to sell at a profit.

Source: The Star

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