Market hot as fire sales spread

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Novaland, the developer of Sunrise City in Ho Chi Minh City, announced that it had decided to sell apartments in the North Tower residential buildings, the third phase of the Sunrise City project, at VND25 million per square metre ($1,190) - half the price of apartments in the project’s first phase South Tower.

Similarly, Phat Dat Real Estate Development Corporation announced they would be selling landed houses and villas at The EverRich 3 project at prices of around VND40 million per square metre, a 50 per cent reduction on last year’s initial quotes.

According to Le Hung, chairman of the An Phu Real Estate company, developers’ price reductions are an intelligent way to survive in the current market.

“It is better to sell successfully, even with a lower than expected price, otherwise developers will be stuck, with no capital return,” Hung said.

Phan Xuan Can, chairman of Sohovietnam, said that developers are now in need of capital investment, forcing them to sell their products at reduced rates.

However Can claimed that even with the sharp reductions announced by Novaland and Phat Dat, their prices were still higher than projects in the same area.

He also believes that the two developers have reduced their prices too late. “This reduction should have been done a year ago, then developers could have sold better,” Can said.

Meanwhile Vo Tan Thanh, deputy director of Phat Dat Corporation confirmed that the new prices at Ever Rich 3 represented a loss for the company.

“We are only selling at the reduced price on 75 units in order to generate capital that we can return to existing projects,”  Thanh said.

His company remains hopeful that the market will recover in 2014 allowing them to increase their pricing accordingly.

Talking with VIR, Phan Thanh Huy, general director of Novaland explained that their new prices would see the project break even financially, and that the price disparity also reflects the differences in quality of the various units.

“In the first phase we sold a five-star product for VND50 million per square metre. The second phase was sold at VND40 million as it was a four-star product. And in this third phase, the price of VND25 million represents a three-star product,” Huy said.

Prior to Novaland and Phat Dat Corporation’s price reductions, two other big developers in Ho Chi Minh City, Hoang Anh Gia Lai and Quoc Cuong Gia Lai had already hastened fire sales on their real estate products.

Hoang Anh Gia Lai, a long term real estate developer is in the process of selling their projects and withdrawing from the real estate market in order to focus on other fields. Meanwhile, the investor of Quoc Cuong Gia Lai was forced to mortgage their private properties in order to raise capital for re-investment in new projects.

According to Nguyen Van Duc, vice director of Dat Lanh Real Estate Company, the present price reductions were bad news for the market. “It means that developers are suffering from a serious shortage of investment capital,” Duc said.

Duc predicted that the reductions will only increase in the near future as developers’ need for capital intensifies.

Duc added that selling units valued at more than VND4 billion was exceedingly difficult. “Therefore, price reduction is the act of restructuring products to be cheaper and more affordable to customers,” Duc said.