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Condotel - Part 2: Resort real estate market shows signs of slowing down

Condotel - Part 2: Resort real estate market shows signs of slowing down

According to the Vietnam Association of Realtors, the tourism real estate market, especially the condotel, has witnessed a drop in both supply and transaction.
04:48, 16/11/2018
Source: Vietnam+

Source: Vietnam+

Market research showed that the third quarter was dull for resort real estate in most developed areas of Vietnam, including Danang, Nha Trang and Phu Quoc. There was no new supply except for the Lanuna project in Nha Trang, which opened its first sale to the market. The nationwide number of transactions for condotels is around 1,000 units.

Explaining the phenomenon, the Vietnam Association of Realtors said that part of the cause is due to government’s tightening of capital, limiting financial flow into this segment of the industry.

In addition, legal policy regarding condotels has not been solved, causing hesitation in the minds of investors.

On the other hand, resort real estate’s developmental capacity is highly limited, and investors’ ability in operating and managing is also weak. This inhibits investors’ confidence, especially when it comes to long-term safety and efficiency. Therefore, sole investors are extremely cautious in selecting resort real estate projects.

Remarkably, tourism real estate product’s price has been pushed by project owners at an average of 35-50 million dong per square metre or even 70 million per square metre at other luxury property. At this high rate, investors can hardly liquidate when there is a demand for transfer.

Looking at Danang’s condotel market over the past three quarters, there were 8,061 products being offered, including those from previous quarters or even previous years. Products were concentrated in projects like Hyatt Regency Da Nang, Ocean Suite, Olalani, Coco Bay, Muong Thanh, Anfanam, Hoa Binh, Furama and several others.

In Nha Trang city, the market continued to record new supply from Hudbuilding projects, Ariyana or Panarama. Particularly, third quarter new offerings for sale of over 1,000 units, bringing the total numbers of condotels in Nha Trang up to 12,000.

However, the market’s absorption rate of new projects offered in the third quarter was only about 20%. Trading volume of condotel products in Khanh Hoa reached 789 products, sharply decreased compared to the first and second quarter of 2018.

According to the report by market research company DKRA Vietnam, topping the list of inventory surplus ratio was Da Nang city where only 9% of supply was successfully transacted (91% inventory still available). Binh Dinh, Khanh Hoa’s condotel market was also falling when absorption rate ranged from 22 to 26%. Phu Quoc and Ba Ria–Vung Tau had the best liquidation, but their absorption rate was still hanging around 39 to 40%.

Pham Lan, CEO of DKRA, said: “Condotel’s supply could dramatically increase in the near future. Particularly, Khanh Hoa is offering to the market around 17,000 resort real estate products (about 15,500 condotel units) in the next 3 to 5 years. Meanwhile, demand does not seem to rise leading to a possibility of a large inventory surplus and causing risky challenges to the real estate market in the coming period.”

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