Oversupply, legal loopholes overshadow rise of the condotels in Vietnam

By Staff reporters   August 14, 2017 | 12:05 pm GMT+7
Oversupply, legal loopholes overshadow rise of the condotels in Vietnam
High-rise buildings line up along the coastline in Nha Trang. Photo by VnExpress

Subinvestors are at risk because they stand on shaky legal ground.

The recent tourism boom is fueling the rise of condotels in Vietnam, but both officials and industry insiders have warned of a supply surplus and a lack of legal guidelines for the new realty market.

Condotels, short for condo hotels, have been springing up in Vietnam over the past five years, especially in popular tourist destinations such as Da Nang, Nha Trang and Phu Quoc.

Many investors prefer them as they can resell individual condotels to small investors instead of bearing the financial responsibility for an entire project. Subinvestors are usually promised a share of the profit after around 10 years.

Along the coasts of Da Nang and Nha Trang, dozens of condotel projects are being built.

One of them is a 25-story project with more than 1,000 units standing on the famous My Khe Beach in the heart of Da Nang.

In Nha Trang, around 20 projects with more than 10,000 units have been licensed, and a tenth of them are already in service.

Dong Luong Son, the vice chairman of Khanh Hoa Province's Tourism Association, said the tourism boom has heated up the resort property market.

The province’s international airport in Cam Ranh receives up to 70 flights a day, and hotels in town as well as the nearby Nha Trang are usually fully booked, which makes condotels an attractive new investment option, he said, as cited by Tuoi Tre (Youth) newspaper.

A survey showed that 7,000 new apartments were completed in Khanh Hoa last year, and 70 percent of them were condotels.

But industry insiders think that oversupply could be a problem.

Duong Thuy Dung, chief market researcher at real estate consultancy firm CBRE, said at a recent press briefing that Da Nang has “too many” condotels and there will also be tough competition in Nha Trang and Phu Quoc.

She said Da Nang will have 32,000 condotels by the end of this year, but it’s uncertain if the city will receive enough tourists to fill them.

Meanwhile, Nguyen Ngoc Thanh, the vice chairman of the Vietnam Real Estate Association, is worried more about legal issues.

He said Vietnam does not have comprehensive regulations regarding ownership rights and management for this form of property.

According to the Housing and Real Estate Market Management Agency under the construction ministry, red books (documents that confirm ownership in Vietnam) are currently not issued for condotels.

That puts subinvestors at high risk, experts said.

The construction ministry is working with the finance and environment ministries to come up with a specific legal framework for the new market.