Housing hang-ups

When it comes to buying property, Hanoians prefer to rely on personal connections

Pham Thanh Hung, deputy general director of Cen Group, a realty consultant company in Vietnam, said the lack of transparency in the market was the result of the mindset the Hanoian had when it came to purchasing residential units. 

“Hanoian investors still think that investing in large-scale apartment projects, which were introduced meretriciously in five-star hotels or that constantly appeared on media, might fail to land them a big profit. They have held onto the habit of scrabbling to purchase units that are still on paper and where prices are rumoured to rise in the near future,” said Hung.

Le Phi Hung, director of a real estate trading floor in Hanoi agreed that not only investors but also end-users still would like to purchase apartments in projects that their developers did not publish widely their launches.

Hung said many home-buyers who visited his trading floor believed that projects which constantly appeared in the media must be suffering from slow sales rates. They usually paid a lot more attention to small-scale projects of around 100 to 200 units where details were never published and where units were transferred several times in a short period of time for greater profits.

Meanwhile, Ta Ngoc Duy, a Hanoi-based realty broker said most homebuyers lacked the ability to value an apartment and didn’t fully believe in the consultation of realty consultants and brokers. Instead, their purchasing decisions rested largely on relatives’ assessments.

Duy added that many developers did not hold conferences to introduce their projects but rather chose to sell their products to their staff at a discount before encouraging these employees to sell their products on to relatives.

Dang Van Quang, director of Navigat, a real estate consultant company, emphasised that most developers did not want to publish their products’ prices and their projects’ sales rates as they wanted to evade taxes, especially corporate income tax.

“As it’s very difficult to reduce input costs, developers often cooperate with brokers to sign low price contracts on house sales, then brokers sell properties to homebuyers at higher prices and developers still receive profits which are not listed on official contracts. That way developers can avoid evade tax,” said Quang.

For example, an official contract might state that an apartment was sold at $1,000 per square metre. However, the homebuyer in fact paid $1,500 for each square metre. The differential of $500 per square metre was then not counted in the developer’s turnover.

Quang said that Hanoi property market would only become transparent if all realty laws were strictly observed.