Hanoi apartment prices slashed

The move reflects an over-supply of apartments in the capital. According to CB Richard Ellis Vietnam, there are more than 21,000 units unsold on Hanoi’s market. This figure even exceeds Ho Chi Minh City, with 18,000 unsold units.

Golden Gain, the developer of Mandarin Garden, was  the latest developer as of last week to announce its price reducing to VND37-38 million  ($1,760-$1,809) per square metre, from the initial of VND44-46 million ($2,095 to $2,190) previously.

Vu Ngoc Thuy, public relations manager of Hoa Phat Group  - the mother company of Golden Gain - confirmed that the developers even offered prices of only from VND29 million to 30 million ($1,380 to $1,438) for every metre of bare shell finished apartments. Mandarin Garden is one of the city’s largest scale apartment projects, with total offer of 1,000 units.

Some days after, Mai Linh Investment Company – the developer of the 1,000-unit Golden Palace located in My Dinh area near the National Convention Centre, also announced a further cut in prices to roughly VND24 million ($1,142) per square metre of bare shell finished apartment, from the initial price of VND27 million ($1,291) for every completed square metre it sold mid this year.

The Golden Land Building in Nguyen Trai street has also reduced prices to only VND22.7 million ($1,080) per square metre of bare-shell  apartment or VND27 million ($1,285) for furnished units, compared to the price of VND34 million ($1,619) for every completed square metre offered more than one year ago.

The price slashing shows how developers are struggling to sell off units to recover investments.
Golden Gain announced its price reduction amid good, on-schedule progress on Mandarin Garden to deliver units to customers by the end of 2013. The latest price reduction indicates that the pace of sales has been disappointing, with  less than 30 per cent of units sold.  

Sales of Mandarin Garden have been pressured by the huge supply of units in Hanoi.

Notable projects include Golden Palace (1,000 units), Thang Long Number One (1,000 units), Golden Land Building (800 units), Dolphin Plaza (430 units), Hapulico Complex (800 units).

Especially, Royal City developed by Vingroup is offering 4,000 units. Smaller projects in the works include Discovery Complex, Star City, Ha Do Park View, Star Tower and Skyview Phuong Thanh.  
The price-slashing trend has not only occurred among private developers, but also in big state-owned corporations.

The Urban and Housing Development Group has  reduced the price in its New Kyline in Ha Dong district by from 10 to 14 per cent from the initial VND30 million ($1,438) per square metre offered last year.

The lower-end housing has also joined the trend. Every square metre of Dai Thanh Urban Area has been reduced to as low as VND10 million ($476) – lower than even the accommodations sold to low-income people in Hanoi.

Since the beginning of this year, about 10 apartment projects in Hanoi have trumped major price reductions. A popular approach has been to offer the bare-shell finishing option, instead of completed units, allowing buyers can adjust their expenses for the completion. But, prices may continue to fall because of the growing unsold stock of apartments already built and others under construction.

“Developers now are under many pressures, especially the lack of financial flow into their projects,” explained Pham Thanh Hung, deputy director of Cen Group. “Although bankers started offering more pocket for developers,  they can hardly  get access from banks while the liquidation is still very low.”

Hung predicted that developers would have to lower further if the liquidation continues to its slow pace.

The unsold units now, Hung said, were like a cancer in real estate developers’ body. “We must cut it and accept loss,” he said.”Buyers still believe that the price would be reduced more then they are still waiting before deciding to pay money.”