Scaling down business to survive

When the local real estate market boomed and then peaked in 2007, it saw the birth of a series of real estate trading floors.

Across the country, real estate transaction centers sprang up like mushrooms after rain. The market witnessed not only transaction centers developed by new players who joined the race to set up a real estate trading floor to reap high rewards in the sector, but also property developers who set up a property exchange center to grab a share of the good times.

Also, the construction ministry’s requirement that forced all apartments to trade via a real estate trading floor was another reason the number of property exchange centers increased.

According to Vietnam Network for Real Estate Transaction Floors, there are some 750 real estate trading floors established in cities and provinces around the country. The capital city of Hanoi has some 345 units; HCMC has 310 units and the remaining units come from other provinces.

The centers live and die by the market. That means the more transactions, sales and purchases the property market has, the more benefits those centers will enjoy. However, gone are the heydays for many property transaction centers after the market slid into difficulties over the past three years.

Poor liquidity in the market has discouraged individual investors and speculators to pour their money into the apartment sector.

And the wait-and-see attitude of many homebuyers who are waiting for a further decrease in housing prices has contributed to making the market gloomier.

The current market has challenged many property trading floors, especially those that are small and new, in terms of maintaining their businesses.

The director of a large property exchange in Dong Nai Province told the Daily that the current market has created financial difficulties for property developers and brokerage services.

The current credit tightening policy, high interest rates and poor liquidity in the market have all put more pressure on developers who have suffered market difficulties for two years. To make the market move, many of them have to offer different incentives to woo buyers.

The director said her company business reduced by half in terms of the number of housing products traded via her property trading floor, and that it was a challenging period for most property trading floors.

Except for brokerage services companies, which are financially supported by their parent companies, many new and small players have found it hard to survive and a number had to withdraw from the market, she said.

“There is no room for surfing investors and speculators, but the market is focusing on real housing demand,” she said, adding the market currently targets investors who consider the property sector as a channel to keep their savings. However, the number of actual trading on a monthly basis is limited.

Depending on the size of businesses, a property trading floor will need VND200 million for its monthly operational costs. In normal market conditions, such a monthly fee is not a problem, but it is a real financial burden at the moment for a property services company. For each housing product sold, a property trading floor receives from 1% to 2% commission from a property developer. That means a property exchange will be given from VND10 million to VND20 million for a successful trade of a VND1 billion apartment. To maintain its business, a property exchange center needs from five to ten products traded successfully per month.

Hoang Anh Tuan, general director of Tac Dat Tac Vang Joint Stock Company, told the Daily that with a monthly expenditure of VND500 million, the brokerage property services provider has trimmed off costs to maintain its business to ride through the current difficulties.

Tuan said his company had seen the number of trades decreasing significantly, and that survival and not growth was their biggest challenge.

He, however, noted the current market has opportunities for the company as many property developers, which are under pressure to settle their debts at banks and want to quickly clear their stock to return their investment, may offer some business.

In a move to attract potential customers, Binh Chanh Construction and Investment JSC (BCCI) last week moved its second property trading floor to Nam Ky Khoi Nghia Street in District 1 to facilitate business and to introduce apartments and land lot projects in HCMC.

Ngo Dinh The Thao, director of marketing of BCCI, echoed Tuan’s ideas, saying that the difficult market was also a challenge to weed out the short-term and incompetent players and a chance for companies who survive to improve their professionalism in the market. – SGT

Tags: Vietnam Property market, Vietnam property sector, vietnam real estate market