Vietnam's hospitality real estate sector struggles to recover
Vietnam's hospitality real estate sector struggles to recover
Hospitality real estate will perform better in the second half of 2024 and in the years to come.
Three laws (Land Law, Housing Law and Real Estate Business Law) that took effect on August 1 are expected to ease the difficulties for Vietnam's hospitality real estate, setting the necessary elements for recovery, according to local insiders.
Oakwood Halong project in Quang Ninh Province. |
Nguyen Van Dinh, Vice President of the Vietnam Association of Realtors (VARS), believed that the hospitality real estate segment would have a positive recovery and rebound in the second half of 2024 and beyond, driven by the strong recovery of the tourism industry and new laws that took effect on August 1, 2024.
Dinh cited that in the first six months of 2024, Vietnam welcomed over 8.8 million international visitors, a 58.4% increase year-over-year and 4.1% higher than pre-pandemic levels, reaching 50% of the 17-18 million target for 2024.
The construction of many critical national transportation infrastructure projects, such as bypasses, coastal roads and new airports, is fueling hopes for the hospitality real estate sector, he added.
"The strong recovery and growth of the tourism industry, and its designation as a key economic sector, are creating a positive momentum to drive hospitality real estate businesses to accelerate the implementation and execution of their projects," Dinh stressed.
He also said that on the legal side, Decree 10 and especially the three new laws that will come into effect on August 1 are expected to resolve the difficulties and obstacles related to the issuance of land use rights certificates for condominiums and officetels.
"This will enable the hospitality real estate segment to recover and make a strong comeback. In 2024, the supply of resort real estate will improve by around 20% compared to 2023,” he said.
In the second quarter of 2024, the tourism and resort real estate market recorded seven new launches, bringing almost 2,800 new products to the market, up 45% compared to the same period in 2022, according to the latest market report from the VARS.
Expectations from new policies
A hospitality property project - Vega City Nha Trang in Khanh Hoa Province. |
Local insiders attribute the lack of investor appetite to a number of factors, including the disruption to operational profitability caused by the epidemic and the persistence of high selling prices that have not been reduced to more reasonable levels, as many previous investors had used financial leverage.
"The hospitality property segment is short of the necessary elements for recovery, as businesses and investors are struggling to access bank loans, investors have lost confidence due to legal and policy mechanisms, as well as some developers failing to deliver on their profit promises," said Vo Hong Thang, Director of Research and Development at DKRA.
He added that new projects remain dormant and ongoing developments are being carried out cautiously as investors are wary of the market demand for the product and are therefore reluctant to expand their investments further.
Local economist Vu Dinh Anh said that there are solid reasons to believe the hospitality real estate segment will recover and regain its former strength, driven by the positive growth in the tourism industry and the continued surge in international visitor arrivals year after year.
He added that after a period of crisis due to the pandemic and the lack of "landmark" products, the professionalism of resort developers has improved. Additionally, the adjustments made to the policy framework have created stronger momentum for a more vibrant market.
He explained that the new laws, which will take effect on August 1, 2024, have addressed the need for a stable, long-term framework for these projects. While the market remains favorable in terms of supply-demand dynamics and pricing, the continued improvement in people's incomes will also boost consumption.
"Thus, we can affirm that the hospitality real estate segment will see better developments in the second half of 2024 and the years to come," Anh underlined.
In the first half of 2024, the market saw more than 3,100 new product launches. That's more than double the first half of 2023, but only 27% of the same period in 2022.
Q2 saw over 1,700 successful transactions, representing 61% of the market, driven mainly by the tourist apartment segment in a condotel project in the beach city of Nha Trang (the southern province of Khanh Hoa). This project is one of the few nationwide to have received a land title deed (accounting for 87% of supply), the report noted.
Over 66% of the primary supply during the quarter was leftover inventory from previous projects. Resort villas priced below VND10 billion ($398,647) and vacation rentals priced below VND3 billion ($119,594), provided all construction and regulatory criteria were met, attracted the most interest from investors.
In the first half of 2024, the resort real estate market recorded nearly 1,800 successful transactions, accouting for 20% compared to the same period in 2022.
Primary market prices remained flat, while the secondary market saw an average price decline of 15-20% from contract prices. While other projects saw sharp price declines of 40-50%, they still had liquidity issues.
"Overall, investment demand has seen a slight recovery thanks to positive developments in the general market and growth in the tourism industry, as well as expectations of legal breakthroughs with the upcoming new laws," said Tran Van Binh, Vice Chairman of VARS.
However, the market is not out of the woods yet, as supply and transaction rates are still significantly lower than in 2022 and especially in the pre-pandemic period. The hospitality segment is still struggling to recover, he added.
