VIETNAM REAL ESTATE: THE PATH FORWARD TO RESTORE INTEGRITY
Amid a backdrop of mounting concerns over market integrity, industry leaders have advocated for transparent disclosure of accurate real estate project ratings. A bold move, it is necessary to foster a healthier market. Government officials also discussed the resort real estate sector’s over-promised, under-delivered conundrum through defining operational guidelines and realistic commitments to transition a sustainable recovery from its current slump.
In recent efforts to restore confidence to the real estate market, the Ho Chi Minh City Real Estate Association (HoREA) has proposed a weighty regulation. Spearheaded by HoREA Chairman Le Hoang Chau on June 20, this regulation mandates developers to register and disclose condominium appraisals based on standards set by the Ministry of Construction before launching sales. This move is crucial in addressing a longstanding issue that has eroded consumer trust and market stability.
A Call for Genuine Standardization
Last August, the National Assembly’s Law Committee highlighted this discrepancy, noting the widespread self-styling of apartment grades by developers. Names like “luxury apartment” or “foreign-name residence” often mislead buyers, concealing the true quality behind flashy titles and inflated prices. The National Assembly’s Legal Committee pointed out that by the end of 2022, only seven condominiums nationwide had been officially classified according to the 2014 Housing Law. This stark statistic reveals a troubling trend: the so-called ‘luxury’ often hinges more on deceptive marketing tactics than on actual quality.
Mr Chau’s proposal for a robust classification system enforced by the Ministry of Construction is a step in the right direction. This system would require developers to register their projects for classification before they can market and sell them, protecting consumers from misleading labels and ensuring properties are accurately represented. Currently, condominiums are categorized into classes A, B, and C based on criteria such as planning, architecture, technical systems, services, and management quality. However, market practices have deviated, often classifying properties based solely on their selling prices, leading to significant inconsistencies and excessive valuations.
Elevating Market Reliability
Deputy Minister of Construction Nguyen Van Sinh emphasized the need for high-quality, well-managed condominiums to improve living standards and provide a clear basis for calculating management and operational costs. Standardization is essential for maintaining market conduct and ensuring buyers receive the quality they are promised.
Meanwhile, Deputy Prime Minister Tran Hong Ha called attention to the importance of recognizing and rewarding buildings that excel in architecture, management, and sustainability. He suggested that such practices could elevate the overall quality of real estate developments and align market perceptions with reality.
Navigating New Terrain in Officetels and Condotels
As Vietnam’s real estate market evolves, mixed-use developments like officetels and condotels are gaining popularity. Officetels blend office spaces with accommodation services, while condotels mix residential apartments with hotel amenities. Deputy Prime Minister Tran Hong Ha stresses the need for clear definitions and regulations for these hybrid structures to ensure both developers and investors understand their unique characteristics and requirements.
Vietnam’s tourism sector has seen remarkable growth over the past year, with both domestic and international travel on the rise. However, this boom has not been mirrored in the resort real estate market, which remains stagnant compared to its vibrant 2016-2018 period. Experts attribute this downturn to the unchecked proliferation of projects between 2015 and 2020, leading to an oversupply that far exceeds investor demand.
Drawn by the overly ambitious promises of rapid returns made by developers, investors treated resort real estates as a quick-turnover investment akin to residential properties, while hoping to sell at a profit shortly after purchase. Nevertheless, resort real estate requires a longer-term perspective, better suited for those with idle cash funds looking to diversify their portfolios, rather than a get-rich-quick scheme.
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