Real value of condo a hanging question

The Saigon Times Daily

A view of residential areas in HCMC’s District 7 - Photo: Dinh Dung

HANOI, HCMC – Many local homebuyers over the past time have wondered if prices of apartments in the future will continue going down or not but they still have yet to find out the reply. Even housing developers differ over an agreeable level.

Many people believe that housing project owners are enjoying hefty profits and they insist that housing prices be lowered further. On the contrary, many others say it is impossible to assess the whole realty market via a number of discounted schemes as different housing projects target different segments with different investment rates.

Price cuts on low input costs

A large number of project owners have been cutting prices for their condos over the past time, which is made possible owing to their low input costs.

For instance, the Dai Thanh condo project developed by Private Construction Enterprise No. 1 Lai Chau is offered at VND10 million a square meter. However, other industry insiders affirmed that it is hard to make profits when developing a condo building with such a low price at this time.

Regarding the issue, representative of the Dai Thanh project developer explained that they was able to fix the price of VND10 million for one square meter as they had their own capital available and did not rely on bank loans.

Another advantage, according to the representative, is that the firm has land source available from 2008 when the land’s price was not so expensive.

Specially, the representative noted that thanks to over 30 years of experiences in the construction industry, the developer has subsidiaries in charge of all related processes helping it minimize expenses for the project.

“With the three advantages, we are completely able to earn profits when pulling the housing price down to VND10 million a square meter,” he asserted.

In the south, Hoang Anh Gia Lai Group also sent shock waves to the local housing market by launching the sale of discounted apartment projects. The group also had the same explanation as the aforesaid company about its sales, comprising the factors of low-value land sources and contribution of member enterprises from material supply to project designing and execution.

Balance between prices and quality

Nguyen Quoc Hiep, chairman and general director of Global Petroleum Investment Corporation (GP Invest), said it is wrong to equate all apartment projects of different levels to the same selling price. It is because each project is designed for a different market segment, he reasoned.

At a dialogue on the 2013 prospects of the real estate market in Hanoi last week, Hiep expressed his disagreement about the idea of certain companies active in the property sector saying the price of VND10 million per square meter is the real value of apartments at home.

The basic construction of an mid-end apartment building alone cost a developer up to some VND8 million a square meter, Hiep clarified. If other expenses are included, such as the coefficient rate of land use and infrastructure development expenses, the cost for one square meter will be about VND14 million, he said.

In the context of the current slackened housing demand, wise property enterprises should recoup investment capital by minimizing their profit margins, Hiep added.

In the meantime, Nguyen Van Duc, deputy director of Dat Lanh Real Estate Co., said the fact that local housing developers slash selling prices should not be considered an act of undercutting. This is a business strategy of industry players only, he said.

A lot of companies accepted losses to recover investment capital instead of keeping rising inventories, Duc said. Low-cost housing schemes in recent times all belong to companies specializing in the construction area, such as the Ehome project of Nam Long Investment Corp. or the Tan Mai project of Tan Binh Investment and Construction Corporation, he added.