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Condotel faced the risk of oversupply in Vietnam - Printable Version

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Condotel faced the risk of oversupply in Vietnam - Địa Ốc - 16-06-2017

Born rather late in the real estate market in Vietnam, condotel hotel segment has grown rapidly in the last two years. A number of condotel projects are being deployed causing this segment to face the risk of oversupply.

"Multiply" supply

In 2012, the name condotel began to appear in the real estate market in Vietnam. Condotel projects are mainly located in coastal cities such as Nha Trang, Phu Quoc, Da Nang, then quickly spread to many provinces and cities across the country.

Although the real estate market freeze, this type of product quickly attracted the attention of investors. These market names are known as Vingroup, FLC, Sun Group ...

In particular, in 2016, the supply of this segment is pushed to its peak. Specifically, according to CBRE report, Da Nang reached 5,751 units, up 8 times over the same period last year. Nha Trang with about 5,000 apartments, Phu Quoc, Binh Thuan, Thanh Hoa ... are also informed that thousands of condotel apartments are developed by domestic and foreign investors.

CBRE forecasts that this apartment segment will continue to grow strongly in 2017, of which Da Nang will have about 7,000 units, Nha Trang will have about 8,000 units, Phu Quoc will also have about 3,000 units.

Explaining the attraction of the condotel type, many experts said that Vietnam has great potential in tourism and this is the original foundation. The number of visitors to Vietnam is increasing each year. In just 7 years (2010 - 2016), the number of international visitors has doubled, from 5 million to 10 million.

Among them, the destination that many tourists choose is still Nha Trang, Da Nang and Phu Quoc. For example, in 2016, Nha Trang welcomed nearly 1.2 million international visitors, an increase of nearly 23% compared to 2015. Similarly, international visitors to Da Nang has reached nearly 1.7 million, A 33% increase from 2015. Therefore, businesses always choose these coastal provinces to develop the condotel project.

"Condotel is more advantageous than a hotel, because it is a connection between the apartment and the hotel. Visitors not only sleep, but also have space to receive guests, cook ... as a short-term apartment during travel. For the type of travel with family, or group of friends, the type of condotel superior.

In addition, this is still a new product line, so the development is quite large, attractive with secondary investors are more and more in Vietnam, "representative of investor condotel apartment type in Da Nang said.

In addition, Mr. Rudolf Hever, director of Savills' Asia-Pacific Regional Advisory-Hotel Group, predicts that the condotel market is on the rise, with more than 17,000 units entering the market within a week. The next three years and will be mainly concentrated in six coastal locations, including Khanh Hoa, Da Nang, Phu Quoc, Ho Tram, Ha Long and Quang Nam, which will create an overload of this segment.

Challenge with condotel

In front of a large supply, experts say the condotel is facing a huge challenge, as the demand for this segment goes down. Le Ngoc Tuan, deputy director of the hotel and tourism department, said that the appearance of too many condotel projects would cause surplus or saturation of this segment.

"For example in Danang, need about 180 visitors, the new condotel achieved 50% of operating capacity. Therefore, if condotel projects appear simultaneously without being accounted for in the current local development plan, then secondary investors buying condotel apartments will be vulnerable to investment burdens, because of the potential Profit is not as expected, "said Tuan.

In particular, the fact that some investors commit a profit of up to 12% per annum for 8 years, while the number of guests staying in the market is also causing many investors to doubt and start to be wary of this product line.

Mr. Nguyen Van Thuc, a resident of Binh Thanh district, HCM City, said that in 2015, he would invest in apartments in Vung Tau at a cost of VND2.6 billion. The investment is committed to lucrative profits, and will be capitalized within 15 years. However, real profit is not so. Disappointed by this type of investment, Thuc informed on the travel forum that people should not invest in the condotel segment.

Mr. Rudolf Hever also made the recommendation, because the real estate market is volatile and can be influenced by many factors. In particular, the management factors operate like hotel condotel model, the investors have little interest. Hence, it is unlikely that the profit margin will be as promised.

Meanwhile, the committed rate of profit in Vietnam is currently quite high. Therefore, when selecting real estate property for investment, the investor needs to plan well, as well as carry out feasibility study from the beginning, so that there can be a product suitable for the article. Sue the market, as well as financial capacity and ensure good future operation.