What factors cause resort real estate to remain 'frozen'?

The market has no clear changes.

According to a recently published report by DKRA Group on the real estate market in July 2023, many resort real estate projects did not achieve expected liquidity, so they postponed the sales implementation time. For that reason, in July, only 1 new project opened for sale with 40 products brought to the market, down 88% compared to the same period.

Notably, the demand of this market is still very low with only 1 successful transaction recorded, down 99% compared to the same period. DKRA Group commented that the offering price of these products is relatively high, combined with the cautious psychology of investors, making liquidity still quiet. Not to mention other factors such as legality, interest rates and the insignificant recovery of the tourism industry have affected the liquidity of resort real estate.

Vacation villas down 99% in transaction volume, what factors are still affecting the market? Image 1 — Only 1 resort villa will be sold in July 2023. (Photo: DKRA Group)

In the following month, DKRA believes that market supply and demand increased slightly compared to July but there were no significant changes. In the resort townhouse/shophouse segment, new supply in July increased compared to the first 6 months of the year but only 2 projects were offered for sale in the next sales phase. Supply in this segment decreased by 75% compared to the same period last year. The absorption rate was only 1%.

With condotels, the supply increased by approximately 52% compared to the same period last year with 3 projects opening for sale, equivalent to 405 units. This number is even more than the total number of new apartments offered for sale in the entire second quarter of 2023 with 378 units. However, all new products are concentrated in the Central region.

Condotel is also the segment with the most transactions in this market with 113 successful transactions in July. However, the transaction volume is still concentrated in one project, the remaining projects have modest consumption rates. These are projects with complete legal documents, operated by major brands and have a selling price of less than 50 million VND/m2.

DKRA also forecasts that in the next month, market supply and demand will continue to recover but there are unlikely to be strong fluctuations in the short term.

Vacation villas down 99% in transaction volume, what factors are still affecting the market? Image 2 — Resort real estate is unlikely to have a breakthrough in the short term.

Regarding the selling price of resort real estate, the primary market is expected to not have many fluctuations compared to last month. Investors who are implementing products still maintain interest rate support programs, discount incentives of up to 50% for customers who pay quickly, principal grace period, etc. With the maintenance of incentives, it is expected that supply and demand will have a slight recovery, mainly concentrated in Binh Dinh and Kien Giang.

According to the latest report of the Ministry of Construction, in the second quarter of 2023, the new supply of hotels and resorts nationwide will be supplemented by only a few projects that have been opened and put into operation. There is only one newly licensed resort tourism project, which is the Thematic Tourist Area and Resort on the top of Ba Den Mountain (Tay Ninh).

How to rescue resort real estate?

Surveys at some famous tourist areas across the country show that the situation of abandoned villa projects, resort villas, condotels, and officetels with no customers is quite common. Many secondary investors have had difficulty coping with financial pressure due to the use of leverage, unable to exploit cash flow from the product, so they have accepted to sell their products at "suffocating" prices in recent times.

Many market studies also show that the profit margin of resort real estate is currently very low, only reaching around 1%, very few projects reach 4-5% or more. Many projects when opening for sale committed to a profit of 8-12% are currently unable to be implemented.

With the specificity of resort real estate, recovery like other segments of the market with the removal of interest rate and legal obstacles seems not enough. The remaining problem of resort real estate is still the supply exceeding the demand in the resort and tourism sector.

Vacation villas down 99% in transaction volume, what factors are still affecting the market? Image 3 — The increase in product supply but the lack of suitable development of potential tourists has led to a large gap between supply and demand.

According to data from the General Department of Tourism, in the first 6 months of the year, Vietnam welcomed nearly 70 million visitors, including 5.6 million international visitors and nearly 64 million domestic visitors. The number of international visitors was only 66% compared to the same period in 2019, while the number of domestic visitors increased by 1.4 times. Total revenue from tourism is estimated at VND 343,100 billion, up 1.45% over the same period in 2019 at VND 338,200 billion.

With the number of international visitors not really recovering, the supply of resort real estate continues to increase, the oversupply crisis has caused many resort products to be unexploited in the past time. Many opinions say that if the number of potential tourists does not recover, or even has to increase sharply, the resort real estate market will continue to freeze. This creates a loop, the frozen market makes the service not develop and leads to difficulty in attracting potential tourists.

According to experts, rescuing the resort real estate market with legal and interest rate solutions only solves the problem on the surface. These moves largely support project owners and investors to regain confidence in the current period. However, to truly promote the value and increase liquidity of this type, the key still lies in the issue of actual demand.

Therefore, in addition to focusing on sales, investors must also operate accompanying services and focus on promoting their image, combining with the tourism market to attract potential customers. This also makes investors more interested in the products of this market and continue to choose to invest. According to analysts, this problem cannot be improved overnight, so to see the recovery of the resort real estate market, we still have to wait until the end of 2024 or early 2025.

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