In late first quarter 2009, there came positive signs in the house market when a series of commercial apartment buildings appeared in Xuan Mai, Hanoi and Vinh Yen city of Vinh Phuc province at the price of VND2.5 million – VND3 million/sqm. Then, a 100 sqm apartment will be valued at between VND200 and 300 million which is the price that low income earners dream of. After his field trip to check the quality of those buildings, Minister of Construction Mr Nguyen Hong Quan affirmed that “the implementation of apartment buildings priced at VND200 million/apartment is feasible.”
Apartment price continues to decrease
According to the Management Unit of Vinaconex Xuan Mai, despite the low profit of 3 – 5 percent, the company is optimistic about the profit that they may gain from other similar projects. This will be a groundbreaking in terms of the reduction of apartment prices. The fact that investors accept low profit shall facilitate low income earners with accessing apartment buildings. Deputy Minister of Construction Nguyen Tran Nam said the apartments built in Xuan Mai and Vinh Yen by Vinaconex Xuan Mai could ensure their security within tens of years and all equipments and interiors installed therein were in the same quality with those which are sold out at the price of VND15- 16 million/sqm in Hanoi. Nam added that: “Vinaconex Xuan Mai did not receive any support from the State relating to land, tax or other loan policies for these two projects.” If the current preferential treatment for building social houses and houses for low income earners is fully applied in these projects, the apartment price in cities like Hanoi and Ho Chi Minh City shall be only VND5 million/sqm.
When the apartments are being sold at VND15- 16 million/sqm, investors are gaining profit at the rate of 250- 300 percent which is one hundred times higher than what Vinaconex Xuan Mai gains from the two above projects. So, it comes to a question that should the price be interfered by the State in the current situation where the interest gained by investors is enormous while the people’s income is average or low?
It can be seen that the land and housing price fever is bringing prices down, but not to rock bottom. The apartment price may continue decreasing in the time to come if investors accept the profit rate of 25- 30 percents.
Real estate market is needy for tax policy
Nevertheless, it is a necessary condition to reduce profit gained by investors of house building projects to a reasonable rate. Whether the house price shall continue decreasing and how much it may decrease depend on other relevant conditions. According to real estate managers, there are at least two conditions. First, it is the planning and land policies. It is obvious that the land price in big cities like Hanoi and Ho Chi minh City (hot-spots of real estate demand and price) is much higher than the land price in Vinh Phuc. It is also obvious that building houses for average and low income earners is infeasible unless they are built in a remote places. Then, it is very important for local authorities to put forth clear policies to reserve land for this kind of project. Businesses often complian that while the land price payable to the State budget for an apartment building project is not very big, the expense for “lobbying” is. Projects procedures should be simplified in order to reduce expenses which will be calculated into the price of each sqm in an apartment.
Secondly, how investors can obtain such high profit in this field and why is Vietnam’s real estate market so speculative recently? It is because the policies are not strict enough to regulate the real estate market. We have almost no tax policies - one of the fundamental tools to clean up the real estate market - issued except for the land tax applied since 1993. As a matter of course, investors or market holders will surely seek chances to raise their profit if financial policies are not clear and transparent enough.
The Ministry of Construction is trying to speed up the implementation of social houses and low-price houses building projects in which businesses and State Corporations under the Ministry are the key force. If businesses are expected to realise a revolution of house prices with specific projects, then proper policies will be a solution to a healthy real estate market.
Luong Tuan
Vietnamese
