The capital’s apartment prices slide

For the first time ever, Hanoi’s apartment sector is experiencing saw strong price reductions. Recently VP3 apartment project in Hoang Mai district slashed prices to VND25 million per square metre, from the previous price of VND32 million seven months ago.

Explaining this sharp reduction, a source at the developer said many buyers were suffering from financial difficulties and could not continue paying installments. “We must support our customers to help them continue paying and sell the rest of our apartments,” the source said.

Although the pricescuts at the above mentioned project were not as dramatic as those seen at Ho Chi Minh City’s PetroVietnam Landmark Tower and Hoang Anh Gold  House, this decision to discount has proved contagious.

Thang Long Garden, distributed by Sohovietnam real estate company, is now quoting prices of VND23 million per square metre, compared to around VND26 million some months ago.

“With these lower prices developers hope their products will be more competitive and affordable to customers,” said Phan Xuan Can,  chairman of Sohovietnam.

With a price of VND23 million per square metre, Thang Long Garden is now the cheapest project in  Minh Khai street, Hai Ba Trung district. Other projects in the same street including Hoa Binh Green City and Times City are selling for VND24-27 million per square metre.

Can said the government’s tightening credit policies had seriously affected many developers, forcing them to slash prices. Also, the number of apartments in the pipeline was huge.

“A strong increase in supply will continue to raise competition. Many developers are now “riding on the tiger” – that means they must start selling soon to recover investment capital, and they have no option other than to lower their prices,” Can said.

Can said that for those projects not yet on sale, developers would set a lower starting price to increase competitiveness and bring in buyers. Pham Thanh Hung, deputy president of Cen Group, said market conditions would be very tough until mid 2012 because developers were fighting for buyers.

Meanwhile, speculators are facing tough competition because they can’t sell their products.
Hung said: “When speculators accept to drop prices, developers will have to follow, or they [developers] can’t sell anything.”

A case in point is Victoria Van Phu project where speculators are offering prices of VND15 million per square metre compared to VND23 million previously. “This makes the maths very difficult for developers when they fix their prices as speculators are slashing prices first,” Hung said

Now the price cuts are spreading from the city centre to the outskirts. Projects on sale like Tan Tay Do and AZ Thang Long on National Road 32 or Kien Hung Apartment on Road 70 have discounted selling prices by VND2-4 million per square metre but buyers are still not biting.
Peter Ryder, CEO of Indochina Capital, said oversupply was feature of all segments of Vietnam’s real estate market.

“The key for every project now to be competitive is good location, design and affordable price,” Ryder said.

According to David Blackhall, deputy managing director of VinaCapital Real Estate, land prices in Hanoi and Ho Chi Minh City had slumped 12 per cent in the past year, while apartment prices were down 10 to 15 per cent.

“With the current downturn of the market, I think these prices will come down even more in the next few years,” Blackhall said.