Prolonged 'hibernation' period for resort real estate

Resort real estate was expected to strongly recover after Vietnam resumed international flights and reopened tourism post Covid-19, but is likely to remain in hibernation due to general economic difficulties and lingering legal issues facing the segment.

In the short term, property experts and developers feel it will be difficult for resort real estate to make a reversal and will continue to be quiet with moderate liquidity. Market development will depend on the legal framework, cash flow and tourism growth.

Expert Nguyen Hoang told The Investor that the property market in general and resort real estate in particular are currently facing many difficulties with no solutions in sight. This situation has lasted since the fourth quarter of 2019, even before the housing crisis in early 2022.

"Resort real estate often develops after other types of property, when economic conditions, income and tourism demand increase. Obviously, from now to 2024, this segment will face huge difficulties," Hoang said.

Among the difficulties are high inventories, very low demand, poor project implementation and operational capacity, tightened credit with high interest rates, and legal bottlenecks.

The government’s upcoming support measures will only focus on affordable housing, social housing and housing for workers, but not resort real estate, he said, adding that proposals to tax second properties have also reduced demand.

However, Hoang said there are still some opportunities for resort real estate to develop in the next 2-3 years and the medium term. For example, investors will target customers who have idle money and want a second home. Large and capable investors with an ecosystem for tourism will take the lead in this recovery and development journey.

In addition to sales policies such as offering discounts and support, the post-pandemic recovery of domestic tourism and an expected high influx of foreign visitors from 2025 will help boost the resort real estate segment.

He stressed the need for regulations on the interests and responsibilities of investors, buyers and operators. "We can also allow foreigners to buy condotels and operate them. This will attract foreign investors, thus increasing the segment’s attractiveness and liquidity," he said.

Recovery still far ahead

According to property consultancy DKRA Vietnam, in 2022, more than 16,700 resort real estate units were put on the market, a year-on-year increase of 24%. Of this, over 11,000 units were sold, up 12% over the same period in 2021.

The market has experienced a downtrend since the end of Q2/2022, with no clear signs of recovery. The situation has been blamed on economic and geopolitics instabilities, credit tightening, inflation control measures, high interest rates, operational problems, and profit sharing commitments. In addition, the international tourism recovery has been below expectations while supply remains high.

The Ministry of Construction reported that in Q4/2022, four new tourism and resort projects were licensed with 196 apartments and eight villas, doubling the previous quarter’s figure but down 33% year-on-year. Of these, three are in the south-central province of Phu Yen and one in the northern province of Cao Bang.

There were 126 projects with 19,922 apartments, 4,282 villas and 282 officetels under construction, up 121% quarter-on-quarter and nearly 137% year-on-year. They included 79 projects in the southern province of Kien Giang and 26 in south-central Vietnam’s Khanh Hoa province.

Six projects were completed, down 33% and 14% quarter-on-quarter and year-on-year, respectively. They included 2,251 apartments, 241 villas and 245 offcetels, all in the northern midland province of Phu Tho.

For the whole of 2022, the country had 12 new projects licensed, equivalent to about 23% of 2021’s figure, and 30 projects completed.

In Q4/2022, tourism and resort real estate prices in most projects nationwide remained the same as in Q3. Many investors continued to deliver profit sharing commitments and interest rate support to stimulate market demand.

For example, in Quang Ninh province, the Grand Bay Ha Long project offered a price of about VND118 million ($4,980) per square meter for resort villas, and VND120 million ($5,060) per square meter for shophouses. Meanwhile, the Holiday Ha Long project set condotel prices at VND36 million ($1,520) per square meter.

The respective resort villa and shophouse prices were VND107-137 million ($5,780) and VND83 million ($3,500) in Khanh Hoa; and VND66-69 million ($2,910) and VND100 million ($4,220) in Ba Ria-Vung Tau province.