Danang positioned to be the next great getaway

April 24, 2013 | 11:28
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Despite Vietnam’s current economic hardship, Danang’s second home market and tourism potential has ample room for growth, writes Michael Piro, general director of Vietnam’s Sotheby International Realty.

Investors are always looking to get into frontier markets early to maximize long-term returns.  Phuket and Bali have already experienced exponential growth as they have emerged as top-tier resort destinations and are overbuilt in comparison to Danang. Phuket and Bali are mature markets with limited opportunities for growth or appreciation as prices have already experienced significant growth over the past 10 years.
I am not saying price levels will not continue to increase - but the exponential growth that attracts long-term investors has already occurred.   Danang as a real estate investment destination is still in its infancy with incredible growth potential as flight access continues to increase. Prices are still relatively cheap in Danang in relation to comparable projects in Phuket and Bali.

Direct flights from Hong Kong opened on March 28  by Dragon Air, while flights from Bangkok are in the works and Singapore is expected to increase frequency of flights later this year. This means  Danang will finally have direct access from the three key regional hubs. Previously a tourist  from North America or Europe would be required to stop over in regional hub and then connect through Ho Chi Minh City or Hanoi which was inconvenient and a major drawback. With flights from these key areas in place, Danang becomes easily accessible and this is a key ingredient for growth in property values. 

Danang is also the closest South East Asian resort destination to Hong Kong and many first and second tier cities throughout China and with direct flights is only 1.5 hours away. Factor in the short drive from the airport to the coastal road and Danang offers supreme convenience while Phuket and Bali are three hours 15 minutes and over four hours and 15 minutes respectively.  Phuket and Bali are reaching their capacity in terms of developable land supply and air access while Danang is a long way from reaching its capacity in terms of land supply and air-lift capacity.  

Again, this presents opportunity for Danang as the world’s middle-class population increases and becomes increasingly mobile (particularly the Chinese, which as of 2012 represented 15 per cent of all tourists into Danang).  Excess demand for vacationers which cannot be met in Phuket or Bali will begin to spillover to Danang. According to CBRE, there will be 2,781 resort villas in Phuket by the end of 2013, while our independent research shows in Danang there are only 593 actual beach villas completed and under planning or development. 

In addition Phuket already has more than three times the number of hotel rooms and nearly 800 per cent more condominiums. This demonstrates how far Danang has to go and also to a certain extent how overbuilt Phuket is.  Another key difference is political stability. Danang has one of the most proactive government in Vietnam as referenced by the area receiving the highest rating on the Provincial Economic Competitive Index for two years running. On the other hand, we have seen consistent political unrest in Thailand over past several years which has resulted in the airports being shut down while in Bali we have seen three bombings since 2002. Overall, Vietnam remains safe and politically stable. 

Danang now has all the key ingredients to rival Bali and Phuket which include cultural amenities – including three UNESCO World Heritage Sites, world class golf courses, and quality real estate and hotels.  One of high-profile investors in the area - Peter Ryder, Indochina Capital CEO – has visions that Danang will become a world class destination and with the Hyatt Regency Danang Residences, Nam Hai, and Montgomerie Links Vietnam the company has helped to position the area to be attractive to international tourists and investors. Particularly, the Hyatt Regency Danang Residences is well positioned given the brand name, management company, and comparably low price points from branded residences along a stunning beachfront locale. 

With all ingredients for further growth of the Danang market, we are very confident in the international markets to boost occupancy and rental rates from an operations perspective while providing another platform to generate additional sales.  

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