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HCM City: Overly high interest rates burden real estate developers
While other real estate markets have begun prospering again, the HCM City market remains in hibernation as overly high interest rates keep investors away.
Le Hoang Chau, Chair of HCM City Real Estate Association, told Dau Tu reporters that members wailed over the last month about overly high interest rates. He remarked that no business will profit enough to cover bank interest rates that have climbed to 16-18 percent per annum.
With such high rates, few individuals dare borrow money to purchase houses. Meanwhile, no investor can borrow money to invest in real estate projects. Investors are sure to lose money since real estate prices remain low.
“Both buyers and sellers are not entering the market, so it is understandable why the market is so quiet,” Chau noted.
According to Chau, transactions are only taking place in the low-cost real estate sector, where people purchase houses or apartments for accommodation rather than speculation.
“Those who purchase homes to live in have been saving money for years and have the financial capability, so they are not influenced by the high bank interest rates,” Chau explained, adding that other market segments are very gloomy.
Tran Van Thanh, General Director of Nha Viet Nam, reported that the overly high interest rates push up production costs. Developers must also contend with skyrocketing steel prices that have climbed by 30 percent to 15,000-16,000 dong per kilo.
“Real estate developers must now halt project implementation and watch the situation before deciding what to do next,” Thanh remarked, adding that Nha Viet Nam still must continue half-done projects, while delaying all other new ones.
Dang Hong Anh, Chair of Sacomreal (Which develops many big real estate projects), revealed that they must adjust prices and offer the most comfortable payment methods for clients. Anh added that profit is not the top priority any more. Sacomreal would rather cut prices to have more buyers.
A Binh Tan project investor observed that the high prices have destroyed all previous estimates. The project’s board of directors decided to extend the deadline. “We worked with the clients and they agreed to a slowdown,” he stated.
“A slow-down will benefit both sides. Our clients will not have to pay as previously agreed,” he described
Experts say that 2010 will still be a difficult year for real estate developers. The supply is too profuse, while products are not diversified as apartments are the single product. Meanwhile, the capital market is not supporting the real estate market
vietnamnet, Dau tu
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