Real estate firms slash prices to remain in business

A project of Sudico

The PetroVietnam Power Land JS Company recently announced it would lower prices of 85 apartments in its flagship Petro Vietnam Landmark project to VND15.5 million ($741.62) per square metre from a previous VND21.6 million ($1,033). The company needs to begin repaying a VND100 billion ($4.78 million) loan from the Lien Viet Post Joint Stock Commercial Bank.

Before announcing the sell-off, the company reported losses of VND4.4 billion ($210,526) in the third quarter, pushing its post-tax profits between January and September to VND7.5 billion ($358,851), down 70.9 per cent against the same period last year.

Thu Duc Housing Development Joint Stock Company incurred a loss of VND5.8 billion ($277,511) in the third quarter, reducing its post-tax profit to VND34.6 billion ($1.65 million) between January and September, down 80 per cent compared to the same period last year, blaming overly high interest rates.

Kinh Bac Urban Development Joint Stock Company racked up losses of VND119 billion ($5.9 million) in the first nine months of this year.

Song Da Urban & Industrial Zone Investment and Development Joint Stock Company (Sudico) made a loss of VND9.2 billion ($440,019) and the Transport Engineering Construction and Business Investment Joint Stock Company 584 reported losses of VND6.3 billion ($301,435) in the third quarter.

Real estate project prices, particularly in Hanoi and Ho Chi Minh City, have dropped by 20-30 per cent so far this year. Despite big discounts, many projects continue to remain unattractive; meanwhile, banks continue to squeeze access to credit in the real estate sector, pushing many investors to brink of bankruptcy.

Just three days after PetroVietnam Power Land JSC announced its sell-off, on October 31, the Saigon Mekong Company followed suit, hailing reduced prices on 500 apartments in the An Tien urban area project. Prices will drop from VND18 million per square metre to VND14.5 million per square metre. The company said the move was an attempt to recoup capital.

According to economists, banks are urging real estate company to repay loans, darkening the already gloomy real estate markets for investors, with no respite in sight before the year end.

As an immediate solution, companies are selling off their projects at lower prices to ease cash-flow difficulties, and to avoid high interest payments and bank charges on overdue loans.