Danang Muscles In on Regional Market

It is astounding to see the rapid emergence of the property market in Danang, central Vietnam. For markets such as Phuket, it's important to track existing competition and to look at up-and-coming destinations vying for real-estate investors' cash in order to draw comparisons and see what is driving demand.

Danang is the fourth largest city in Vietnam with a population of just under one million people. It has a permanent expatriate population of less than 1,000. There is an international airport with direct links to Singapore and Siem Reap, along with numerous domestic flight routes. Tourist arrivals for 2006 were about 700,000, with foreigners accounting for over 200,000 of those.

As a key domestic city, Danang is home to government offices and close to a seaport and booming petroleum-refining industry. With China Beach rated among the finest in the world and cultural tourism attractions such as My Son, the Cham Museum and Marble Mountains in nearby Hoi An and Hué, there is more than enough to keep visitors busy.To draw a comparison with Thailand, you'd have to combine the commerce of Surat Thani, the culture of Chiang Mai and the beaches of Phuket.

Already host to international hotels, including the Furama and Nam Hai, Danang currently has nine internationally-branded projects under development by operators such as Raffles, Hyatt, Intercontinental, Four Seasons, Sofitel and Novotel.More than 3,200 new hotel rooms are also being supplemented with an excess of 1,000 residential villas and condominiums. Two 18-hole golf courses are under construction, including a Greg Norman course that Greg actually visited recently. One of the more ambitious projects is a mixed-use, integrated resort similar to Laguna by Banyan Tree-founder KP Ho.Nam Hai, one of the first branded lifestyle resorts in Danang, is managed by Adrian Zecha's GHM Group – in Phuket they manage the Chedi and The Yamu. The villas are in the US$2- to US$2.5-million bracket.

Unique to the market is the massive expanse of vacant land available for beachfront hotels and residences, with a four-lane highway and modern electrical infrastructure skirting lots that range from 300 to 500 meters long.Developers in Nam Hai want sites such as these and there is nothing directly comparable in Thailand that I am aware of. Most of the lots have been snapped up and are at some stage in the project cycle, but there remains a bullish resale market with companies looking for partnerships.

Danang is similar to Phuket, attractive to both the long-haul travel market and the regional sector. Travel time to the Hong Kong and Singapore is under two hours, although there are no direct flights to South Africa.

Over the next three to five years, developers in Danang will be asking: if we build it, will they come? Looking at the pulling power of international brands, a quality infrastructure and the current pro-business attitude, along with reforms in the government, it looks likely that they will come. Two key issues have been the increase of land leases from 50 to 70 years and the ability of foreign firms to directly invest in the country. This bodes well for a competitive edge over Thailand's wait-and-see attitude about property and foreign ownership.

It's important to remember that even Vietnam has its potential issues. While still a communist country, visa requirements and an enormous bureaucracy remain byproducts of a hostile era. As for the depth of the property market, there will be a shakeout from the highly-speculative double-digit growth market.

Weather also plays a factor, given the number of days with little sunshine and likely a nine-month-a-year beach-holiday season. Possible oversupply issues also loom as most of the branded projects offer lifestyle villas and apartments that are commonplace in Phuket.

It will take time to assess how Phuket can compete with destinations such as Danang. With beach destinations such as Langkawai, Sanya, Boracay, Nha Trang and Kota Kinabalu all staking their claim for their share in the market, both Danang and Phuket have some stiff opposition.

Danang, however, already has the foundations for a thriving property sector.