Several months ago, the condotel market was described as ‘falling into decay’, but now it is heating up again.
Unlike previous years, 2019 has been surprisingly quiet. Even in Nha Trang, a famous tourism city, no new condotel project was on sale. Only 140 condotels of the second phase of an existing project were launched into the market.
The limited supply and the cautiousness of buyers reduced the number of transactions in the first half of 2019, reported Savills, a real estate consultancy firm.
According to the firm, fewer than 200 products were sold, a sharp decrease compared with 850 condotels sold the same period last year.
However, the market has shown signs of recovery in the last months of the year, while the sales strategy has changed. Instead of trying to attract buyers with a profit commitment policy (some developers commit to a high profit rate of 12-14 percent per annum), developers are now focusing on making heavy investments in utilities and building real value for products.
An Gia Group, for example, recently introduced The Song project with 1,600 condotels in Vung Tau City, with no commitment on profit. Nam Group has also introduced Thanh Long Bay, a tourism complex without commitment on profit. Even Novaland gave up commitment on profit for its Novaworld Phan Thiet complex.
Analysts say that the trend will be growing in the last months of the year, which is considered a test of the viability and development of condotel products in Vietnam.
The analysts said the profit commitment policy was a double-edged knife. In the immediate time, the policy could increase the attractiveness of projects. However, this will discourage buyers if the profit is not as high as committed. Bavico Nha Trang is an example.
In some cases, real estate developers have to cut their profits to ensure profits for buyers. “How can they make money to ensure high committed profit of 10-12 percent for clients?” said the deputy general director of a HCM City-based real estate firm.
In fact, the quiet condotel market was mainly attributed to the unclear legal status of condotels, especially ownership.
According to Vo Thi Khanh Trang from Savills HCM City, after a period of overly hot development, many problems in management and legal framework have been exposed, and management agencies are planning to fix them.
Condotel are known for their satisfactory profit rate for buyers.