Resort Real Estate Still Has Wide Room for Growth

9:28:08 AM | 27/8/2020

The resurgence of the Covid-19 pandemic has upended the real estate market, just as it was getting back on track. All sales plans of the businesses and real estate floors have been almost reversed. In which, resort real estate is the most hard-hit segment.

Hibernation likely to last till 2021

According to CBRE's announcement, with the quarantine regulations due to the Covid-19 outbreak, Vietnam's tourism industry in the first six months of the year was seriously affected. International visitors to Vietnam in the second quarter are mainly foreign experts and technicians working on Vietnamese projects. In the first six months of 2020, Vietnam welcomed 3.74 million international tourists, down 55.8% compared to the same period last year.

Mr. Mauro Gasparotti, Director of Savills Hotels Asia-Pacific, said that the policy of closing borders and restricting flights caused the number of tourists, room capacity, booking rates, especially segments dependent on international arrivals, to decrease significantly. Pressure from low occupancy caused the average hotel price in Q1/2020 to decrease by 21% on average compared to Q1/2019. In June, when the pandemic was quieter, the number of domestic tourists increased, and resort real estate entered the recovery phase in the peak season. The occupancy of hotels and resorts improved well during the weekends. Demand for events in major cities was back.

However, in the end of July, the pandemic broke out again in Da Nang as a fatal blow to the entire resort real estate market nationwide. Hotels and resorts in Da Nang suffered the earliest impact from cancellation of bookings for August and September. Several hotels and resorts allowed customers to change booking dates in the hope of maintaining a source of guests. Even areas where the pandemic has not yet reappeared, such as Phu Quoc, Nha Trang, Binh Thuan and Phu Yen are also heavily affected. Almost all projects are being implemented in moderation. Resort business which has just gone through a difficult period, now continues to encounter the pandemic, so the loss of personnel and finance is inevitable.

According to experts, in the case of prolonged pandemic, even at the end of the year, the resort real estate market may continue to be affected by stronger preventive measures of the Government. The market will then have to hibernate possibly to 2021.

What opportunity for resort real estate to revive?

The impact from the pandemic is only an immediate difficulty, because the resort real estate in Vietnam still has wide room for growth and the demand of consumers is still great. When the pandemic is controlled, the real estate market for resort tourism products in Vietnam will continue to grow steadily. According to the latest report by the Ministry of Construction announced on August 4, in the second quarter, the number of licensed tourism and resort projects also increased over the previous quarter. Specifically, 12 projects including 70 tourist apartments, 1 condotel and 256 tourist villas were completed; 92 projects including 197 tourist villas, 6,300 tourist apartments and 46 condotels were licensed; 91 projects with 8,407 tourist villas and 19,878 tourist apartments were under construction.

Mr. Doan Van Binh, Vice President of Vietnam Real Estate Association, assessed that the real estate market in Vietnam in general and tourism real estate in particular still has room for very strong development, because of the national strategy of taking tourism as a key economic development. The prices are still low, which is another attraction to investors in addition to favorable conditions of nature, people and the economy of Vietnam. This is the factor that helps Vietnam's resort real estate enter a new growth cycle, which is expected to explode in the next 5 -10 years.

According to Savills Hotels, Vietnam currently has 49 resort real estate projects in the 4 and 5-star segments in major resort destinations that are under construction and are expected to come into operation by the end of 2020, adding about 16,900 rooms to the resort market. Surveys show that 53% of these projects are still rushing to complete the final steps, the remaining 23 projects postpone completion till 2021. Of which, more than 60% are expected to be complete in the 1st and 2nd quarter of 2021.

Opportunities from new generation FTAs ​​are a highlight to attract foreign investment into Vietnam in the coming time. Thereby, it will increase the demand of foreigners living and working in Vietnam with financial capacity, contributing to the growth and better liquidity of the resort real estate market.

Mr. Doan Van Binh said that open real estate mechanisms and policies for foreigners are reflected in the synchronous amendments of the law on land, real estate, and construction, tourism, credit, immigration. If applied soon, it will be an urgent solution to help the market recover quickly after the negative impacts of the Covid-19 pandemic. At the same time, this is also a long-term solution for Vietnam to become a resort destination for foreigners to invest in real estate, increasing their competitive advantage with other countries in the region.

By Nguyen Mai, Vietnam Business Forum