Luxury apartment sales in Hanoi to remain in red until first half of 2011

Graphical view of the Xa La luxury apartment building in Hanoi (Photo:diaocxaydung.vn)

Attempts to boost sales of luxury apartments during the quiet market this year have seen property firms in Hanoi quickly carrying out many promotional packs including steep price reductions for homebuyers and high commissions for investors.

This is the first time ever the property companies released these kinds of promotional packs, which are only familiar with Ho Chi Minh City’s real estate market, brokers said.

Sales of many five-star apartment buildings including Richland Southern, Mulberry Lane and Tricon Tower slumped. The unlisted property firm FLC last month announced it would sell more apartments in the FLC Landmark Tower at the price of VND28 million (US$1,400) per square meter.

The price was a bit lower than previous sales, but brokers said it plunged on the stronger dollar, surge in construction materials and gold prices this year.

Similarly, apartments in Time Tower in Ha Dong District were offered at the price of VND19.2 million per square meter. Royal City’s apartment of the listed builder Vincom (VIC) were sold at VND$2,000 per square meter only.

Brokers said property enterprises offered an average profit rate of $50-70 per square meter for investors.

The plunging sales of luxury apartments in Hanoi showed the property bubble was about to burst, analysts said.

“Luxury apartment suppliers tried to make huge profits, prompting a big gap between actual and market prices,” a property broker in Hanoi said.

Fluctuated gold price, dollar getting stronger and high interest rates have also led investors to stay away from luxury apartments, brokers noticed.

Statistics from the commercial property and real estate services adviser CB Richard Ellis showed demand for apartment worth $1,500 per square meter or more fell sharply in the first half of 2010.

The supply meanwhile is abundant, of which around 10,000 new apartments will be available on Hanoi in upcoming time. They will raise the total amount of new apartments to 20,000 this year.

Experts expected the prolonged boom of apartments for middle earners would bring sales of luxury apartments in the first half next year down further.