In the situation that other financial investment channels are increasingly difficult and has potential risk, real estate is a form of investment to be noticed. In the history of the real estate market, the ability to preserve capital by land always reaches the ideal rate with extended period.
Suburban land is receiving attention
In general, the real estate market nationwide in the period of 2015 – 2016 and early of 2017, the properties including land segment, especially land, is considered as a trendy investment channel. And with the rapid development of infrastructure and transportation, suburban land with value of approximately 1.5 USD billion/plot is well received. With that change, to make a profitable investment, it is necessary to take into account longer-term goals in projects with synchronous infrastructure and good business potential to ensure that invested capital will always increase.
According to the estimation, the average profitability rate of ground land in 2017 can reach an average of 15-20%, so the expectation to increase profit 2-3 times higher than the bank interest rates can easily become reality.
Along with that, this is a safe property accumulation channel because the land resources do not increase, so prices often increase over time and less badly affected by the growth cycle. Land ground is classified into existing groups and therefore is less risky by advertising tactics, especially fully legal projects supported by bank loans.
From the above advantages, the land segment is selective to investors and it takes opportunity cost because of faster payment and land allocation. Not to mention, the capital can’t be split to share to other investment channels.
Moreover, land investment can only expect in assets increase, profits gained when completed, interrupted purchase and sales so do not have a monthly income but have to wait for long time to take advantages the change from infrastructure, planning or urban restructure.
Apartment – Investment with little amount of money
In order to promote the liquidity of the project, many owners offer a favorable payment method for secondary investors such as to be delivered house without payment in two years to optimize capital. In addition, the apartment segment is also financially supported easily. With low owned capital, customers can still own apartments for investment thanks to support from owner by borrowing capital with quick and easy loan making procedures. Specially, this is an investment channel that can bring profit on monthly basis because the apartment is easily subleased thanks to the safety, comfort and superior advantages.
However, this investment form also encountered many difficulties such as the fierce competition in apartment market because the supply of apartments has increased steadily in recent years. This can lead to the slow of liquidity or the reduction of the apartment’s value in case used for rental purpose.
In addition, the apartment segment is dominated by advertisements because this is a product formed in the future. Therefore, advertising images and messages may be different from reality. Not to mention that this investment is difficult to increase price suddenly as land real estate because the reality has showed that except for the first 10 years of good exploitation, the apartment’s price can be continuously at narrow margin below 5%/year and then there are signs of saturation.
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Condotel – The form of investment which is committed to profitability
As a hybrid product between condominium and hotel, appearing in Vietnam in 2009, condotel has become a new and potential investment channel of real estate industry. The characteristics of serving for vacation and resort purposes have made this kind of investment become secured by the profit commitment from owner.
Currently, when investing in this segment, investors will be committed to profit up to 10-12% per year and can recover capital within 8-10 years. Thus, when spending 3 billion to buy a condotel, investor will get about 300 million of profit from the owner from renting.
It is estimated that after 10 years, investors will recover capital of 3 billion and own a coastal resort real estate product. Thus, in addition to ensuring economic benefits, this is also a quite leisure investment form.
However, whether guarantee of profits are as committed or not depends on whether the occupancy rate in the future. And if the project is not owned or managed by professional units with no experience in the resort market, the deployment and operation will be risky.
Not to mention, the fact shows that the current abundant condotel supply will lead to oversupply and thus the investment profit may not be as attractive as the initial commitment.
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