Vietnam’s Condotel market heats up in 2018

Vietnam’s “Condotel” market is a hot topic among real estate developers, property owners, travel agencies and government officials as increasing numbers of international tourists visit Vietnam. By definition, “Condotels” are condominiums that are operated as hotels, with owners allowed to make their units available for short-term rentals.

Condotel units are normally one or two-bedroom apartments with living rooms and fully-equipped kitchens. The properties are attractive to business and consumer travellers who are planning to stay for a long period in the country or who may be traveling with families.

The condotel market is forecast to have increased supply of units in 2018 in 2019, but the rapid development of the condotel segment has left many concerned about oversupply.

According to data from the Viet Nam Real Estate Association (VNREA), in 2017 condotels became the brightest star in the resort real estate sector. The investment in condotel projects accounted for more than half of total inflows into the real estate market and its estimated that there are more than 22,800 units currently available across the country.
During 2018, it’s forecast that there will be 29,000+ condotel units available for sale.

Stephen Wyatt, CEO of global real estate services firm JLL Vietnam, said that the development of resort condominiums is in direct proportion to the accommodation needs of tourists. As tourists’ demand grows, this type of asset has a positive future.

In 2017, international tourism increase almost 30% to reach 12.7 million visitors with the most attractive tourist destinations include Da Nang, Hanoi, Ho Chi Minh City, Nha Trang and Phu Quoc.

In 2017 the government listed the tourism industry as a key economic sector for the future and is developing investment incentives and policies that it hopes will lead to increased international investment in the sector.

To support the business segment, the government is looking to expand convention facilities in Hanoi and Ho Chi Minh City at a scale equivalent to facilities in competitor cities such as Bangkok. The government and tourism leaders want to attract large international conferences and exhibitions to Vietnam but are currently limited because of the small size of existing convention facilities.
Vietnam’s hosting of the Asia Pacific Economic Conference (APEC) in Da Nang in November 2017 was seen as a successful case study of how Vietnam can create international conferences and bring greater visibility to its tourism sector so the government will actively seek to host similar conferences in the future after larger convention facilities are built.

According to JLL’s Wyatt, with 2015 ~ 2017 considered foundation years, 2018 is expected to be another exciting year for resort real estate as investors simultaneously introduce their projects to capture the wave of development of Vietnam’s tourism industry, but its necessary to focus on quality, business strategy and commitment to profitability in order to adapt to the growing market and increasingly tight legal framework of this market.

According to Wyatt, there are three major reasons that condotel / vacation apartments attract investors:

First, resort condominiums hit the investment market within the last three years, so the competitiveness of this sector is still low compared to other markets such as apartments, townhouses, villas and land plots.

Second, this type of real estate is attractive to investors because developers typically promise that investors will receive rapid returns on their investment.

Third, the 2017 Tourism Law identifying tourism as a key economic sector in the future will continue to create momentum for the development of resort real estate for the foreseeable future.

Other articles