According to a developer in Nha Trang, they launched about 112 villas in Cam Ranh in 2017 and expected sales to be completed in early 2018 due to a reasonable amount of stock.
Negative signs that the market is going down
Even though in the first launch in May 2017, 90% of the total stock was deposited, the actual purchase was only at 40%. At the same time, the second home market was predicted to go down.
The second launch of the project was held in October 2018, only 4 out of 20 villas launched were sold. This incredibly low sales volume caused the delay of the third launch of the project until 2019.
The issue is also happening with other newly launched projects in Phu Quoc and Da Nang. According to Nguyen Thanh Toa, sales director of a trading floor in Thoi An, Phu Quoc transactions are mainly for land plots and residential land segments, however, there is very low interest in coastal villas, the second home products, by investors.
In the last 5 months, the demand for the second home market dramatically decreased. Developers stopped launching new projects but are focusing on selling the existing stocks on hand or re-sales for investors. Some agents even did not make any sales during Q3.
The land price in Phu Quoc is quite high at the moment while there are too many developments; the profit margin for investors is lower than before which immediately reduces their demand for buying. Many investors could not re-sale their properties, which in turn created a ‘cautious environment’ among investors making them afraid to buy bad land. The luxury segment is especially cautious territory because not only does it face low transaction volume but is also very difficult for investors to find agents for it. Despite the limited supply for this segment, agents are very hesitant to sell second home products.
Postpones building second home products
According to DKRA, the clear rate for condotels is approximately 47% in Q2/ 2018 despite a sufficient supply. Selling does not look positive for this segment causing the inventory to sharply increase in Da Nang and Phu Quoc. The total new launch of the market was 2,100 units, but actual sales were only 850 units. The clear rate in Phu Quoc was 39-40%, Khanh Hoa 26%, Binh Dinh 22% and Da Nang 9% making the average inventory at 70-90% accounting for a total of 12,000 units in Q3 2018. Total sales in Khanh Hoa was 789 units, strongly decreased compared to Q1 and Q2 2018.
The southern market did not reveal any new launch in Q3 for this market segment. Transactions were mainly in existing stocks from previous quarters which were still on the down trend as the clear rate only peaked at 21% and on average 9-15%. Total inventory is up to almost 90%, especially in Phu Quoc where the clear rate stopped at 7% causing inventory at 93%.
According to the Real Estate Agency Association, the second home market including condotel products has decreased on both supply and demand. In Q3, there was no new launch for this segment in the emerging developing area, except for the first launch of Lanuna project in Nha Trang. Total country sales for condotels only reached 1,000 units.
“It is time to stop starting new projects, focus on completing the ongoing projects, bring the projects into operation, build tourism infrastructure, build foundation for growing tourism sector in Vietnam, and bring financial benefits for investors,”said Mr. Nguyen Van Dinh, General Secretary of Vietnam Real Estate Agency Association.
Given the unclear regulations to protect buyers in this segment, condotel developers are postponing their projects to wait for clear legal instruction and policy. This signals that investors should be careful before deciding to buy at this stage.
