Are apartment prices headed down ?
With some HCM City apartment developers offering discounts of up to 35 percent, buyers anticipate a firm downward trend in apartment prices.
The Saigon Times daily quoted Fiachra Mac Cana, CEO of Ho Chi Minh Securities Corp, as saying the housing market would see a rash of discounts by the end of the second quarter next year since developers were under pressure to clear their bank loans.
PetroVietnam Power Land (PVL), for instance, recently announced a discount of 34 percent on units in its PetroVietnam Landmark apartment in District 2.
It is offering 85 apartments at VND15.5 million (US$756) a square metre, VND5.8 million a square metre lower than the price it paid to buy them from PetroVietNam Construction Land Corporation and VND8.3 million lower than the price it initially announced. But the discount is only offered to buyers of at least five units.
PVL said it would lose VND70 billion but had to resort to the price cut because it could no longer cope with the pressure from its VND100 billion loan from Lien Viet Bank.
Saigon Mekong Co cut prices by VND4 million a square metre to VND14.5 million for the 500 units in its An Tien apartment project in Nha Be District.
But the Saigon Times pointed out that many developers had begun to cut prices earlier in the form of promotions.
The director of a real estate company said the price-cutting trend was not new since many real-estate investors could no longer bear the loan pressure.
Insiders said the price cuts would not improve market liquidity this year since prospective buyers would wait for prices to slump further.
Chris Brown, deputy director of housing at Cushman & Wakefield Co, said investors had shown little interest in property though the stock and gold markets were volatile.
This had hit the HCM City apartment market, with prices declining by up to 20 percent in the third quarter, he added.
Meanwhile, due to the market slump, many real-estate companies reported big losses in the third quarter even without cutting prices.
Phat Dat Real Estate Development Corporation, for instance, reported a loss of VND7 billion in the third quarter since it managed to sell almost no apartments in that period. In the first quarter it had incurred a VND14 billion loss.
The 584 Investment and Exploitation Traffic Construction Co reported a VND6 billion loss, saying it was mainly due to the high loan interest rates.
But VietCapital Securities Co said in a recent report it was too early to declare a downward trend in apartment prices.
Tuoi Tre - November 3, 2011
Real estate firms slash prices to remain in business
Many real estate companies have reported incurring losses in the third quarter due to the country's moribund domestic real estate market.
The PetroVietnam Power Land JS Company recently announced it would lower prices of 85 apartments in its flagship PetroVietnam 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 HCM 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.
Vietnam Investment Review - Novembre 4, 2011