Secrets of real estate price drops finally revealed

The radical price drops by major real estate developers shocked the market and attracted new buyers
Photo: Le Toan

Recently, Novaland, the developer of Sunrise City in Ho Chi Minh City, announced that it had decided to sell apartments in the North Towers residential building, the third phase of the Sunrise City project, at VND25 million per square metre - half the price of apartments in the project’s first phase South Towers.

According to Phan Thanh Huy, general director of Novaland, the new price would reflect a difference in quality between the units.

Huy said that the price of VND50 million per square metre had been applied in the first phase of this project when its quality was at five-star level. This new price – VND25 million per square metre, was applied for units with three-star equivalent.

Talking with a project salesman, VIR discovered that the North Towers have only one basement, with buyers granted space for just one car and motorcycle. While in the South Towers – where units were sold for VND50 million per square metre, have two basements containing much more parking space for residents.

“The expense of building one floor of basement is equal to that of three above ground. It’s clear that the developer can make great savings by reducing the number of basement levels,” said a construction expert.

Moreover, the design of the North Towers has from 8 to 12 units on each floor, reducing the total number of square metres per apartment.

The starting price of VND25-33 million, was initially considered remarkable, however they are for unfurnished units. In order to finish the units, buyers will require to invest an additional VND5 million for every square metre and will have to wait two years more for the project t be finished.

Meanwhile, the Phat Dat Real Estate Corporation also 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 quotes.

According to the company’s financial declaration, Phat Dat had suffered from low turnover in the last several months.

Until the second quarter of 2013, the company had experienced eight continuous quarters with turnover of under VND40 billion per quarter. In some quarters, the company had only earned VND2 billion.

The short term debt of Phat Dat also increased from VND305 billion at the end of the third quarter of 2011, to more than VND1,500 billion in the beginning of 2013.

Rising debts and lack of income forced Phat Dat to sell their products as quickly as possible in the hope of raising cash in the short term.

According to Hoang Anh Tuan, general director of Tac Dat Tac Vang, Vietnamese developers have never had to make such large reductions in the past. “It’s difficult to define where the bottom of the market lies in regard to price” Tuan said.

He added that for those with spare cash under the mattress, now was an ideal time to invest in real estate.