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Developers slash property prices
With bank loans falling at the end of this year and losses from a gloomy domestic real estate market, many property developers have begun slashing prices of their apartments to boost revenue.
On Monday, just three days after PetroVietnam Power Land announced a discount of 34 per cent on it's apartments, the Sai Gon Mekong Company reduced prices on 500 apartments in the An Tien urban area project in HCM City's District 7 from VND18 million (US$860) per square metre to VND14.5 million ($690) per square metre.
Representative from the company's leaders Ho Van Tuyen said the move was an attempt to recoup capital for new business opportunities.
Late last week, PetroVietnam Power Land Company cut off 34 per cent of the 85 apartments in its PetroVietnam Landmark project in District 2 to VND15.5 million ($738) per square metre from the earlier VND23.8 million ($1,130).
The sell-off was aimed at resolving the difficulties of a frozen property market and rising costs, the company said in its filing with the State Securities Commission.
Its VND100 billion ($4.75 million) loan from the Lien Viet Post Joint Stock Commercial Bank is due on November 23.
In the case of a failure to pay on time, the company would have to pay a penalty of 150 per cent of the interest rate, said its general director Hoang Ngoc Sau.
Selling all the units at the discounted price, however, would mean the company's profits would fall by VND70 billion ($3.33 million), Sau said.
In HCM City's neighbouring province of Ba Ria – Vung Tau, Vung Tau Real Estate and Construction Joint Stock Co recently announced a 12-27 per cent discount for its Thuy Van apartment project.
Dang Hung Vo, former deputy minister of natural resources and the environment, said slashing prices was a good sign that brought property prices closer to their real value.
It was a normal phenomenon and in line with market rules, he said, adding that even a 30 per cent price cut would not cause losses for companies.
Economists said that with banks urging real estate companies to repay loans, darkening an already gloomy real estate market with no respite in sight, more price cuts were around the corner.
Le Hoang Chau, chairman of the HCM City Real Estate Association, said this was the best measure in the current situation to ease cash-flow difficulties and avoid overdue interest payments.
Enterprises could accept losses in one project to raise funds that save other projects and tide over the current difficulties, he said.
However, some insiders worried that the mass discounts would lead to market chaos.
There would be a big problem if all real estate developers in the domestic market decided to reduce prices of their apartments, said a representative from Hoa Binh real estate trading floor.
Buyers would believe the final purchase price to be much cheaper and no one would want to buy first, which would make the market more stagnant, the representative said.
Le Tan Hoa, director of Lilama SHB Co, which is developing four apartment projects in HCM City, agreed. He said that it was unreasonable that apartments with the same standard, quality and investment costs were sold at different prices.
"I do not support the sell-off because it inadvertently makes customers sceptical about the quality of apartments," he said, adding that no clients would dare to buy an apartment if the second would get advantages over the first.
The Viet Nam Real Estate Association General Secretary, Phan Thanh Mai, said lowering prices meant poor effectiveness of the real estate projects and enterprises might suffer losses.
Thus, enterprises should draw up suitable and effective business strategies to avoid scattered investments, Mai said.
Economist Vu Dinh Anh said enterprises had to reduce the prices of their apartments mainly due to pressure from the banks.
This was a good lesson for enterprises utilising borrowed money in the real estate business. The real estate market was not always hot. It sometimes went down or froze, Anh said.
The most important thing was that the enterprises needed to offer reasonable housing prices that customers could afford because the local housing demand remained large, he said.
Thu Tra
vietnamnews
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