Prices plunge

Not only regular apartments, but also high-grade apartment buildings have seen a sharp price decrease. A 67 sq m flat on the fifth floor of a 9-storey building in Trung Hoa, Nhan Chinh area was once offered at VND650mil, but is now VND600mil, while an apartment on 18th floor of Ciputra high-grade apartments is now offered just 10VNDmil higher than the original release level.

According to Vu Van Tuat, Director of Hanoi Construction and Real Estate Joint Stock Company, on average, the price of an apartment has been reduced by tens of million of dong compared to 2-3 months earlier.

Dormitories in central city districts are also offered at lower prices. A 45 sq m flat in the five-storey Trung Tu dormitory is now offered at VND550mil. At the same time last year, an adjacent flat sold for VND700mil. However, despite the price decrease, the real estate market remains gloomy.

Even real estate transaction centres under the Housing and Urban Development Corporation find few customers these days. Pham Thi Phuong, an officer from FPT said that she has decided not to buy a house at the moment, as she expects real estate prices to drop further.

Price decrease a good sign

Analysts have warned that price decreases will badly affect the national economy. Recently many real estate businesses had to shut shop because they could not sell houses to recover capital for debt repayment to banks. However, Deputy Minister of Natural Resources and the Environment Dang Hung Vo sees the price decreases as inevitable, and a good sign for the national economy. He went on to say that the apartment price decrease will lead to price decreases in other areas, for example, houses prices in land tenure will decrease in the coming time.

Prof Le Dinh Thang, Dean of the Real Estate Department under Hanoi Economics University said that the price decrease should be seen as a good sign. For a long time, prices have been set at overly high levels, and are now returning to real levels.

With the average income of young families at VND6mil ($400) per month, VND5mil per sq m is considered ‘affordable’. Regarding calls from real estate businesses that the state should take measures to stir up the market, Prof. Thang said that intervention is not necessary at the moment. “The state should focus its resources on the improvement of urban systems and living standard,” he said.

Meanwhile, real estate businesses have no other choice than to wait. Vu Van Tien, Director General of Hanoi General Import – Export Company said that the company has several land plots, however, it is wise not to inject money in construction right now.

He believes that the real estate market will begin bustling again as demand for houses continues. “The problem lies in the fact that prices should be set at more suitable levels,” he said.

Source: VietnamNet, 15/2/2006