The Vietnam tourism property market is still relatively new, but it is a segment many experts have pointed to as having the potential for strong development. That’s due to rising foreign and domestic tourism alongside a growing number of appealing holiday destinations.
Prior to the COVID-19 outbreak, nearly two million foreign tourists visited the country in January with more than half of this total coming from China, South Korea, and Japan. According to Kenneth Atkinson, Founder and Senior Board Adviser at Grant Thornton Vietnam, foreign homeowners could be a major factor in sustaining the tourism market over the long term.
He told the Vietnam Investment Review that the country has a rather low portion of returning visitors when compared to Thailand which has a return rate for arrivals that sits closer to 70 percent. With more foreign buyers being drawn to holiday homes in Vietnam’s tourist areas, his could be set to rise in the coming years.
Market experts also expect to see a rise in the number of branded residences as the interest from more affluent buyers remains high. Vietnam currently has the third-highest number of projects in the pipeline to meet their demand. Overseas investors are attracted to the Vietnam tourism property market due to high yields that come with properties offering flexible usage for holidays.
“Rental yields on city properties remain decent at 6-8 per cent in the better developments and many developers in the coastal resort areas have attracted buyers with high guaranteed returns of 8-10 per cent for 10 years, although it is expected that these will fall back on default values over the coming months, not only because of the impact of COVID-19,” Atkinson explains. “In total, however, rental yields in Vietnam are significantly higher than say in Bangkok and other parts of Thailand, and Singapore.”
Next steps for growth in Vietnam tourism property market
A key driver of the Vietnam tourism property market will be infrastructure in resort destinations. There has been some tourism infrastructure developed in popular locations like Da Nang. And while this has allowed for the development of international-standard projects in some locations, the Vietnam tourism property market has room for future growth.
“The domestic and international tourism industries held opportunities for investors due to the rising number of new customers,” Nguyen Tran Nam, VNREA Chairman, told the media at a recent event. “Developing projects in the old way would not ensure competitiveness or suit customers’ demands.”
One way to do this is to create new hospitality products, something Robert McIntosh, Executive Director of CBRE Hotels in Asia-Pacific, said was already happening. He cited the building of coastal shophouses and shopvillas in Phu Quoc and Ha Long as an example of how developers were ensuring the Vietnam tourism property market was adapting.
“To carry growth forward, hospitality real estate developers in Vietnam will have to go through market diversification, paying attention to potential non-traditional areas such as Nam Hoi An, Binh Thuan and Ba Ria-Vung Tau, as well as diversifying their product offerings and bringing in professionals to manage their properties,” McIntosh added.