Real estate market report (March 13th, 2009 - March 19th, 2009) Property businesses start a new race
It seems that the property market is entering in a new race – the race of price decrease. This isn’t a secondary market’s price decrease (beginning of early 2008) but a strategy of property investment businesses.
Actively decrease the property prices
After Hoang Anh Gia Lai Group (HAGL) has reduced from $950 to $550 each square meter of the Hoang Anh Riverview and Phu Hoang Anh projects (accounting for a 40% decrease), other businesses also do the same.
Dat Xanh Real Estate Joint Stock Company lowered the prices of SunView Apartment (in Thu Duc District) from $1.300 to $764 each square meter. According to the latest unit price, this project knew a 50% decrease in comparison with November 2008. Besides, this company also supports the homebuyers with the 4% interest rate from banks, until January 1st, 2010. Customers buying the SunView apartments can borrow 70% of the total apartment value within 15 years, thanks to the Tien Phong Bank or the Vietin Bank.
For mid-sized projects, such as Thai Son, Sadeco, each square meter is now priced at VND10 million, compared to the previous VND24 million. The University Village project got its peak at VND30 million and is currently at VND12 - 16 million per square meter. Project land price with complete infrastructure in the Nha Be District only fluctuates about VND7 million/sq/m, compared to the previous VND17 milion/sq/m. Property prices in the District 9 and Thu Duc are around VND10 million/sq/m. Many projects’ villa foundations (10x20 or 8x20 areas) in Phuoc Long B Ward, District 9, proposed a VND6 million for each square meter but there were only a few customers (70% decline compared to the previous period).
Van Do apartment building (District 4) is used to have a VND30 million/sq/m, but it is now about VND18 million/sq/m. Hoang Anh Gia Lai 2 apartments are transacted at VND15 - 16 million per sq/m, a decrease of about VND10 million compared to its peak.
Contributing to this wave of price decreases, Hong Ha Development and Invesment Joint Stock Company lowered the price of The Morning Star (Binh Thanh District) from $2.000 (in 2008) down to $1.200 - $1.500 each sq/m.
Lam Van Chuc, Chairman of Phuc Duc Real Estate Company said that the property price decrease expressed the desire for capital withdrawal from investors. The situation will be worse if the property prices are kept high and unmarketable. According to him, most businesses have spent too much money in long-term investment projects. Now, because they wish to withdraw a part of their stagnant finance, they aren’t afraid of launching a series of promotion campaigns. “Capital management to avoid the loss going to happen is very important for businesses’ survival, thus they find ways to reduce the price, stimulate, accept less profits, in order to sell more commodities,” he emphasized.
Property prices will continue to fall
Le Tham Duong, head of Finance Department, University of Banking, judged that this is a wise action of the businesses amid the difficult economic situation. According to him, the construction cost for an apartment is 9 dong, and they are only able to sell at 9.5 dong. They can’t expect the rate of 10 dong. This is not only applied for Vietnam but also in the whole world. Therefore, some property businesses have only two choices: either decrease or die. Price decrease will force the employees and workers to develop their brand name and even satisfy their strategic partners.
Similar to Le Tham Duong’s view, Le Hoang Chau, chairman of HCM City Real Estate Association (HoREA), acclaimed the positive movement of the property investors about their price decrease, contributing to foster the Government’s stimulus program. In the current frozen period, selling price decrease of the apartment projects infuses a new spirit into the market. This decrease is indispensable at the time when the market has only sellers, but no buyers. Moreover, prices of construction materials have deeply plummeted, directly affecting prices of commodities. In addition, Chau advised the investors to reduce their selling prices, without affecting the quality of commodities and by extending progress of homes hand-over.
Some foreign experts working in Vietnam for many years told to DiaOcOnline that property prices will continue to decline for 2 reasons. First, the 2009’s economic downturn will continue. And secondly, the current property prices remain high compared to the population income having real demands of housing. According to our assessment, although current property prices have fallen, they remain too high compared to the beginning time of the property fever in 2007. For instance, projects in Districts 2, 7, 8, 9, Nha Be, Binh Chanh, and Saigon South area had selling prices of VND7 million/sq/m at its previous period. After the fever, their prices increased fourfold, up to about VND28 million/sq/m. And now, the current price remains at VND10 million/sq/m (VND3 million more than the 2007 pricing). Generally speaking, the property market during the past time can be considered as the inflated part of a balloon.
Despite the foundation land prices are low, they are still out of reach from those having real demands of housing. As a result, there are few transactions. Some successful ones mainly focus on a group of customers having real demands of housing, but not for investment. Hi-end apartment prices are continuously slumping down, but there are only a few customers, because they aren’t much interested in buying them in such difficult period.
Actively decrease the property prices
After Hoang Anh Gia Lai Group (HAGL) has reduced from $950 to $550 each square meter of the Hoang Anh Riverview and Phu Hoang Anh projects (accounting for a 40% decrease), other businesses also do the same.
Dat Xanh Real Estate Joint Stock Company lowered the prices of SunView Apartment (in Thu Duc District) from $1.300 to $764 each square meter. According to the latest unit price, this project knew a 50% decrease in comparison with November 2008. Besides, this company also supports the homebuyers with the 4% interest rate from banks, until January 1st, 2010. Customers buying the SunView apartments can borrow 70% of the total apartment value within 15 years, thanks to the Tien Phong Bank or the Vietin Bank.
For mid-sized projects, such as Thai Son, Sadeco, each square meter is now priced at VND10 million, compared to the previous VND24 million. The University Village project got its peak at VND30 million and is currently at VND12 - 16 million per square meter. Project land price with complete infrastructure in the Nha Be District only fluctuates about VND7 million/sq/m, compared to the previous VND17 milion/sq/m. Property prices in the District 9 and Thu Duc are around VND10 million/sq/m. Many projects’ villa foundations (10x20 or 8x20 areas) in Phuoc Long B Ward, District 9, proposed a VND6 million for each square meter but there were only a few customers (70% decline compared to the previous period).
Van Do apartment building (District 4) is used to have a VND30 million/sq/m, but it is now about VND18 million/sq/m. Hoang Anh Gia Lai 2 apartments are transacted at VND15 - 16 million per sq/m, a decrease of about VND10 million compared to its peak.
Contributing to this wave of price decreases, Hong Ha Development and Invesment Joint Stock Company lowered the price of The Morning Star (Binh Thanh District) from $2.000 (in 2008) down to $1.200 - $1.500 each sq/m.
Lam Van Chuc, Chairman of Phuc Duc Real Estate Company said that the property price decrease expressed the desire for capital withdrawal from investors. The situation will be worse if the property prices are kept high and unmarketable. According to him, most businesses have spent too much money in long-term investment projects. Now, because they wish to withdraw a part of their stagnant finance, they aren’t afraid of launching a series of promotion campaigns. “Capital management to avoid the loss going to happen is very important for businesses’ survival, thus they find ways to reduce the price, stimulate, accept less profits, in order to sell more commodities,” he emphasized.
Property prices will continue to fall
Le Tham Duong, head of Finance Department, University of Banking, judged that this is a wise action of the businesses amid the difficult economic situation. According to him, the construction cost for an apartment is 9 dong, and they are only able to sell at 9.5 dong. They can’t expect the rate of 10 dong. This is not only applied for Vietnam but also in the whole world. Therefore, some property businesses have only two choices: either decrease or die. Price decrease will force the employees and workers to develop their brand name and even satisfy their strategic partners.
Similar to Le Tham Duong’s view, Le Hoang Chau, chairman of HCM City Real Estate Association (HoREA), acclaimed the positive movement of the property investors about their price decrease, contributing to foster the Government’s stimulus program. In the current frozen period, selling price decrease of the apartment projects infuses a new spirit into the market. This decrease is indispensable at the time when the market has only sellers, but no buyers. Moreover, prices of construction materials have deeply plummeted, directly affecting prices of commodities. In addition, Chau advised the investors to reduce their selling prices, without affecting the quality of commodities and by extending progress of homes hand-over.
Some foreign experts working in Vietnam for many years told to DiaOcOnline that property prices will continue to decline for 2 reasons. First, the 2009’s economic downturn will continue. And secondly, the current property prices remain high compared to the population income having real demands of housing. According to our assessment, although current property prices have fallen, they remain too high compared to the beginning time of the property fever in 2007. For instance, projects in Districts 2, 7, 8, 9, Nha Be, Binh Chanh, and Saigon South area had selling prices of VND7 million/sq/m at its previous period. After the fever, their prices increased fourfold, up to about VND28 million/sq/m. And now, the current price remains at VND10 million/sq/m (VND3 million more than the 2007 pricing). Generally speaking, the property market during the past time can be considered as the inflated part of a balloon.
Despite the foundation land prices are low, they are still out of reach from those having real demands of housing. As a result, there are few transactions. Some successful ones mainly focus on a group of customers having real demands of housing, but not for investment. Hi-end apartment prices are continuously slumping down, but there are only a few customers, because they aren’t much interested in buying them in such difficult period.
Le Dinh
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