Sunday, June 08, 2008

Property market freezing, but investors still making fat profit

17:00' 06/06/2008 (GMT+7)

VietNamNet Bridge – Real estate developers are all complaining that they have been falling into a very bad situation, and that many of them are on the verge of bankruptcy. However, in fact, they are still making fat profit.

Complain, complain…

At the end of May, Chairman of the HCM City Real Estate Association (HOREA) Le Hoang Chau persistently asked the government to allow real estate developers to mobilise capital before they complete the construction of buildings’ foundations. HOREA’s members all said that they were facing big difficulties because they could not access bank loans, and could not sell apartments due to the frozen market.

However, in fact, the investors are still launching apartments onto the market and their apartments are still selling well.

Nam Long Company, for example, has sold nearly all the apartments of An Vien project at VND16.5mil/sq m. Kien A Company has just marketed Blooming Park apartments in district 2 in HCM City at $1,700/sq m. Cityland is offering apartments in Vung Tau city at $1,550/sq m, while Sacomreal is also selling their products.

It is true that the real estate market is sliding, but prices have only been decreasing compared to the peak prices: they are still higher than the original prices set by investors. Luxury apartments in HCM City, including Saigonpearl, The Manor, Phu My Hung, Hung Vuong, Everich and Salling Tower, are still selling at $2,500-5,000/sq m, or double the original price.

Tran Hung Minh, Deputy Director of Minh Nam Real Estate Company, affirmed that no real estate firm could suffer a loss if it could sell space at VND15mil/sq m, despite the construction material price increases. Minh said that with the current construction prices, investors have to spend VND12mil at maximum for every sq m of construction.

Deputy Minister of Construction Nguyen Tran Nam in a recent interview with the press said: “The profit real estate firms are making remains very big….Don’t worry about them.”

In fact, a lot of investors are still injecting money in new real estate projects. If they were losing money on current projects, they wouldn’t be spending money on new projects.

Most construction works are still under construction despite skyrocketing material prices. V-con Tan Truong, the investor of V-Star in district 7, HCM City, said that the company will complete the project on schedule as the company is well-situated in regards to capital and materials. The sale price of the project’s apartments will be below VND15mil/sq m.

Nam Long Company is also going to launch a lot of new products, and said that products with reasonable prices are still selling well.

Don’t complain, opportunities still exist

While domestic enterprises complain that the domestic market is gloomy, foreign investors are still jumping into the market. A lot of projects have been licenced, including the $4.2bil Ho Tram Tourism Complex in Ba Ria-Vung Tau province invested in by Canada’s Asian Coast Development, and a $1.29bil 5-star hotel and entertainment complex by the US’ Good Choice Group. Starbay Holding Ltd. B.V. Island has decided to inject $1.648bil in a real estate project in Vietnam, while Capital Land, Vincom and VinaCapital are executing big projects worth several hundred million dollars.

The director of a foreign investment fund said that if Vietnam’s real estate market were not attractive, no investor would be brave enough to inject billions of dollars in projects here.

“Don’t complain. The real estate market still promises a lot of opportunities and investors can get big money from it,” he said.