The total number of tourists coming to Nha Trang has been stable despite the economic slowdown, which indicates a promising future for the hotel market there, Savills said.

In the next few years, Savills reckons that 14 hotel projects with about 2,300 rooms could be completed in Nha Trang.

Currently, there are 373 hotels in Nha Trang, providing 9,712 hotel rooms.

They include three 5-star hotels and resorts, five 4-star hotels, twelve 3-star hotels and approximately 51 two-star ones.

Most hotels, resorts and guesthouses are concentrated on and around Tran Phu, Nha Trang’s beachfront boulevard. Others are located on the streets of Tran Hung Dao, Hung Vuong and Yersin, among several others.

Since October, many hotels of all grades have offered discounted room rates.

The majority of tourists travelling to Nha Trang during this period were foreigners. Hence, occupancy of 4-star and 5-star hotels was higher than in 3-star hotels due to foreigners’ preferences for high quality rooms.

There was a big difference in room rates among hotel grades. Five-star hotel room rates, at around US$170 per night, were more than double of 4-star hotel rate and nearly six times of 3-star hotel rate.

Demand trends

Nha Trang has long been renowned as a popular tourist destination, but the MICE (Meeting-incentive-conference-event) segment and demand from other business travellers remains limited.

The number of tourists in Khanh Hoa Province increased constantly in the period 2000-08.

In 2008, despite the global economic downturn, Khanh Hoa welcomed about 1.6 million visitors, an increase of nearly 17 per cent compared with 2007, in which domestic and foreign visitors accounted for 80 per cent and 20 per cent, respectively.

According to Savills, in November 2009, the total number of apartment projects in Nha Trang stood at 12 with more than 1,500 units.

The number of land plot projects remained at six, with 1,000 land plots. There are four villa/townhouse projects with a total of 250 villas and townhouses.

Most of the apartments are located in the city centre while the villa/ townhouse and land plot sectors are concentrated in Vinh Nguyen and Vinh Hoa wards with sea views.

The land sector is enjoying the highest primary price in Nha Trang residential market, at an average of $710 per square metre, while the primary price of apartments and villas/ townhouses is $595 and $620 per square metre, respectively.

All land plot projects in the primary market have a very good location, with excellent views to the sea.

There is a real demand for ready-built houses in Nha Trang. Due to the limited land area close to the seaside, many apartment buildings have been developed in the city centre in the last few years in order to meet this demand.

With Nha Trang increasingly considered as a destination for the holiday-home market, many foreigners living in Nha Trang consider this area as their second home.

Individual investors can buy land lots in a good location, build their own villas and the lease them to expatriates.

Savills said that a total of 31 residential projects may come on line in the next few years.

Large project areas are expected to be developed in Vinh Thai and Phuoc Hai wards to the west of Nha Trang, accounting for more than 60 per cent of Nha Trang’s total future development area.

Prior to the current tourism boom the endless coastal stretch from Danang to Hoi An had been free from development for years. The beaches used to be a place for locals to take a dip on hot summer days or unload their overnight catch. But, the tourism boom has seen this stunning coastline divvied up by developers and it seems inevitable that grand resorts will soon have a monopoly on the seaside view.

That’s all very well for the more cashed up members of society and travelling community but the locals that once swam freely would be doing well to afford to join in the fun. The developers would argue that the hotels and resorts will provide employment with better earnings for the local population, though not everyone wants to or can make that kind of transition.

Fishermen will sail elsewhere as beaches accommodate the guests of the luxury hotels and golf courses. The developers will fence off the beach fronts so privileged guests are undisturbed. Local swimmers will have to drive further up the coast to find a spot to dump their bucket and spade.

For the time being you can flop around the beach at Non Nuoc or Cua Dai but for how much longer? Local authorities eager for tourism dollars continue to lease the beaches out to hotel developers. Hotel groups such as Hyatt, Raffles and InterContinental all have designs on this part of the country.

In Danang, at least, the authorities decided to buck the trend and earmarked a modest stretch in My Khe beach for public swimming. On Son Tra peninsula, the former military zone, nearly got swept away by the wave of tourism. The Danang authorities decided to reserve a small piece of this small paradise for public bathing and announced it would reclaim three hectares of Bai Nam and Bai Con for public use.

The only problem is that they already signed off this beach to a developer, which is still planning to build 198 villas and a hotel. The company is refusing to back off, claiming they have mortgaged the land to a bank to take out a loan for the construction of the resort. The matter is unresolved.

It is odd, however, that the authorities looked to stop a project that was already under construction while just a few hundred metres away, another resort project has sat idly for years with just a few half-completed villas.

Lo Dieu and Tan Thanh are accessible by motorcycle or car from Bong Son Town on National Highways 1A, a beginning point of a coastal road that runs by these two beaches and other obscure but tranquil beaches in the province.

Nestled in a small hamlet between two passes named Lo Dieu, the beach of the same name in Hoai My Commune looks like a giant bow and its yellow sand tempts sea lovers to at least sit or lie leisurely on the beach or else jump into the turquoise waters.

As the beach is rather remote, it is quiet most the year round except for Lunar New Year holiday, or Tet, when locals and visitors from Bong Son put on parties on the beach in the late afternoon to enjoy local foods and the joys of the biggest holiday of Vietnam.

We did not have any party during our visit to Lo Dieu Beach over the weekend as we arrived after breakfast and before noon, so it was not an appropriate time to have a party. Furthermore, we had a long way ahead and more beautiful beaches to explore.

We got into our hired nine-seat car after touching down on the sand and taking photos to move on to other unspoiled beaches along the way, a drive that put a few of our group to sleep. But, they were awakened when our car ran over some holes on some sections of the road.

After traveling more than 50 kilometers of rough road we reached Tan Thanh, a beach that can attract both sea lovers and those who are afraid of the scorching ocean side sun. Breezes from the ocean welcome all visitors.

Tan Thanh Beach is bounded by lines of pine trees, naturally creating a wonderful area for visitors to take a siesta or rest while listening to the gentle waves clapping against the shore and the bells hung on the cows and oxen grazing the weeds in the far distance.

For lovers of swimming in the sea, they cannot miss their chance at Tan Thanh Beach to cool down, shrug off the tiredness and be revitalized after hours of sitting in a car.

There are no showers here and some may be scared of not being able to rinse their skin with fresh water after the sea water. Never mind. A good towel and a change of clothes is enough to be comfortable on the way to Quy Nhon City for a proper bath.

Before leaving Tan Thanh, ask the locals to point out the mountain whose peak has a boulder that looks like a woman waiting for her husband. Visitors can see this landmark attraction even from the car on the way to Quy Nhon, the capital city of Binh Dinh Province.

Projects to build villas for sales are emerging quickly in the region, and in the next couple of years, there will be significant villa and resort developments along the Son Tra – Dien Ngoc coastal road from Danang to Hoi An, the company said.

Savills says villas are mainly developed in Ngu Hanh Son and Son Tra districts, and as of the third quarter of this year, there had been about 218 villas for sale from six projects and 630 apartments for sale from three projects.

Highlighted projects whose products have been launched onto the market include The Ocean Villas, Hyatt Regency Danang Resort & Spa, and Blooming Tower among others. This quarter will soon witness Furama project invested by Ariyana Company with 134 villas for sale.

There will be 13 projects along Danang City’s beach with 670 villas expected to enter the market in the next few years, plus 15 apartment projects providing some 7,600 apartments to the market until 2015, the market research company projected.

In another segment, the office market in the city has witnessed considerable changes in the last few years, with many office buildings springing up to meet the increasing demand of both local and international enterprises.

Savills reported that there were 19 office buildings with a total floor area of about 62,500 square meters launched onto the market in the last quarter of this year. Office rents are ranging from US$6 to US$15 per square meter per month, but a few other buildings such as Indochina Riverside Tower and Danang Software Park have rents higher than US$15 per square meter per month.

However, due to the impacts of the global economic downturn, the occupancy rate at office buildings has decreased quite a bit in the last quarter compared to the second quarter of this year, according to the research company.

Savills anticipates that some 143,000 square meters of office space will enter the city’s market in the next five years. Around two-thirds of the office space will be situated in the key districts of Hai Chau, Son Tra and Thanh Khe.

In another sector research, the company shows that the retail market in the city is still in its infancy as shopping in traditional markets and small retail street-front shops remains the preference of the majority of residents.

However, there were some major retail properties supplying some 114,000 square meters to the market in the last quarter of this year. Retail space rents are widely ranging from US$18 to US$50 per square meter per month, according to Savills.

The company forecasts that the city’s retail sector will see 16 retail projects coming on stream over the next four years, mainly trade centers and supermarkets, with total floor space of some 260,000 square meters.

The Cham, which stretches along Non Nuoc Beach in Ngu Hanh Son District in the central city, consists of 132 luxury condos and is designed to take advantage of the ocean view and maximize the natural light entering the condos, according to the developer.

The project is a residential component of Danang Beach Resort, which includes a 5-star hotel managed by Marriott, two 18-hole golf courses, a marina, a cultural center and almost 400 luxury villas.

Savills Vietnam, which has been appointed as the exclusive marketing and sales agent for the project, said it had received many enquiries from potential buyers to the tourism property project, whose condos vary from 70 to 180 square meters with one to three bedroom units.

The developer says it is expected to finish the project’s foundation by April next year, and the condo prices are ranging from US$1,600 to US$2,300 per square meter.

Property market on the verge of rosiness

Since emerging in the late 90s, the modern condominium sector in HCMC has witnessed the typical ups and downs of the development process. The real estate market has been feverish at times with many homebuyers flocking to certain property projects to make deposits in the hopes of earning a certain profit margin. The market has been through periods of hibernation with investors not seeing profit potential or else getting into deep debt because of their investments. This can be seen in the current half-asleep market which has witnessed a significant decline in transactions over the last year since it was hit by the credit tightening policy from the Government.

However, some experienced property experts, who have watched the market from the beginning, have drawn a lesson from the market’s development saying it repeats two and four year cycles. They have projected that the property market will witness another boom next year, regardless of its current idleness.

“Next year will start a new cycle of property market development, thus it will kick off another boom,” said Nguyen Cao Tri, CEO of Ben Thanh Land, who was a key speaker in a seminar called Trend of Vietnam Market in 2010 which was held by CEO Club in HCMC at the five-star InterContinental Asiana Saigon in downtown HCMC last week.

Tri told the seminar of CEOs and executive managers the local property market had boomed in cycles and gone into hibernation in the same way. For example, the market experienced its first fever in 1993-1994, then went flat in 1998-1999 before kicking off another boom. The property market turned rosy again in the early 2000s and then developed strongly in 2006-2007 when many individual investors lined up in front of developers’ offices in the early morning, jostling each other to deposit for a property.

Tri said land prices would probably be adjusted next year by the Government who would apply a one-price policy to every sector.

He explained that many state run real estate companies which are holding lots in the city have been offered low prices for many years. With the would-be adjustment, developers have no choice but to factor the increased costs into output product prices. As a result the market will feel more pressure.

Commenting on the coming trend, some property experts said project developers could not make market for their apartments and they were holding out in the current tough times and anchoring their development to the promise of next year.

Responding to a question at the seminar about the surplus and low liquidity of the luxury condo segment and the good sales of the mid- and low-cost segment, Tri agreed that according to market feedback, the mid- and low-cost condo segment, thanks to its liquidity, was meeting homebuyers’ budgets. He said that following the 20%-80% theory representing market potential, many developers were inclined to target the major segment. However, when there were so many people eyeing the 80%, there would be less room for participants. Thus, the narrowed 20% segment would be more attractive and should be considered for investment.

Tri echoed other experts saying the real estate market was competitive, risky and required a big amount of money and developers had to predict the market to tailor their products to customer demand.

“In property investment, sometimes when you see the trend of the market it is too late to invest because of many reasons, among them procedures for a construction license is a problem. You should be prepared for that,” he advised the seminar, alerting investors to the risks.

Tri took his own company’s example to prove that Ben Thanh Land was given two land lots to develop two downtown office buildings in the 1990s. Both projects were carried out at the same time, but only the one on Nguyen Hue Boulevard came online with the office building Sunwah as seen today. The other, on Me Linh Square, whose site clearance is completed, has been nothing but fenced in land for nearly 18 years.

The road seeking approval from the municipal authorities for construction was lengthened because of several adjustments in design requested by the management agencies and the economic downturn. Tri said the difficulty for project developers was not capital but policy, for they often have to wait two or three years for a construction license. Once receiving it, business opportunities are often gone. That is a risk property developers must take.

The market research company CB Richard Ellis Vietnam (CBRE) said in a recent statement that more projects would be launched in coming quarters. As the dust from the global economic crisis begins to settle, some developers are testing the waters by basing initial prices for new launches on real development costs instead of their own, sometimes unrealistic expectations and benchmarks with other projects.

CBRE says both buyers and developers will be waiting to see if the market stabilizes at the new lower price points or begins to edge upward, and if so, at what rate. Few expect a return to the frenzied increases seen in 2007 and early 2008.

The villas project covering 7.4 hectares is located in Phu Hai Ward, Phan Thiet City with a villa area of 139 units, a greenery area, fitness and gym facilities, amini-mart, and dining and refreshment facilities. The project will be ready within about two years.

Each villa includes one ground floor and an upper story with a “front room~ a living- room, a dinning-room with kitchen, a sauna, a single bedrooms and a toilet on the ground floor. The upper story consists of three large bedrooms of high-grade amenities, said the project owner. The villas are designed according to European styles, according to the investors.

In the first phase, Sunshine Hill Villas property project has 44 villas from 384 to 523 square meters each with prices from $230,000 to some $300,000 a unit.

Savills Vietnam Ltd serves as the exclusive agency for the project.