Condotel after 1 year of legal "unbinding", investors still advertise for sale

According to a survey, many condotels (apartment hotels) and resort villas in tourist destinations such as Nha Trang (Khanh Hoa), Ha Long, Da Nang, Phu Quoc... are being sold at a loss.

For example, a 40m2 condotel with sea view in Nha Trang is being sold at a loss of nearly 500 million VND. According to the advertisement, the apartment was previously purchased for 1.8 billion VND but is now being sold for only 1.35 billion VND.

Or the condotel on Vo Nguyen Giap Street (Da Nang City) is being sold at a loss of up to 1 billion VND compared to the original price. This apartment has an area of ​​65m2, is arranged with 2 bedrooms and has a sea view, the selling price is 3.1 billion VND, equivalent to nearly 48 million VND/m2.

Similarly, another condotel in Ha Long (Quang Ninh) is also being advertised for sale at a loss of 1 billion VND. Accordingly, the purchase price in 2020 was 2.7 billion VND but is currently being sold for just over 1.7 billion VND. The apartment is advertised as having a direct sea view, high floor, unobstructed, high-class interior, 5-star standard, and long-term red book.

According to surveys by many real estate research companies, the demand for condotels is very low. For many months, the country has not recorded any new projects opening for sale.

Once a "golden goose" and developed rapidly in the period 2015 - 2018, but after the noise from the lack of a clear legal corridor, difficulties in granting pink books, to the broken profit commitment of Cocobay, the condotel segment fell into a long period of stagnation and "freezing".

By April 2023, Decree No. 10/2023/ND-CP was issued with the expectation of removing legal obstacles for this type. The Government's Decree allows the granting of certificates of land use rights, house ownership rights and other assets attached to land to buyers of products in non-housing projects, including tourist accommodation facilities on commercial land.

Before Decree 10, the laws or guiding documents only provided for granting red books to buyers of products in housing projects or projects with mixed functions between residential apartments and commercial services. However, for tourism accommodation projects built independently on commercial and service land such as condotels, officetels or resort villas, there was no legal basis for granting red books to buyers.

With the new regulation amending Article 72 of Decree 43/2014 (detailing the implementation of a number of articles of the Land Law), allowing the issuance of red books to transferees of land use rights, purchasers of houses and construction works in real estate business projects other than housing development projects (commercial and service products), this bottleneck has been removed.

The Decree also amended and supplemented regulations on granting red books according to the purpose of using commercial and service land for construction works used for tourist accommodation purposes according to the provisions of the law on tourism on commercial and service land.

However, according to many experts, the revised regulations still do not cover the entire market.

Mr. Le Hoang Chau, Chairman of the Ho Chi Minh City Real Estate Association (HoREA), analyzed that the new decree only stipulates the granting of certificates for constructions used for tourist accommodation purposes according to the provisions of the law on tourism on commercial and service land, so the scope of regulation is very narrow, not including all constructions used for accommodation purposes on commercial and service land.

Mr. Nguyen Van Dinh - Vice President of Vietnam Real Estate Association - also said that some regulations of the 2013 Land Law in the past time were not really clear, so it was difficult for localities to apply them to support businesses in granting certificates of ownership to investors participating in resort real estate development. Although some localities have committed to granting red books, some places have followed the support trend, but all are against regulations, so they have been stuck for a long time.

Decree 10 was issued with the view of directly untying the legal constraints on resort real estate, removing difficulties for this type of real estate nationwide that has been entangled for many years. Although the Government has been determined and localities have also strongly supported it, the general consistency between the Law and the Decree is still difficult. Moreover, the Decree does not have any guiding circulars, so no locality has been able to apply it. This issue needs to be amended to the Land Law, when all issues are clear, localities can implement it.

“From that bottleneck, investors do not want to re-enter this market because of the high risk,” said Mr. Nguyen Van Dinh.

On the other hand, the economic recession has also seriously reduced the demand for tourists, and policies for this sector are not attractive. In addition, domestic tourism costs are still high, and airfares fluctuate a lot, leading to weak tourism economic efficiency and lack of investor appeal. This has made the resort real estate market less vibrant.

According to Mr. Mauro Gasparotti, Director of Savills Hotels, another reason why the condotel segment has not been able to recover is because many products are not suitable for market demand. Some investors rushed into the market, leading to a gap between supply and demand in some destinations.

"We also observed a focus on quantity over quality in some projects. The lack of consideration for factors such as market characteristics, industry trends, etc. has created many potential risks when projects are developed but do not meet the needs of tourists, especially now that foreign tourism is becoming more popular, competition is becoming fiercer," Mr. Mauro Gasparotti analyzed.