Last updated: Wednesday, May 15, 2019


No Need to Worry about Tourism Property Bubble

Posted: Monday, January 07, 2019

The tourism real estate segment is an attractive investment channel and there will be no freezing or bubble in the coming time, said Prof Dang Hung Vo, former Deputy Minister of Natural Resources and Environment when asked about Vietnam’s tourism property prospect. Huong Ly reports.

What do you think about the advantages of investing in tourism property compared to other investment channels?
Looking into other investment channels, gold has very low profitability and is tightly controlled by the State. Foreign exchange is in unrest, especially in the context of the US-China trade war. Securities can create certain effects but require very high expertise. Therefore, real estate is still a traditional investment channel that receives great attention.

Tourism property investors will have two benefits if they can choose qualified developers. Firstly, they can benefit from the developers’ commitment to interest rates. Many projects are guaranteed by reputable banks. Secondly, real estate may increase in value over time.

In the last three years, tourism property has grown dramatically, will there be oversupply?
Vietnam has a high growth rate of tourism, up to 30 per cent per year. Increasing demand for tourism requires the tourism property sector to grow accordingly to ensure accommodation. Tourism growth rate is still higher than tourism property’s.

The investment in resort real estate is always in the Government's development target because the tourism industry is Vietnam’s key economic sector, aiming to attract high-end customers with high payment ability. That is the quality demand leading to productive business.

I think that investing in the tourism segment does not lead to supply exceeding demand as well as the situation of freezing demand. The possibility of saturation is far from happening, so there is no need to worry about it.

Could you tell us about some potential risks for secondary investors?
The biggest barrier to tourism property market is the legal framework. The current legal framework is one step behind, inflexible to the actual requirements. For example, the opportunity to develop tourism and resort real estate is huge, but there is a lack of legal mechanisms for new types such as condotel and officetel.

On the other hand, I think that the investors' commitment to a high level of profit can be attractive to people to put money in, but sometimes a bit reckless. Importantly, the legal framework must be complete to see that the level of profit commitment is highly feasible.

Which criteria help investors choose the right tourism property?
Investors should consider carefully before selecting a project, because in addition to the criteria of geographical location and functional design, the policies to share profits from investors and operational management when in operation are extremely important factors to ensure sustainable profitability.

There are three steps to choose a tourism property project to invest: choose which provinces that have developed tourism, then choose a project with a good location in that locality and finally choose a reputable investor.

How do you expect the tourism property market to grow?
Investors should also pay attention to professional factors, especially from investors. The concession in profit commitment will not happen in the professional business environment. This is the development trend in the coming time.

Professionalism in the business method and operation mode of the project is very important because it will create real estate value added many times. Normally, large real estate projects need to hire professional operators, ensuring transparency and project quality. Good conditions from a professional operating unit will ensure the highest occupancy of the rental property. High business value will make real estate value immediately increase.

Thank you very much!

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