Pricing debate looks for answers

The never ending property pricing debate continues to rumble on with buyers suffering the consequences.

So, what is an “origin price” and a reasonable price for an apartment unit?

Jeremy King, managing director of Knight Frank Vietnam, said the “origin price” was the price at which the apartments were put onto the market for the first launch.

However, Pacific Real Estate Service Company director Khuat Vu Huu Trung said there was no simple answer.

In other countries, Trung said, there were only two kinds of prices set for accommodation, the primary and secondary price.

The primary price is calculated by the apartment’s price announced at the launching time by the developers, without any commission. This price is defined by a combination of many different expenses such as materials, workforce and land.

Meanwhile, the secondary price is combined with the primary price and the interest of the sellers or speculators.

“If we look at two above prices it seems that the so called origin price is most like the primary price,” Trung said.

However in Vietnam, Trung added, there were four different kinds of prices. First is the “under-table price” with a special discount, which is undisclosed and reserved for VIPs.

Second is the price sold at the investment contribution contracts, which could be publicised depending by the developer. Under the current law, this price is applied for 20 per cent of the total units in every project. Especially developers can only sell accommodation at this price whenever a project’s infrastructure system is finished.

The third is the one announced by the developers in official sales announcement when the foundations of buildings are completed.

The last price is the one buyers speculate on their units and cannot be controlled because they are transferred among many sub-investors.

In Vietnam, Trung said, the majority of buyers suffered the last price and fell victim to speculators.

‘That is why the prices of every metre of apartment increase many times compared to the price combined with expenses,” Trung said.

Meanwhile, King said the price offered by developers must be higher than construction costs plus land costs and other costs for the developer to make a profit.

“This is the case for every development. The question is whether the expected profit margins are too high. In some cases this margin may be at a level that forces final prices well above market demand,” King said.

Nguyen Hai Thang, a speculator in Hanoi, said apartment prices also depended on other issues such as the brand name and prestige of developers, the location and infrastructure systems.

“In my calculations, a reasonable price for a high to mid-end apartment unit in Hanoi could be from VND30 to VND40 million per square metre and VND15 to 20 million for lower grade,” Thang said.

He added that buyers were smarter and would consider the transparency of developers, their way of selling and their after-sales policy commitments.

Source VIR

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