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Wednesday,  Sep 20,2017,14:41 (GMT+7)

HoREA warns of condotel oversupply

Cao Ban
Tuesday,  Aug 22,2017,01:14 (GMT+7)
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HoREA warns of condotel oversupply

Cao Ban

HCMC - The HCMC Real Estate Association (HoREA) has expressed concern that the ongoing condotel market segment boom may lead to an oversupply.

Data of Danh Khoi A Chau Real Estate JSC shows that in the second quarter of 2017, there were over 1,800 condotel units offered for sale, up 88% compared to the earlier quarter. However, only 7% of them found buyers, falling 47% compared to the three previous months and nearly 120% year-on-year.

In the first half of 2017, only 382 condotel units out of over 2,780 units offered for sale were sold. There are about 5,060 condotel units unsold, of which over 3,000 units are in Danang City and over 1,300 in Nha Trang City.

According to HoREA, as of 2016, about 16,000 condotel units had been marketed. In 2017-2019, it is estimated that there will be 27,000-29,000 units launched a year.

HoREA warned that a weak consumption might result in a condotel oversupply, especially after the APEC Vietnam 2017 in Danang City late this year, when there will be a low of international guests coming to the city.

In Vietnam, condotels are sold at VND25-45 million (US$1,100-1,980) per square meter, or VND1-3 billion (US$44,000-132,000) a unit, equivalent to the prices of mid-end apartments in HCMC.

Investors of most condotel projects pledge a profit margin of 8-12% per year in the first 8-12 years after handover. Using this business practice, they will not have to take out bank loans at higher interest rates as they can raise funds from condotel buyers in advance without having to pay interest.

However, investors have no specific measures to guarantee profit for secondary investors.

To make their projects more appealing, some investors promise that secondary investors could get long-term land use right certificates. However, HoREA said such commitment does not comply with Clause 126 of the Land Law.

“The maximum duration of land allocation to an organization is 50 years or in poor areas, 70 years. Therefore, the certificates of those condotels will be valid within this period only. It is extendable under the law,” said HoREA.

Authorities of Khanh Hoa Province have recently inspected 10 condotel projects and found that seven of them are used for wrong purposes. Particularly, some investors transformed condotels into apartments which buyers can rent to tourists on their own.

Therefore, HoREA suggested the Ministry of Construction work with the Ministry of Culture, Sports and Tourism to draft regulations for condotels, and allow foreigners to buy condotels in Vietnam to improve liquidity for the market.

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