HCM City landlords have little choice but to cut rents as 2nd wave of COVID-19 hits

Rents in HCM City have continued to drop with the second wave of COVID-19. - VNS Photo Van Chau

During the first COVID-19 wave, when the entire country was under social distancing in April, she first reduced the rents to $1,100.

But at the end of July, when a new wave came, brokers asked her to reduce the rent further to $900, saying since foreign experts could not come to Viet Nam in the absence of commercial flights, they have to do so to attract Vietnamese renters.

"I do not know how long the pandemic will last," Minh said.

“The longer I leave the house empty, the more losses I will suffer since I still have to pay interest on the loan.”

Not only high-end apartments, but also mid-priced and affordable apartments and townhouses face strong pressure to reduce rents.

Tran Minh Trieu, the owner of two apartments and a townhouse in District 7, said his total lease income used to be VND35 million ($1,500) per month, but he has had to reduce rents two times in the last five months by a total of 25 per cent.

“I also have difficulties because I am paying VND25 million per month for a loan. But if I do not reduce the rent, my tenants will leave.”

Landlords of commercial spaces face similar difficulties. On major roads in the city’s central districts, it is common to see rental signs going up after cafes, milk tea shops, restaurants, and fashion stores closed down due to a lack of customers.

Many landlords have cut rents by 30-40 per cent, but still cannot find tenants.

Tran Khanh Phong, who owns three commercial spaces in District 1, said he used to earn more than VND180 million (US$7600) a month, but recently cut rents by 50 per cent.

“Two tenants have stopped renting my place, and I expect the remaining tenant to also stop soon.

“I am suggesting that if they sign a new contract they will get a 30-40 per cent discount for a year, but they are hesitant because they do not know when the business situation will return to normal.”

Businesses in the food and beverages and fashion sectors could only sustain losses for a maximum of six months, and so if they do not see good prospects soon, they should close down, experts said.

Tran Trong Tien, owner of a fashion shop on Le Quy Don Street in District 3, said: “The social distancing campaign has ended. But people have now reduced spending on unnecessary things including new clothes. I am worried.

“If I make losses for three to five months, I will definitely go bankrupt. So I am thinking of returning the premises to the landlord or subletting it."

Recently many retail giants too have asked landlords to reduce rents.

F&B firms like Golden Gate Group, Trung Nguyen Legend, The Coffee House, and Starbucks and retailers such as Mobile World Joint Stock Company, FPT Shop and Mai Nguyen Shop have all asked landlords to reduce rents by 30-50 per cent until year-end.

A recent survey by Savills found 57 per cent of tenants hoping landlords will reduce rents by 40-50 per cent, while landlords were reluctant to cut them too much, with many saying the maximum possible is 30 per cent.