Resort real estate sales fall to 10-year low

The CEO of a company that is building of more than 300 condotels in the central Khanh Hoa Province said in the first three quarters of 2023 the number of transactions fell by 80% year-on-year despite many promotions, including a discount of nearly 20%.

Construction is behind schedule, he said, and expressed the fear the situation would continue to remain difficult this year.

The resort real estate market began to decline in late 2022 and remained depressed through 2023 with supply and investor confidence remaining low along with sales.

Data from real estate consultancy DKRA Vietnam showed that supply of beach villas, townhouses and condotels declined by 94% and 96% to 300, 300 and 1,600 units.

The company estimated resort real estate sales fell to 10% of the 2022 figure and the lowest level since 2014.

As of December the number of unsold condotels and resort townhouses had increased to around 50,000 and 30,000 units, with villas accounting for more than half of the latter.

DKRA said the three localities with the largest inventories are Phu Quoc Island, Binh Thuan Province and Ba Ria - Vung Tau Province.

According to statistics from real estate consultancy Savills Hotels, in the first three quarters over 83,000 beach villas and apartments in the mid-level and high-end segments were offered for sale.

Mauro Gasparotti, director of Savills Hotels, said some places are facing a risk of oversupply of resort real estate due to rapid growth over the years.

Since 2013 supply in coastal localities has been rising by an average of 16% a year. Some destinations such as Mui Ne in Binh Thuan, Nha Trang in Khanh Hoa and Ha Long in Quang Ninh Province have focused on developing the mid- and high-priced segments.

Many projects are large, with some even having more than 1,000 rooms.But room occupancy has been low.

In the first three quarters Da Nang City was the leading coastal destination with an average room occupancy rate of 60%. The rate in Nha Trang and neighboring Cam Ranh was only around 30% with Chinese tourists not visiting them in large numbers unlike in the pre-Covid period. The rate in Phu Quoc was also 30%.

Abandoned shophouses at a resort real estate project along the Han River in the central Da Nang City. Photo by VnExpress/Nguyen Dong

Vo Hong Thang, director of consulting services and project development at DKRA Vietnam, said the net profit from operating a beach property like villa, shophouse or condotel by investors is often 1.5-3%, many projects are unprofitable and few yield returns of above 5%.

It would take them 20-25 years to recoup their investment, he said. "Some projects may not recoup their investment in 50 years, while the life cycle of a resort real estate project is usually only 50 years."

Tran Trong Vu, co-founder of SPE.R Company, which researches the real estate market in the central region, said the secondary market for resort real estate is not promising.When the market was booming, many developers and investors hastily built and bought assets that did not reflect local culture, and so they fail to attract tourists.

Experts agreed unanimously that the resort real estate segment is often the last to recover in the property market, and so its slump is set to continue.

Vu said the resort real estate market would continue to be gloomy in 2024.

Gasparotti said this is the right time for developers to adjust their business model, focusing on how buyers would use their property rather than on scale.

He said investors are increasingly paying attention to developers’ capacity, brand and operation and not simply on media claims and promises of high profits.