Untangling legal knots not a panacea, condotel developers discover as demand tanks

The number exceeds that of unsold shophouses and villas combined, according to property consultancy firm DKRA Group.

The chief of a property developer based in Ho Chi Minh City’s District 3 said his company was only able to sold a few units in the second quarter despite offering discounts of up to 30%.

A developer based in District 10 said some condotel owners are trying to sell their properties back to the developer as they could not find other buyers.

Industry insiders said most condotels are not fetching the expected returns to owners, and most are trying to sell out even at a loss.

DKRA Group said condotel sales plummeted by 78% year-on-year in the second quarter despite discounts and other incentives sellers offered.

Years after they first appeared, condotels were finally granted title deeds in May, but industry insiders said it could take a long time before this type of property is in demand again.

Trang Bui, country head of property consultancy Cushman & Wakefield Vietnam, said investment in condotels has stalled in the last three years due to Covid-19 and economic challenges.

Many criteria need to be met before condotels bring profits, such as ideal location, unique features, professional management, and a sound business strategy, and they also need to partner with tourism agencies and airlines to ensure a steady source of customers, she said.

It is too early now to expect a recovery in the condotel market as it depends on the economic situation and the tourism market, she said.

"We can expect a recovery next year when Vietnam’s economy is expected to bounce back as forecast by the Asian Development Bank."

Vo Hong Thang, director of consulting and development at DKRA Group, said condotels might be the last segment to recover in the property industry.

Although issuance of title deeds has been approved in policy, specific regulations need to be created so that owners do not become victims in case of conflicts, he said.

Some condotels are overpriced – costing up to VND154 million ($6,505) per square meter -- which means a buyer has to wait for up to 50 years to recoup their investment, he said.

The surge in condotel development in recent years has resulted in oversupply, he said.

"We might have to wait until 2025 to see the light at the end of the tunnel."