Seachange for realty leasing market

Hot spot: resort developers in Hoi An are among the first to offer long-term leases to holidaymakers

Those who long for a seachange can now lease luxury villas for up to 50 years in Danang, Hoi An, Nha Trang and Mui Ne, which developers say are areas with potential for property investment. Long-term leasing is a popular investment method in other regional tourist destinations such as Bali and Phuket but it has only just started to gain a foothold in Vietnam.
Luong Ngoc Khanh, managing director of H&K consulting company, said increasing numbers of developers, both foreign and Vietnamese, were following this investment approach, particularly in Danang and Hoi An.
“Many projects of this kind are being designed or under construction,” he said.
He added the approach is popular around the world because it allows buyers to receive a return on their investment by renting the villas out to tourists while the developers are able to quickly recoup investment capital.
The developer of an elegant resort in central Vietnam who wished not to be named said that the model allows developers to spend a minimal amount of money building resorts because they can collect sales proceeds from buyers during the construction process.
Meanwhile, he said, those who purchase leases can make returns on their investment by cooperating with the hotel management company to lease the properties. What’s more, in most cases the villa’s value increases once the resort opens for business. He revealed that a luxury villa in Bali and Phuket now fetches $1-2 million while a property of the same kind in Vietnam sells for $500,000-700,000.
“So buyers can expect a hefty return from the increase in property value,” he said.
He said this investment method will grow in popularity in Vietnam as it did in Bali and Phuket because both local and foreign developers are venturing into the luxury real estate market. Indochina Resort Hoi An was among the first foreign developers in the country to adopt the approach. The company is building a five-star resort near the historic town of Hoi An that comprises 60 villas and 60 bungalows.
One, two or three-bedroom villas are available in the resort which include a private swimming pool, living room and kitchen.
The villa and bungalow complex is managed by General Hotels Management, a boutique resort operator. Indochina is selling long-term leases for properties with all associated facilities and amenities to foreigners for between $400,000 and $500,000 over a period of up to 50 years, or the life span of the project.
Sources close to the company revealed that it has managed to sell a number of villas to foreign investors who will cooperate with General Hotels Management to rent out the properties to tourists. Another foreign company, Magnum Group, is marketing its luxury villas in the central city of Danang. The Paradise villa compound is part of a deluxe resort the company is building near Marble Mountain.
The whole complex was designed by Wimberly Allison Tong & Goo, a well-known Hawaii-based architect company, and includes 48 one-bedroom and 96 two- and three-bedroom villas for lease, with prices starting from $174,000 for the life span of the project.
The locally bankrolled Son Tra Joint Stock Company is another company currently selling 200 villas in a five-star resort it is building on Son Tra peninsula in Danang. The developer said local companies like Son Tra had advantages over foreign developers since they can sell freehold land titles to Vietnamese buyers whilst foreign developers can only lease properties for up to 50 years as foreign land and house ownership is not legally recognised in Vietnam.
However, he said foreign developers often had large international customer bases willing to pour millions of dollars into buying villas while local companies are restricted in the global market and have to sell most villas to Vietnamese investors at much lower prices.