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Low liquidity, why are apartment prices still increasing?

Báo Thanh niênBáo Thanh niên23/11/2023


Later projects, later sales all increase

In recent days, some real estate brokers of Phu My Hung Company have been inviting customers to the project that is expected to officially open for sale in December 2023, The Aurora. According to the introduction, the project is located on the frontage of Nguyen Luong Bang Street (District 7, Ho Chi Minh City), opposite the Hung Phuc project and near the newly handed over The Antonia apartment building, with an expected price of 90 - 100 million VND/m2 including 10% VAT and 2% maintenance fee. It is worth mentioning that The Antonia project, also invested by Phu My Hung Company, has just handed over apartments of similar quality and in the same location but the selling price is only 75 million VND/m2.

Contacting a broker named Quyen, we were advised: "This is the selling price for the next 2 years. Now you find it high, but in 2 years when the house is handed over, you will find it very cheap. Like before, The Antonia project sold for 75 million VND/m2, everyone said it was high. Currently, this project still has some apartments, the investor sells for about 80 million VND/m2. This price compared to The Aurora project next door, which is selling for 100 million VND/m2, everyone sees that The Antonia is cheap. But the price from 90 - 100 million VND/m2 is only the expected price. Only on December 2, when the model house opens, will there be the exact price of each apartment."

Thanh khoản thấp, vì sao giá căn hộ vẫn tăng ? - Ảnh 1.

West Gate Apartment (HCMC) has handed over the houses so the price has increased compared to previous sales.

Not only new projects, but also projects opened for sale in the next phases have increased in price compared to before. For example, the Paris Hoang Kim apartment building (Thu Duc City) in the first phase, the investor opened for sale at about 65 million VND/m2. But recently, when the house was completed and handed over, the investor opened for sale at the final stage, the price was up to 85 million VND/m2, excluding VAT. According to Mr. Doan Chi Thanh, Sales Director of Khoi Thanh Construction and Housing Trading Company Limited (project investor), the first sale was at the end of 2019 when the project was under construction. By mid-2023, the project will be completed. Thus, after about 4 years, the price increased by about 25%, which means an increase of about 6% per year.

Another project, West Gate in Binh Chanh District (HCMC), by An Gia Company, is currently selling the last apartments at a price of about 45 - 47 million VND per square meter, with basic furniture. Customers only need to pay 10% to move in. Meanwhile, in early 2020, the selling price of this project was about 40 - 41 million VND/m2. Brokers admitted that each time the project was opened for sale, the investor would increase the price a little. Now that the project has handed over the houses and many residents have moved in, the price has also increased compared to the opening phase.

Data from many market research units also show that the apartment segment continues to increase in price. In Hanoi , Savills said that primary apartment prices have increased for 19 consecutive quarters and are 77% higher than in the first quarter of 2019. Specifically, primary prices this quarter reached VND52 million/m2, up 2% quarter-on-quarter and 13% year-on-year. Secondary prices are also on track to increase by 2% quarter-on-quarter, reaching VND36 million/m2. In Ho Chi Minh City, a report by Cushman & Wakefield said that investors tend to keep prices stable to stimulate demand in the market. The average primary price in the third quarter was almost unchanged compared to the previous quarter, but increased by 15% year-on-year. A real estate market report for the third quarter of 2023 by Batdongsan.com.vn stated that over the long period from 2015 to present, the price increase index of apartments in Hanoi and Ho Chi Minh City has exceeded the growth rate of people's income. After 8 years, apartment prices in Ho Chi Minh City and Hanoi increased by 82% and 56% respectively. Meanwhile, the income of people in urban areas increased by only 39%.

Due to lack of supply

Mr. Doan Ngoc, General Director of PropertyX Company, explained the reason why apartment prices are still increasing despite the gloomy real estate market because all input costs have increased. From land purchase costs, land use fees, construction materials, labor, capital costs have all increased. To create a clean land fund, complete the legal procedures to implement the project, it takes 3 years, even 5-7 years to complete.

During this time, if a business borrows capital, the cost can double. Not only that, building a project is difficult, selling is even more difficult. Not everything built can be sold and 100% of the money collected immediately, but the amount of money collected can take several years, equal to the time it took to build the project, or even longer. During this time, businesses also face many risks, so they have to add financial costs, causing prices to increase with each stage of opening for sale. If they cannot sell everything and have a lot of inventory, the business will suffer even more.

According to Mr. Doan Ngoc, currently all new real estate projects when opening for sale are priced in the future, always higher than the price of projects in the same segment and the same location. The reason is that new projects are paid in installments over a long period of time, customers can use their savings to pay in installments without having to borrow from the bank. New projects are designed to be more beautiful and modern. Like new cars compared to old ones, the same car model but the improved version is always more expensive than the old version. New projects are advertised a lot. This affects customers' purchasing behavior even though the price is higher.

Mr. Le Hoang Chau, Chairman of the Ho Chi Minh City Real Estate Association, also admitted: Housing prices have been increasing continuously since 2017 and are still "high" beyond the financial capacity of middle-income earners, low-income urban people, officials, civil servants, state employees, armed forces officers, workers and immigrants. The reason why apartment prices are still increasing is because the supply is decreasing. Therefore, any business that has goods to sell at this time is the "king", dominating the market, "alone in the market" so it also keeps the price.

Another reason is that investors are lacking cash flow and should sell at all costs, but they have the mentality of trying to "anchor" high prices to increase revenue. Only when they can't bear it anymore do they reduce prices. Another reason is that the demand for housing, especially the segment that meets the real needs of society, is still very high, so any company that has a project for sale at this time will use all resources to try to push prices up.

"I still recommend that businesses sell projects and products at a discount, even break even and lose money to have cash flow and liquidity. Our grandparents taught us that when business is difficult, it is better to sell at a loss than borrow at a profit. Because if you borrow from a bank, the interest rate is up to 15%/year, and if you borrow from outside, it is up to 30-40%/year. Businesses still expect the market to gradually improve, so they keep prices high and wait until the market recovers. Therefore, it is necessary to remove legal obstacles for about 1,000 real estate projects nationwide to increase supply. Businesses strive to restructure and restructure housing products towards real demand, reducing housing prices to a reasonable level, helping the real estate market have the prospect of recovering and growing again from the second half of 2024," Mr. Chau shared.

In a recent report on the real estate market, Mr. Hoang Hai, Director of the Department of Housing and Real Estate Market Management ( Ministry of Construction ), assessed that the level of interest in apartments still remains, despite the negative impact of the market last year. In the third quarter alone, demand for this segment showed signs of recovery when the number of buyers increased by 1% and those looking to rent increased by 6% compared to the previous quarter. Of which, apartments priced from 2 to 4 billion VND were the most searched. Apartment prices in the primary market in Hanoi and Ho Chi Minh City both increased. In Hanoi, the average price increased by nearly 7% quarter-on-quarter and 14% year-on-year, reaching nearly 51 million VND/m2. Similarly, in Ho Chi Minh City, secondary prices increased by 3% compared to the previous quarter, reaching 45 million VND/m2.



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