Competition heating up
04-09-2012
 Carina Plaza project on Vo Van Kiet Boulevard in HCMC’s District 8 is where the sale price is down from VND15.5 million to VND13.2 million per square meter - Photo: Dinh Dung |
But falling demand, plus offerings by secondary housing investors who are ready to sell at prices lower than original home builders, has thrown many developers into a tougher position. As Nguyen Van Duc, deputy general director of Dat Lanh Real Estate Company, has put it, a host of companies in the real estate sector might become insolvent in the coming time if the situation is protracted. A majority of businesses have lost their last vigor over the past two or three years, he noted.
A race to slash prices
Like in 2009, Hoang Anh Gia Lai Group (HAGL) has broken the ice by lowering apartment prices, which has compelled others to follow suit. After two years of buying high-end Hoang Anh Riverview apartments in the upscale Thao Dien residential area in HCMC’s District 2, Dai Tin A Chau Company and An Binh Land have decided to reduce prices of 120 apartments from VND28 million per square meter in 2009 to VND18.2 million.
This is one of the two projects in which HAGL offered price cuts of a shocking 40% in 2009, from US$2,300 (about VND49 million) to US$1,350 (around 28 million) per square meter. After two bouts of price reduction, the aggregate price fall of Hoang Anh Riverview is 60% compared to the original price.
Meanwhile, apartment prices in Hanoi are down by up to 40% as well. Take Tan Viet apartment project for example; its offered price ranges from VND12 million to VND14 million, down from the previous VND14-15.5 million range.
Similarly, secondary investors in HCMC seem to have exhausted their resources to service bank loans after a long time of waiting and seeing. They have begun offloading their stock to cut their losses.
The currently offered price in The Pride project on Le Van Luong Street in Hanoi’s Ha Dong District is VND17-18 million per square meter while the developer’s price is higher, at VND20-21 million. Similarly in Duong Noi project developed by Nam Cuong Corporation, apartments are quoted at less than VND18 million compared the launch price range of VND22 million to VND50 million. The fate of Nam An Khanh project is the same as its price is down to VND23-25 million from the original VND50 million.
Pham Trung Ha, director of Hoa Phat Real Estate Co., has ruled out the possibility that investors would pull out of the real estate market altogether. Previously, around 70% of housing transactions were for speculation, resulting in an artificial undersupply which in turn prompted prices to surge. In the current market conditions, speculators see no appetite of participating in the market. The market is now dominated by actual homebuyers. To survive, housing developers should cut their profit to make it possible to lower home prices.
Nonetheless, Duc of Dat Lanh Real Estate Company cast doubt on price cuts, questioning whether the lowered prices fit the pockets of most home seekers or not.
Price cuts cannot speed up sales
Le Hoang Chau, chairman of the HCMC Real Estate Association, said huge profitability in property projects has now become history, with apartment prices almost on a par with construction cost.
A couple of real estate investors are probing market reactions through price reductions. In reality, the demand remains extremely weak. For instance, a medium-priced condo project of Le Thanh Company lowered the sale price to VND13.9 million per square meter, then VND11.9 million but a few of 50 units on offer have found buyers.
“All this speaks of the market being in very bad shape,” Chau said, adding price reductions by both investors and developers have given homebuyers hopes that prices would further dip, so there is no rush for them to buy.
There are currently two sources of financing for housing transactions, namely bank loans and contributions by homebuyers. But they have dried up, depriving developers of much-needed cash to continue work on their projects.
The developer of FLC Landmark Tower in Hanoi has recently issued an ultimatum for homebuyers to pay their final installment; otherwise, it will liquidate all the apartments of late payers.
Chau forecast the market would not recover before 2014. Meanwhile, Duc of Dat Lanh Co. had a dismal prediction that a number of property companies would collapse between now and the end of the year.
