Danang faces glut of homes

Concerns have been raised over the possible sales glut of homes in Danang as developers flock to the central city.

Although local authorities and developers claim the future is bright for real estate development in the city, which is the economic spearhead of the central Vietnam, some industry insiders point out demand remains modest while the market is in danger of being oversupplied.

“With so many projects planned for Danang it is a big question of how to sell,” said Nguyen Quang Ninh, business development director of Indochina Land, the real estate division of Indochina Capital.

Ninh is concerned over developers building a dozen of residential, hotel, office and new townships in Danang at a time when sales of other properties are slow.

VinaCapital has broken ground for construction of a 9-hectare estate by the Han River, which will be completed in the next 10 years, featuring high-end apartments, hotels, offices, shopping mall and international school. The development cost is around $325 million.

Korean firm Daewon is building two estates, including the $250 million Da Phuoc International City and $30 million Cantavil apartment complex.

Local firms such as Vien Dong Land and Dong A Real Estate are building two large complexes downtown with investment capital of $180 million and $60 million respectively. Vu Chau Long Real Estate Joint Stock Company recently broke ground for construction of two properties costing some $235 million.

Resorts under construction along the coast, include villas and apartments incorporated in resort such as Hyatt Regency, Raffles, Son Tra Resort and Spa and the second phase of Furama.

Ninh said it would not be easy for these properties to sell as local demand for hotels, offices and apartments was still small, which was reflected through the sales of 95 apartments at the Indochina Riverside Towers.

Sales of these condominiums have been slow over the last two years and the developers were only able to sell out all recently when the market heated up late last year and early last year. Only 20 per cent of customers are locals.

Indochina Riverside Towers is the first condominium in Danang. The other, Danang Plaza at No.6 Nguyen Du street, is still under construction.

Ninh said as demand was weak, it would be challenging for developers to pre-sell their properties and as a result, construction might be put on ice in case developers were not financially strong enough. There is also a lack of flights to bring tourists to Danang and local hoteliers are asking for more flights from South Korea and Hong Kong.

“It will be very difficult for us to sell because demand is too weak,” said a developer, who is building a new township in the city.

“However, we can not abandon the project because we have spent quite a lot on compensation and land clearance.”

However, some others remain bullish over the future of Danang. Dam Quang Tuan, chairman of Investment and Construction Joint Stock Company 579 said Danang had potential to become a service and tourist hub of the Southeast Asia.

“There is no adequate information to have an accurate assessment of local real estate market. But, I am confident Danang can be developed in the way Singapore has done,” said Tuan.