Big muscles needed to get property moving

A lack of capital and high bank interest rates have left customers with low confidence with many taking a ‘wait and see’ approach hoping for a further possible easing of property prices.

Ministry of Construction’s project appraisal expert Nguyen Truong Tien said further property price easing was unlikely.

Tien’s housing investment ratio cost breakdown consisted of 10-15 per cent of land prices, 70-75 per cent construction costs and investment costs for relevant public utilities for common use. Of this, construction costs included direct and indirect expenses.

At this point of time, the cost of building hi-end living blocks with incomplete interior fetches around VND11-13 million ($520-$620) per square metre, hiking to VND18-25 million ($850-$1,200) per square metre if indirect expenses are factored in.

The price of some hi-end properties rolled out in the recent past such as FLC Landmark Tower and Ho Guom Plaza are around this price range.

Vinaland chairman Tran Minh Hoang assumed it would be hard for the housing price to further drop. Successful transactions in the past months were mainly in the apartment segment with prices averaging VND12-14 million ($560-$660) per square metre.

With current investment cost structure, such a price range means a loss to developers who have their backs to the wall on the back of a flat market and credit squeezes.

“In this current context, an adequate market approach by relevant government agencies will restore homebuyers’ confidence. This should be handled as soon as possible to break current impasse in local property market,” Hoang said.

Vietnam Real Estate Association general secretary Phan Thanh Mai assumed the property market had shown signs of recovery after central bank decided on loosening the valve on property market credit.

“The move will help rev up investor sentiment and with current ceiling mobilising rate dropping to 12 per cent, per year people will weigh over putting money into bank safes or hooking into [property] business ventures,” said Mai.

CBRE Vietnam chief executive officer Marc Townsend said property firms and individual investors could reap up profits from market opportunities. In fact, albeit a fall in the rate of successful property transactions against some previous years on the back of a fruitful new supply, the number of successful home purchases was not lower than past years’ average, meaning the demand for housing property is real and that would be a potential market segment.