NEWS
Drastic price cuts skewing the market
06-11-2012
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The latest price discount at the Dai Thanh urban project in Thanh Tri district of Hanoi has ignited a debate among developers and investors over whether this was an unfair price dump.
In Dai Thanh project, the developer had decided to reduce the price of every square metre of their apartments by more than one-third, to VND10 million to 13 million ($476 to $620) from a prior range starting at more than VND14 million.
This price was quoted as almost equal to those of properties offered to low-income earners.
The trend of lower apartment price has extended to a range of other projects in Hanoi such as Sails Tower, Mandarin Garden and Golden Place.
In many other projects, the developers did not announce the reduced prices, but have offered many incentives to entice buyers. The aim is to increase the liquidation which has been in a very slow progress for many months.
Reason for the discounts, the representative from Dai Thanh said, was the company was able to hold down its expenses. Unlike many rivals, the developer of Dai Thanh doesn’t need to meet high loan costs from the banks, and that the project’s site away from the city centre makes a lower price feasible.
Questions over whether the price of accommodation continues reducing is now concerned by both developers and customers.
Dang Hung Vo, former vice minister of Natural Resource and Environment, said that a developer can build apartment with the price of VND10 million per square metre.
In order to sell apartment at this price, Vo said, developers much have some crucial conditions such as their site must be granted before 2007, when the land clearance and compensation expenses still low, limitation in management and suitable materials.
Sometimes, Vo said apartment prices were increased because of unsuitable technology [too high compared to apartment building], or because too much was spent on extra services.
In the recent past, “all units were sold out even before it’s release to public has gone out,” Vo said. “Now, developers must depend on the customers and then the price must be as low as possible.”
Meanwhile, customers always want to offer the lower price. “That is their right that the developers must take care of,” he added.
Meanwhile, Nguyen Quoc Hiep, chairman cum general director of the GP Invest, expressed his belief that the price would not be equal to the quality of the product.
“We can not compare the quality between a VND10 million to a VND20 million ($476-$950) per square metre,” Hiep said.
In a lower price building, he said, the developer must offer less, such as unfinished apartment.
He further explained that developers now needed at least VND8 million ($380) for building a square metre of mid-end apartment. Adding other necessary fees and land development expenses it must be from VND13-14 million ($619-$666) per square metre.
“I think that with the current situation not any developers dare to assume higher benefit for their projects because if they can not sell apartments they would be heavily pressed by unsold product and increasing interest from banks,” he said.
Meanwhile Nguyen Van Duc, vice director of Dat Lanh Real Estate company said that the price reductions should not be perceived as a “dumping” price.
“The reducing price must be seen as developers’ strategy. Many of them have to suffer from loss in order to get their capital investment back,” Duc said.
