Dodgy dong fears

High-end apartment developers are in for more pain

Doan Chi Thanh, director of Ho Chi Minh City-based Hoang Anh property firm, said buyers of high-end apartments would be the first losers of the Vietnamese dong’s recent depreciation of 9.3 per cent against the US dollar.

Although the State Bank forbids investors to quote their products in US dollars, many of them were quoting in Vietnamese dong but calculated equally in US dollars.

DTZ Debenham Tie Leung Vietnam general director K. P. Singh said for developers, converting the end revenue back to US dollars would squeeze profits gained from projects. 

“Importantly for house buyers who pay in dong, the devaluation is also likely to lead to increase in comparative prices with sales prices often being unofficially quoted in US dollars.  We would expect that the combined impact of this will be a further slowing of the property market in Vietnam,” Singh told VIR.

Ngoc Anh, a customer of the Mipec Tower apartment project in Hanoi, said as the State Bank raised the interbank exchange rate from VND18,932 to VND20,693 per US dollar and narrowed the trading bank from 3 per cent on either side of the reference rate to 1 per cent on February 11, his 120 square metre unit’s price increased by VND300 million.

“This is a huge sum for any customer or investor,” Anh said.

Meanwhile, the devaluation has also caused price increases in many other main construction materials such as steel, iron, cement, imported facilities and labour costs.

Pham Van Khanh, head of the Ministry of Construction’s Economic Construction Department, said steel and cement prices would increase as their input materials’ prices rose.

That would more create burdens on high-end apartment developers who were trying their best to survive the fierce competition caused by the abundance of high-end units continuously come online in the market for several years, said Thanh.

 “In the low liquidity of high-end apartment segment, even input materials’ prices almost raised, developers will not yet dare to increase their apartment prices. That will less attract customers. Getting fewer profit gained from projects also disheartened developers. All the things may be a further slowing of the market,” said Thanh.

Developers having launched projects before February 11 contacted by VIR said they still had no plans to increase their products’ prices.

Meanwhile, some developers who have scheduled to launch projects this year said that they had to reconsider prices.

A developer of a high-end project located at Ha Dong district, said the price increasing of main input materials still were lower than most of developers’ risk factor prevention.

 “With the high dollarisation likely in Vietnam, it is difficult to calculate how high inflation rate will be and our risk factor prevention calculated before will not be used. We will still launch our projects as schedule, however, the prices have to be readjusted,” the source added.