Lam DongTo escape the situation of suffering losses, many investors offered to transfer homestays and farmstays for one-eighth of the initial capital but still ended up with nothing.
Last year, Tuan Hoang quit his photography job in Ho Chi Minh City to go to Da Lat to invest in homestays when he was 26 years old. The homestay area was invested more than 800 million VND to renovate two villas and design a row of houses and camping tents. Lease contract for 5 years, monthly payment of 30 million VND. Hoang had to pay a 6-month deposit in advance and three months’ rent, making the total investment amount more than a billion VND.
After nearly two years of business, Hoang admitted that he “hasn’t seen any profit yet” because high operating costs and rent have eroded profits. After three summer months that seemed positive but the occupancy rate was continuously below 50%, even on weekends, he decided to transfer because he could not afford more losses.
The transfer started in July, after three months, no customers were interested. Hoang said that at first someone forced the price down to 150 million VND but did not agree. Now accepting a reduction of one-eighth of the cost price, not including deposits and rent, but customers who have asked are no longer interested.
“When it first opened, the homestay was full of tenants, so I was confident in recovering my capital quickly in under a year. Now I’m disillusioned because I’ve given the lowest price and still can’t find customers,” Hoang said.
Hoang is no exception. Recently, the wave of investors fleeing homestays and farmstays has occurred massively in Da Lat – the center of the “leaving the streets for the forests” trend nearly two years ago.
Nguyet Anh, 30 years old, Ho Chi Minh City, also recently offered to transfer a farmstay area to invest with a friend, about 1 hectare wide near the center of Da Lat. The two invested 2.5 billion VND in farmstay including a farm area, flower garden, children’s play area, camping area, cafe… The house lease contract has 5 years remaining, each month rent is 20 million VND. The transfer price is currently 1.6 billion VND, but the number of interested people can be counted on the fingers of one hand. The female office worker also considered reducing the transfer price by another 300 million to quickly leave this market.
A homestay area combined with a cafe located on nearly 2,000 m2 is being transferred for 180 million VND. Image: Character provided
Mr. Tien, an investor with nearly 8 years of experience in the Lam Dong market, acknowledged that in some areas far from the center of Da Lat, the rate of transfer and suspension of homestay operations is up to 40%, while the central area is about 20%. -30%. Most of this group of investors are struggling to post ads even though they have reduced investment rates to the floor, and even added incentives such as rent support, free equipment and furniture, and free fanpages. operate…
There are many reasons leading to the current wave of homestay and farmstay transfers in Da Lat. Mr. Ta Trung Kien, General Director of Wowhome Real Estate Joint Stock Company, said that most of the transfer information comes from a group of amateur investors with little capital. Many young people with capital from several hundred million to several billion VND have rushed to rent land and houses to renovate and design with the mentality of both business and leisure. Because of following the trend of “leaving the streets for the woods”, this group of investors did not carefully research the market and calculate capital flows.
Supply far exceeds demand for one reason. The homestay model in Da Lat has developed in the past 5 years, but after the epidemic, investors continued to flock to develop it further. Large supply requires high competitiveness. Currently, Da Lat has more than 2,400 tourist accommodation establishments, providing more than 31,000 rooms, an increase of 16% and 23% respectively compared to 2020. The types of accommodation that have increased sharply are homestays, resort villas, and hotels.
However, the general tourism situation is gloomy and tourists are absent, leading to difficulties in business. Ms. Le Thi Tham, Head of the representative office of the Vietnam Real Estate Brokers Association in Lam Dong, said that after the landslide incident in July, many tourists felt hesitant and redirected to new locations. more convenient to move. According to her, the number of visitors and the level of excitement this summer in Da Lat decreased by nearly half compared to the previous year.
Statistics from the Department of Culture, Sports and Tourism of Lam Dong also show that the number of tourists and guests staying in the province decreased continuously from July to October. In particular, tourists decreased twice and guests stayed in the province. decreased 1.9 times, having a significant impact on the province’s tourism center, Da Lat.
Mr. Kien said, many young people spend money to renovate, design according to common motifs, copy each other, aiming for “one-time check-in points” so it is difficult to attract or retain tourists.
The homestay area combined with a cafe in Ward 10 has been advertised for sale for more than a month but is still stagnant. Image: Character provided
The lack of capital flow balance is also the reason why many people are “disillusioned” with investing in homestays and farmstays. Mr. Kien said that house and land rent in Da Lat is currently at a high level, up about 20% compared to before the epidemic. Many investors follow the trend of “leaving the city for the forest” in the 2021-2022 period, flocking to buy land, especially garden land and agricultural land. Investing during the fever caused them to spend large amounts of capital, causing future rental income to also skyrocket. Many owners require a 6-month deposit, 3 months or even half a year in advance to have a large amount of money to cover bank debt.
But high rent, plus design, management, and advertising costs have eroded all profits of uncalculated investors. When there was no profit, they had to pay for another 6 months of rent. If they canceled the contract, they could lose their deposit, making financial pressure worse.
“House and land rental prices are too high, making new investors afraid that it will take 4-5 years to do business and it will be difficult to recover capital,” Mr. Kien said.
According to data from the Vietnam Real Estate Brokers Association, the third quarter recorded a situation where many owners of agricultural land and garden land offered for sale at a discount of 20-50% depending on type and location, but still found it difficult to sell. The number of real estate transactions in Lam Dong in the third quarter also decreased by more than 70% compared to the same period last year, mainly cut-loss transactions, about 30% compared to the fever peak.
Experts recognize that investing in homestays and farmstays also requires high professionalism, especially in places that have developed tourism for a long time with a large supply like Da Lat. Therefore, investors must carefully research the market, have long-term plans, good cash flow management and different ideas. Mr. Ta Trung Kien sees the current situation of fleeing from homestays and farmstays as a lesson for investors, especially those with little experience, to be careful against feverish real estate investment trends.
Ngoc Diem
