Selective Vacation Property Investment

1:01:44 PM | 10/4/2019

Vacation property development is a right direction but there is still need for restricting substandard projects that may cause damage to investors, said Mr. Nguyen Van Dinh, Vice Chairman of the Vietnam Association of Realtors, in an interview granted to Vietnam Business Forum. Luong Tuan reports.

What do you think about the rapid development of vacation property, especially condotels, in the past time?

Vacation property investment is always a development target of the Government because tourism is a key economic sector of Vietnam. According to the Tourism Development Master Plan, Vietnam is expected to welcome 25 million international tourists by 2025. To entice and meet international tourists, the country needs to invest in tourism infrastructure, especially high-class accommodation facilities. I emphasize that the holiday home segment, like condotels, is a segment that needs to be developed in Vietnam. However, the supply has been tight recently. The average selling price of holiday cottages ranges from VND35 million to VND50 million per square meter. Many projects even quote over VND70 million per square meter.

The Government should take measures to control the licensing of new projects and the review of projects that are being delayed. If projects are not eligible and appropriate, they should not be licensed.

So, condotel development is necessary but must it be managed more closely? Do you mean that?

Yes, that’s right. In fact, many potential projects are promised to become tourist attractions and elevate local tourism, but many others are behind schedule or lack legality, thus hurting secondary investors. It is time to sort out projects invested by trustworthy investors, operated by professional units. Well-performing projects will be given priority for development, while slow-moving ones need to be reviewed.

What criteria should be used to evaluate a vacation property project?

In my opinion, five factors are used evaluate a vacation property project: Investor competency, management and operation competency, profit commitment to secondary investors, project location, and legality.

Currently, many project developers have been proactive and flexible to introduce very good policies. Some developers are committed to buying back condotels after 5 or 10 years and ensuring liquidity. Many projects are guaranteed profit by big banks and managed and operated by prestigious foreign corporations such as Movenpick and Best Western Premier.

How will the Vietnamese vacation property market develop in the next 5 - 10 years?

The market always follows the supply and demand rule. The increase in international visitors to Vietnam will lead to tourism infrastructure development, especially vacation property in a more transparent and professional manner.

Vacation property development cannot be fragmented and undersized, but must be synchronous and sizeable. In my opinion, it is necessary to put into operation world-class complex resorts fitted with full amenities and high-class services for tourists. The synchronous investment will attract quality international tourists and the value of real estate investment will increase as a result.

For example, Nha Trang recorded an annual tourism growth of more than 30%. This coastal city is strongly invested for infrastructure development. Nha Trang is being invested to expand northwards along Tran Phu - Pham Van Dong Road. For me, building infrastructure such as international yacht wharfs, hotel complexes with helicopter landing areas, casinos and many high standard facilities and applying modern management system in Nha Trang is an exemplary vacation property development model.

Do you have any advice for secondary condotel investors?

Compared to gold, securities or bank savings, real estate is still an attractive investment channel, with the vacation property segment growing very well. With a reasonable investment rate of about VND2 billion, a pledged profit of 8-10% a year plus many other incentive policies, this segment is catching the interest of many investors.

Many project developers building and operating common types of real estate such as commercial houses and apartments do very well, but this not always the case when starting with vacation property, because of their inexperience, resulting in suspicion from secondary investors. My only advice is to select projects operated by reputable operators to ensure stable business operations, achieve high room occupancy rate, and particularly prioritize projects built with registered progress and full legality.

Thank you very much!