Tough spot: Tourists walk over Huc Bridge on Hoan Kiem Lake in Hanoi. As the tourism sector struggles to recover in the wake of the pandemic, so too are developers finding it difficult to fulfil profit commitments. — AFP
HO CHI MINH CITY: The condotel market remains in a slump due to excess inventory and industry insiders warn it will not recover at least until 2025.
Despite recent positive news about government regulations granting land ownership titles to condotels, only 122 units were sold in the second quarter of 2023.
According to a report by DKRA Group’s research department, the inventory of unsold units topped 42,300 as of June, far exceeding the combined inventory of beach shophouses and resort villas.
Developers are struggling to sell them and bearing the financial costs of bank loans taken to develop these projects, it said.
Sales of existing condotels have been extremely slow this year, impacting both the primary and secondary markets, it added.
The condotel segment comprises residential developments that allow individual unit owners to rent to short-term guests, as if it were a hotel property.
Investors are finding it increasingly difficult to sell their condotels at a profit, leading them to accept lower rental returns.
Trang Bui, chief executive officer of Cushman and Wakefield Vietnam, attributed the challenges faced by the market to multiple factors, including the pandemic’s impact and economic pressures.
“It is still too early to expect a market recovery for condotels,” said Bui.
The market relies heavily on economic growth, the tourism sector and developers’ ability to develop and operate theses projects.
A successful project must be in a prime location with a good range of amenities and professional management, and investors must forge close co-operation with travel firms.
Vo Hong Thang, director of the consulting and project development division at DKRA Group, said a boom in the condotel segment in recent years has led to an oversupply.
The lack of specific regulations and standards for condotels and the failure of developers to fulfil profit commitments significantly eroded investor trust, he said.
The high prices make for unattractive returns on investments, he added.
“Investors will need 40 to 50 years to recover their investment, making it an unsustainable option.”
The recovery of the real estate market will likely begin with residential properties that serve essential needs, while resort properties like condotels may take longer to regain balance, experts said.
To restore investor trust, it is crucial to implement specific regulations regarding condotel standards and ensure developers fulfil their profit commitments, they added.
While the government recently issued a decree on granting ownership titles to condotel buyers, further guidelines are needed for the process to be expedited, according to Thang.
Under the decree, properties such as condotels, officetels and resort villas can be granted ownership certificates.
According to the Vietnam Real Estate Association, there are around 240 tourism property projects with around 114,000 condotels worth an estimated 297 trillion dong. — Viet Nam News/ANN
