Supply overhang threatens conotel market

19-Sep-2018 Intellasia | VNS | 6:00 AM Print This Post

Compile by Thien Ly

Accoring to the Vietnam Real Estate Brokers Association last year aroun 23,000 units of conotels, or cono-hotels, were offere for sale, an 65-70 per cent of them were snappe up.

However, eman for conotels seems to be falling.

HCM City-base KRA Vietnam sai in the first quarter of this year aroun 2,100 units came into the market with their locations ranging from a Nang City to Phu Quoc Islan, but only 850 were sol.

Phu Quoc Islan an Ba Ria Vung Tau Province are the two places with the highest eman, though even there sales oes not excee 40 per cent.

It is 26 per cent in Khanh Hoa, home of Nha Trang; 22 per cent in Binh Dinh; an 9 per cent in a Nang.

Market observers sai the tourism sector ha seen rapi growth in recent years with the number of foreign tourists arriving in Vietnam increasing by 30 per cent a year in the last three years, thus sparking a surge in supply of resort properties incluing resorts, hotels an conotels.

Though relatively new in Vietnam, conotels were favoure by both omestic an foreign tourists, an so evelopments in this segment were burgeoning, attracting investors.

They were coming up at most famous tourist attractions.

The central beach city of Nha Trang now accounts for 52 per cent of all conotels in Vietnam, while other places with multiple projects are Binh Thuan an a Nang in the central region an Phu Quoc Islan an Ba Ria Vung Tau in the south, the HCM City Real Estate Association reporte.

Another reason for the booming conotel market is Vietnam’s growing mile class. Analysts sai conotels only cost VN1-3 billion, which is a sum most mile-class can affor.

Yiels from conotels are quite high at 8- 12 per cent, which is also a big attraction for investors.

So why is eman falling?

Since late last year many analysts have been warning that supply has been running up too quickly in the last few years, an investors shoul think carefully before putting money in this segment.

Accoring to the analysts there are signs of oversupply in the conotel, officetel an service apartment segments ue to the mushrooming of conotel projects in many places aroun the country.

A market report last year showe that conotels accounte for 56 per cent of total supply of resort properties, with hotels an resorts only accounting for 44 per cent. This was consiere abnormal.

The analysts sai though conotels were very popular with tourists, the number of people seeking to buy them was ecreasing because of the lack of a legal framework to protect their ownership rights.

Vietnam oes not have clear regulations governing ownership rights an management in the case of conotels, meaning buyers cannot get title ees.

In the event, banks are not willing to len against conotel units.

In aition, the profit of up to 12 per cent which is expecte to bring in to those who invest into conotels are too high to achieve since it is much higher than the eposit interest rates, thus making conotel buyers reluctant to invest into.

Accoring to Savills, the resort property market will see an aitional 18,000 conotel units built at key tourism estinations in the next two years.

a Nang alone is expecte to get thousans of them.

Experts sai the number of conotels in Da Nang in 2020 woul not be fully use unless the number of tourists to the city oubles from 2017.

espite these challenges, many analysts still reckon conotels have great potential in Vietnam, saying the oversupply is only temporary.

Vietnam’s mile class will grow to 44 million by 2020, accounting for 46.3 percent of the population, accoring to Nielsen, the global information an measurement company.

By 2020 tourism revenues are preicte to rise to $35 billion an the number of foreign tourists to 20 million.

To mitigate the problems plaguing the conotel market, legal regulations an policies nee to be tweake.

In particular, the government nees to issue legal regulations an ocuments proviing guielines on purchase an sale contracts, proxy issues, construction stanars, an management methos.

The construction ministry is also working with the finance an environment ministries to come up with a specific legal framework for the segment.

Foreign securities companies sense opportunity, hike capital

Brokerage Yuanta Securities Vietnam plans to issue 70 million aitional shares to raise its charter capital to VN1 trillion (US$44.4 million) from the current VN300 billion ($13.04 million).

The capital increase is aime at raising funs for its business activities, improve its financial capability an evelop new proucts an services besies meeting the requirements of the State Securities Commission.

The capital hike plan is part of the company’s strategy to meet the increasing eman of investors capital as the stock market is forecast to recover an rise to new highs this year.

Yuanta Securities Vietnam’s executive boar has ecie to sell all 34.46 million shares to Yuanta Securities Asia Financial Services Limite.

They were the shares that Yuanta Securities (Hongkong) Company Limite an iniviual shareholer Nguyen Thi Minh Duc i not want to buy when offere to existing shareholers at a price of VN10,000.

If the issuance is approve by the State Securities Commission, Yuanta Securities Vietnam’s prescribe capital will rise to VN1 trillion, enabling the company to meet the capital requirement for entering the erivatives segment.

But espite possibly increasing its capital three fol, Yuanta will not make it to the list of securities companies with the largest hikes in capital in recent times.

Last year Mirae Asset Securities Vietnam (MASVN) increase its capital from VN700 billion to VN2 trillion to become the fourth largest securities company behin only Saigon Securities Incorporate SSI (VN5 trillion), VN irect (VN2.204 trillion) an Agriseco (VN2.12 trillion).

Recently Mirae Asset Securities Lt (Hong Kong), the owner of MASVN, approve a plan to again increase the charter capital by VN2.3 trillion to VN4.3 trillion.

That woul take MASVN straight to secon place behin SSI in terms of capital.

KIS Vietnam has also increase its charter capital by VN784 billion to VN1.897 trillion.

Analysts sai foreign securities companies nurture ambitious plans when they hike their capital.

The securities market is expecte to see more positive changes soon, with customers’ emans constantly increasing an becoming iverse.

With their huge capital, foreign securities companies hope to be bigger players by proviing new proucts such as erivatives an covere warrants, experts sai.

For instance, within a short perio MASVN increase its lening for margin traing buying securities using creit from the brokerage to VN1.835 trillion by June 30.

This figure was only VN787.79 billion in the thir quarter of last year, an an insignificant VN273 billion earlier last year.

Vietnamese firms still ha the largest market share though foreign companies, now with increasingly large war chests, were formiable rivals, the analysts sai.

The Vietnamese securities market, while still relatively young an moest in size, is the fastest growing in terms of both size an liquiity in Southeast an East Asia.

It has nearly 30 companies with market capitalisation of over $1billion, with Vingroup (VIC) with a market cap of $15 billion, Vinamilk (VNM) with $12 billion an GAS with $11 billion topping the list.

Over the last 10 years the market has grown at an average of 43 per cent a year. Its total market cap was 22 per cent of GP in 2006 an 44 per cent in 2010, an is nearly 84 per cent now.


Category: Business, Vietnam

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