50 Percent Sale Likely to Create Consumption Wave?

The oversupply situation of the real estate market has pushed the market into tough conditions and prices to plunge. Pressure on financial resources is weighing on investors, especially whom have invested in the luxury apartment segment. Mr Tu said that the real estate market is in crisis in the luxury apartment segment, which has price in the range of US$1,500-$2,000 per squ.metre. Currently the supply on the luxury apartment segment is very large while the real needs are concentrated in the lower price segment with US$1,000 per squ.metre.

 

Despite tough financial situation, the sharp discount in these luxury apartment projects in order to unfreeze capital flows encountered difficulties, this is pushing the real estate business in the deadlock. However, many experts and investors in the real estate area believe that the move to accept up to 50 percent off to improve the liquidity of several real estate projects would be unlikely to create a wave of discounts as previously, because the price of the real estate products has been deeply cut compared to two years ago. But the move by some investors will cause a negative impact on the senior projects still in large inventories that have plans to release.

 

Mr Truong Chi Kiem, Vice General Director of the Him Lam Thu Do Corporation said that the current luxury real estate products are the outcomes of investment projects of a few years ago, during the "golden" time of the real estate market. In fact, after deployment, the project has also attracted quite a number of customers. Therefore, if at this time the investors are starting to cut prices to deal with the inventory, this will affect the interests of the previous customers who purchased and owned the current properties. This will put investors in a disadvantageous situation. This is considered the main reason why many high-end condominium projects are stuck in a dilemma.

 

However, due to the funding constraints, some investors are starting discount plans. The investors of the Sunrise City Complex project in District 7, Ho Chi Minh City has announced the price of apartments in Noty Tower in the complex is VND27 million per squ.metre (50 percent off compared with the price at the first stage of project). According to the investors, the discount is for two main reasons: that investors are starting financial restructuring, and the external impacts from the market.

 

A representative of the real estate company also said that the discounts of the current properties are beyond the expectations but the selling price of the project is set at reasonable price and not too low because the current price of some quite luxury apartments at Phu My Hung are in range of VND32-33 million per squ.metre. Besides, next to the Sunrise City complex, the apartment of the Him Lam Riverside is priced at only about VND30 million per squ.metre price, along with the extended payment schedule and special gifts for homebuyers.

 

The discounting of many luxury real estate projects in Ho Chi Minh City is raising the question of whether this wave will spread out to the market in Hanoi because the majority of the luxury apartment projects in Hanoi are facing the similar troubles.

 

The representative of the Discovery Complex in Cau Giay District, Hanoi said that despite the number of unsold apartments, many investors do not implement a flat discount policy, but instead will offer customers promotions. For example, the Discovery Complex's investor is applying promotions for apartments less than 120 squ.metres with VND20 million per squ.metre, less than 133 squ.metres with VND40 million, and less than 180 squ.metres with VND80 million.

 

According to many real estate experts, the luxury real estate market in Hanoi is not stuck in as serious a dilemma as in Ho Chi Minh City. The number of the luxury apartment projects in Ho Chi Minh City is too high, causing too much intense competition, while in Hanoi, the projects are well underway with their own customers.

Mr Nguyen Anh Tu said that investors in Hanoi are more persistent than investors in Ho Chi Minh City, which stems from a difference in the investment environment between the two regions. For the Hanoi market, the risks to the investors are less.

 

Some experts believe that the decline in selling price of some luxury apartments in fact reflects the change in the investor's strategy because of strict requirements for the luxury apartment segment. Therefore, the luxury apartment segment is still having market shares if the consumers have the right evaluation on their quality.