Facing difficulties in granting certificates, condotel transactions still increase slightly

Supply and liquidity both skyrocketed

According to the report on the real estate market in Ho Chi Minh City and surrounding areas in the second quarter of 2023 by DKRA, the resort apartment segment (condotel) has resumed trading after a gloomy period in late 2022 and the first quarter of 2023.

Specifically, about 378 condotels were opened for sale from 3 projects, an increase of 90% compared to the first quarter of 2023. Notably, the liquidity of condotels also increased 20 times compared to the previous quarter, reaching 122 units. This is a positive sign because the resort apartment market has faced many negative impacts as well as a lack of interest from investors over the past time. Although compared to the same period last year, the market supply and the amount of sales are still 31% and 78% lower, respectively.

This report shows that most transactions are currently focused on projects with complete legal documents, bank guarantees and operated by reputable units. Primary prices are recorded to increase by 2-4% compared to the same period last year. However, in return, investors also offer many preferential policies for customers such as interest rate support, profit commitment, principal grace period, discounts for customers paying at once...

The recovery of condotels is believed to come from the Government's issuance of Decree 10/2023/ND-CP, supplementing a number of articles of the Decrees guiding the implementation of the Land Law, effective from May 20. In particular, it supplements regulations on granting red books for construction works according to the purpose of using commercial and service land for construction works used for accommodation and tourism purposes according to the provisions of the law on tourism on commercial and service land.

The number of condotel deposits has increased 20 times compared to the previous figure, picture 1. — Condotel is showing signs of recovery.

However, in reality, the issuance of red books has so far only stopped at the level of expectation because there are still many problems in implementing Decree 10. Because, although Decree 10 has supplemented Article 32 of Decree 43/2014/ND-CP, regulating the conditions for "Certification of ownership of non-residential construction works", the regulations on the order and procedures for issuing books are still general and vague, causing localities to not dare to "take strong action" in issuing books.

Currently, there are 2 types of condotels on the market, the first is a project on commercial service land, the State grants the policy and the investor issues a red book to customers, which is also commercial service land for 50 years. The second type is commercial service land, but some localities change commercial service into residential land without forming residential units. Currently, this type of condotel is being proposed to be adjusted to commercial service land to be suitable and eligible for a red book.

In addition, some localities are also facing difficulties with the viewpoint of issuing separate certificates for each condotel, which would be no different from issuing certificates for apartment buildings. Issuing certificates for condotels - a hotel and accommodation business model - would also change the nature of the type. These issues are still waiting to be clarified and could become a turning point for the recovery of condotels if resolved soon.

Other forms gradually recover

According to DKRA's report, in addition to condotels, other types of resort real estate also show signs of recovery. For example, in the resort villa segment, in the second quarter, 76 products of 5 projects were opened for sale, only 4% compared to the same period in 2022. Meanwhile, the consumption reached 50 units, demand increased slightly in certain projects.

Regarding the resort townhouse/shophouse type, the report recorded 75 new units from 4 projects opening for sale. Consumption reached 44% of the new supply, equivalent to 33 units. However, more than 80% of primary projects continued to close their product portfolios to adjust their selling prices and sales policies accordingly.

The inventory in the condotel liquidity index has increased 20 times compared to the previous figure, picture 2. — Resort real estate is gradually gaining attention again.

The increase in consumption in this type is believed to be due to the discount policies of up to 40-50% of investors for customers paying in one go. This is a measure to re-attract capital in the face of cash flow pressure of some investors facing financial difficulties.

DKRA Group forecasts that in the third quarter of 2023, the supply of all types of resort real estate will increase. Specifically, condotels will continue to increase by about 400 - 500 units, mainly concentrated in Ba Ria - Vung Tau, Binh Dinh... Meanwhile, the supply of resort villas and resort townhouses/shophouses is forecast to increase slightly and are mainly concentrated in Kien Giang. The overall market demand will continue to increase compared to the second quarter of 2023 but without many sudden changes.

Discount policies, incentives for quick payment with equity, and revenue sharing programs will continue to be widely applied by investors in the third quarter of 2023 to stimulate market demand. This has led many investors to expect that the resort real estate market will have a strong recovery in the late this year and early 2024.

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