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Property firms in Hanoi and Ho Chi Minh City are drastically slashing apartment prices to recover investment capital amid the housing glut.

Hoang Anh Gia Lai recently put up a new apartment complex on sale in Ho Chi Minh City’s District 7, offering 30-50 per cent lower rates than other projects in the nearby area. The Saigon Mekong Company also reduced the price of 500 units in a District 7 development to VND14.5 million ($694), from the initial VND18 million ($861) per square metre.  

There has never been a better time for buyers to snap up apartments 

In Hanoi, Mai Linh Investment cut prices ranging from VND2-9 million for every square metre in its Golden Palace in Tu Liem district, while the developer of Dai Thanh Residential Area decided to cut its price down to only VND10 million ($478) for every square metre of its condos. 

Most recently, Westa project in Ha Dong district’s Mo Lao New Urban Area has reduced prices by 35 per cent compared to the previous price of VND26 million ($1,244) per square metre. Other projects joining the trend include VP3 Linh Dam, which has reduced prices twice, from VND31 million ($1,483) early this year, to VND25 million ($1,196) mid this year and around VND22 million ($1,052) per square metre now.

The parade of price reductions continues with many other projects in a hope that the developers can have some capital return to continue building their projects. Nguyen Van Duc, vice director of Dat Lanh Real Estate, said real estate companies faced the “risk of death” if their products could not be sold.

“My advice now is to restructure portfolios and find different ways to reduce the price of the product. Then they can have investment return and continue their business,” Duc said. He predicted that the price of condos could continue its downward trend till the mid of next year, with a further reduction of 3 per cent.

Alan Phan, chairman of Viasa Investment Fund in Hong Kong, said real estate prices in Vietnam must fall a further 20 to 30 per cent. Due to capital pressures, Phan predicted the market would bottom out in 2013’s second quarter and would fall further. But, Phan said current prices were still unaffordable for many buyers. Based on the people’s current incomes in the nation’s two biggest cities, an affordable price could be as low as VND14 million ($666) per square metre.

Moreover, he predicted that the market would recover only when the price of condos was reduced to VND10 million ($476) per square metre.

In Hanoi, according to a Savills Vietnam market survey, property firms had released more apartments in the third quarter, approximately 14,500 apartments from 100 projects. During the last quarter only projects with competitive prices or discounts will be able to lure buyers.
Fierce competition between property companies is expected to eliminate smaller enterprises with smaller capital.

CBRE reported that the apartment sector in 2012’s third quarter saw few signs of a trend reversal, with new supply continuing to be released while large price declines were observed in both primary and secondary markets.

Despite the historical slow down due to the lunar July, in which Vietnamese traditionally do not disburse large sums of money, the latest quarter saw a new launch supply of 2,700 units, a slight pick-up from previous quarter.

The majority of condos now in Hanoi are offered at around $1,000 per square metre, the most affordable price since 2008. The secondary asking price, according to CBRE, continued to drop by 5 per cent on-quarter, following the downward trend that started in 2011’s last quarter.

Dim economic outlooks through 2013 will further dampen buyers’ confidence and the flight to safety will strengthen savings at the expense of investments. Cash is available but does not flow into real estate. 

Bich Ngoc