Condotels have become an increasingly popular asset type

Stephen Wyatt, General Director of JLL Vietnam, in an interview to the Vietnam Economic Times, said condotels have become an increasingly popular asset type. Many condotel projects have reportedly achieved positive sales rates of up to 70-80 percent within just six months of launching.

Nguyen Tri Hieu, a renowned banking expert, said there are many latent risks in the market segment because of unclear legal mechanisms and the sharp increase in supply just after two years.

“The supply of condotels increased too sharply in 2016-2017, while the demand is not high enough,” Hieu said. “This will lead to a demand-supply imbalance and make it difficult for investors to sell products.”

Also, it is difficult to classify the product, so there is no legal framework for the trading of condotels. 

Some investors have committed to give land use right certificates (red book) to condotel buyers on delivery. However, if buyers resell condotels, their sales contracts may not be notarized.

Duong Thuy Dung from CBRE Vietnam said that besides the legal risks, the oversupply is worrying. Most condotels are bought by investors to lease. They rush to buy because of the profits, while ignoring legal risks.

However, Dung warned that the number of tenants will not increase indefinitely, and the number of condotels has risen too quickly. 

In the sea city of Nha Trang, for example, the number of travelers has been increasing rapidly, which means high demand for rooms. However, the number of condotels has risen even more quickly. 

“Will condotels continue bringing the expected profit to investors if the gap between demand and supply becomes wider? This is a matter of concern,” she said.

According to Dung, there are four popular real estate products for investments – villas, condotels, shophouses and streetfront houses. 

Shophouses and streetfront houses in central areas of cities promise high profits with prices increasing rapidly. 

However, the demand for leasing shophouses and streetfronts in coastal areas is very low, while it is not easy to sell the products.

The great advantage for investors is that condotels don’t require a high investment rate. However, the risks lie in the lack of legal framework and the stiff competition because of oversupply.

Hieu said condotel owners say they have attractive profit of 8-10 percent per annum. However, that has not been independently confirmed.

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