“Choose the right price” is a popular local television game show. Joining the game, the player is challenged to identify the exact prices of consumer goods such as shampoos, kitchen wares, perfumes and beverages among others. Although the player gets hints from the audiences at the studio before giving a final decision, they often miss chances to be the winner of the game. The property market is just like that if it comes to looking at the apartment segment. The real prices of apartments are challenging the homebuyer to guess.
The apartment prices are on the decrease under the pressure from dampened sentiment. Some project developers have begun slashing selling prices of apartments. Some say this is the right time to grasp the opportunity while others claim that such declines have yet to reflect the real prices, so they will continue for some time.
Margins narrowed
After a long period of overheating, the property market has been experiencing the fallout from the past credit crunch and then the economic slowdown, with land and housing prices taking a nosedive. Some property firms have been making efforts to pull themselves of the blues.
Several weeks ago, HAGL Land stirred up the quiet market with a surprise announcement by slashing prices of apartments by a stunning 40% to attract potential buyers. Some 500 apartments of the two apartment projects including Hoang Anh Riverview in Thao Dien Ward in District 2 and Phu Hoang Anh in HCMC’s Nha Be District were on the promotion list.
Back to 2007 when the property market was seeing prices running wild, HAGL Land quoted Hoang Anh River View apartments at US$2,300 per square meter and Phu Hoang Anh ones at US$1,800. However, until recently the prices have slid to as low as to US$1,350 and US$1,250 respectively. Explaining the huge price cuts, the company said prices of building materials ware falling, coupled with the low prices the company enjoyed when acquiring land for the projects.
Following HAGL Land, Dat Xanh Real Estate Company has been running an advertising campaign for its SunView Apartment in Tam Phu Ward in HCMC’s Thu Duc District. There are 200 apartments put on sale with prices slashed to US$764 per square meter from the US$1,300 a year ago.
In another project, Daewon Hoan Cau Housing Development Joint Venture Company is offering a price of US$2,000 per square meter for the Cantavil Hoan Cau project on Dien Bien Phu Street in HCMC’s Binh Thanh District. This is the project which sparked a controversy several months ago as a property service company released research results showing a considerable decline in prices in the project. A representative of the Daewon Hoan Cau denied it, saying such information threw the company into a difficult position.
Commenting on the most recent apartment price reductions, Le Tham Duong, head of the Administration Faculty of the HCMC Banking University, said it was just an excuse. Property companies said they were supporting the Government’s economic stimulus program, but in fact, they have no choice but to lower prices to either recoup capital or restructure their investment portfolios, he said. Slashing prices, Duong said, is the wisest decision under the current circumstances and they have to narrow their expected profit margin to survive troubled times.
Financial woo
To some extend, the fall in prices of apartments is sending out a positive signal to the market as there are many transactions reported in the last few weeks. However, this would not have happened if there had been no promise of financial support from banks. Most of the projects that are on the price promotion rampage have got pledges from banks to offer loans worth at least 70% of the value of an apartment.
For example, Sai Gon Thuong Tin Real Estate Joint Stock Company (Sacomreal), which is distributing some 300 Hoang Anh Riverview apartments, is supporting the homebuyer with loans from Sacombank, Vietcombank and Bank for Investment and Development of Vietnam (BIDV), with repayments to be made for 10 to 20 years.
Phu My Hung Corporation (PMH) early this month started selling apartments in the Riverside Residence project at VND37 million per square meter. The company said 128 apartments were snapped up within one morning. Twelve banks were backing the company by providing loans up to 70% of the value of an apartment for the buyer. The term of loans is up to 20 years.
Besides prices, financial support is a vital condition for both project developers and homebuyers. With the market becoming busier in the last several weeks, some say the market is being warmed up, but others show a conservative attitude as prices of apartments remain high regardless of the most recent drops.
However, the current market conditions are still for a certain group of moneyed people since many people with limited finances but real demand for a home are still seeing the current apartment prices unaffordable.
Source: The Saigon Times
Vietnam Property Report 