Two overseas Vietnamese check out C.T. Group’s luxury apartment project Leman in Ho Chi Minh City. Photo by Dinh Son
Ho Chi Minh City-based property company Novaland said it sold 70 apartments on the first day of sales late last month after it acquired some stalled projects and offered units at lower prices.
The market is hearing plenty of good news like this, thanks to developers’ flexible payment options and the government’s plan to open up the market to foreign and Viet kieu buyers.
A Novaland spokesperson said the 300 units at Icon 56, one of the three projects it took over, have almost been sold out.
The project is attractive thanks to its location in District 4, next door to the downtown area, and the company’s policy of allowing payment in monthly installments of 2 percent of the price, the investor said.
A company executive said they were themselves surprised by the response and intend to retain some of the remaining units for better prices.
Novaland bought Icon 56 and Galaxy 9 in District 4 and Lexington Residence in District 2, which together had been invested with around VND3 trillion (US$142.5 million).
It resumed sales of the apartments at prices 20-40 percent lower than nearby projects - around VND22 million a square meter for Lexington and VND38 million for Icon 56.
Hoang Anh Thanh Binh project of leading property group Hoang Anh Gia Lai has also managed to sell nearly 400 apartments through property exchanges thanks to the affordable price of VND21 million a square meter, which according to insiders is 30-50 percent cheaper than nearby projects.
It allows buyers to pay installments of just VND17 million a month.
Bui Tien Thang, general director of Sacomreal, which invested in Celadon City project in Tan Phu District, said nearly 100 villas have been sold since late January and there are a lot of inquiries.
Customers can take delivery of their land and start building the house by paying just VND260 million or 20 percent of the price.
The market revival has prompted the company to begin sales at a similar project in Thu Duc District at VND9.9 million a square meter.
Insiders said most of the projects that are selling well have cut prices by up to half from the peak rates of 2006-07.
Their developers also managed to persuade banks to roll over their debts and increase loan limits for buyers.
Le Hung, chairman of HCMC-based An Phu Real Estate Company, said the market has become busy.
It was not as if any project would sell, he admitted, only those in good locations and offering prices suitable for a wide range of customers.
Government policies have also shown effect, like lower interest rates and, especially, the Ministry of Construction’s proposal to scrap all restrictions on Viet kieu and foreigners’ buying of houses and investing in the property market.
Under amendments the ministry proposes to the Housing Law, Viet kieu (overseas Vietnamese) can buy houses without restrictions once they are allowed to enter Vietnam and can transfer, sell, or rent out the item.
Existing laws only allow them to own one house or apartment after they are in the country for at least six months and only for their own stay.
Foreigners, excluding diplomats and those who work for non-governmental organizations, will also be allowed to buy and own houses and apartments once they get a work permit in Vietnam.
Now foreigners can only buy apartments and not houses and only if they fulfill certain conditions like having a Vietnamese spouse or invest in the country. As of the second quarter of 2013, five years after they were allowed to, a total of 126 foreigners had bought apartments.
Tran Kim Chung, president of C.T. Group, developer of luxury apartment building Leman in downtown HCMC, said the project has attracted increasing attention from foreign and Viet kieu customers this year.
Sales are up 30 percent from last year with around two-thirds of the 200 apartments having been sold for $4,000-5,000 a square meter.
“All our projects are readying to catch up with the recovery of the market,” Chung said.
Several city property firms have announced the launch of new projects starting in the second quarter.
The housing bill is still being debated, with many lawmakers being concerned that rules would be relaxed too much and suggesting that only Viet kieu with Vietnamese nationality - rather than just origin - are conferred the privilege.
National Assembly spokesman Nguyen Hanh Phuc said at a meeting March 10 that measures and conditions need to be drafted to regulate overseas investors before opening up.
But more lawmakers have supported the proposals than rejected it.
Tran Van Hang, chairman of the assembly’s Foreign Affairs Committee, said the proposed amendments already has a section on what kind of housing and buildings cannot be used from commercial purposes, and so there is no need for more restrictions on foreign investors.
The Ho Chi Minh City Real Estate Association estimated that there are more than four million ethnic Vietnamese living abroad, mostly in the US, and they are already investing in the market through the $10-billion remittances they send to Vietnam every year.
Figures from the central bank’s HCMC office show that remittances to the city have surged in the last two years and that 71 percent of the money has gone into property through friends and relatives.
Tran Van Trung, director of a foreign remittance company, said the amendments to the Housing Law can boost that kind of remittances and enable the government to control the investment.
Prof. Dang Hung Vo, a former deputy minister of natural resources and environment, said allowing Viet kieu and foreigners to invest in property is “inevitable” in the process of globalization.
“Allowing Viet kieu investors will benefit the market at this moment.
“The policy will not just thaw the market but also have an impact for a long time.”
Dr. Le Xuan Nghia, former vice chairman of the National Financial Supervisory Committee, said the policy would fuel and diversify the market.
He suggested that the government should direct overseas funds to the mid-level and luxury segments.
Pham Si Liem, a former deputy minister of construction, said overseas investors would add options to the market and raise its competitiveness.
The privileges should come with clear and simple administrative procedures so that the country does not end up inviting foreign investors only to discourage them.
GOV'T URGED TO CUT RED TAPE
Government support policies need to be carried out quickly and red-tape must be cut to turn recent positive developments on the property market into a full-blown recovery, economists said.
Dr. Le Ba Chi Nhan, a lecturer at Ho Chi Minh City Economics University, said that a surge in transactions reported by developers this year could be the light at the end of the tunnel for the long-ailing property market.
What it needs now is for the government to speed up the implementation of support policies and to develop a simple and effective administrative system.
Insiders said red tape and a lack of relevant instructions have kept many rescue efforts from taking effect.
Few customers have benefited from a policy that allows buyers of apartments smaller than 70 square meters or cheaper than VND15 million a square meter to enjoy a 50 percent cut on value-added tax. It is now three months until the rule expires.
Also, little disbursement has been made of a VND30 trillion (US$1.43 billion) subsidy package unveiled by the central bank last June, with 70 percent of it earmarked for certain categories of buyers and the rest for developers of social housing.
Both buyers and developers have complained about too much red tape, while experts have said that social housing is poorly competitive compared to low-cost commercial housing with lower prices and better locations involving little red tape.
Dr. Do Thi Loan, vice chairwoman of Ho Chi Minh City Real Estate Association, said the package fell far short of expectations.
“People and businesses were at first very eager about it, considering it a savior, but they have lost confidence the more they wait. So the government needs to focus on clearing the package this year.”
A developer who asked not to be named said the government doesn’t have to save the market with money, but only needs to simplify procedures and cut red tape to save time and costs so developers can reduce prices.
Red tape often delays projects three to seven years, which provides a lot of time for bank interest rates to go up, he said.
Nhan also said lawmakers should quickly approve a recent proposal by the Ministry of Construction to scrap all restrictions for Viet kieu (overseas Vietnamese) and foreign buyers.
“Opening up the market for them will bring more funds to the market and the economy. We’re not doing it for free. It’s a win for everyone,” he said.
Lawmakers have expressed concerns about a wider buyer base, suggesting making new rules to control them.
But economists said that is unnecessary as Vietnam has already established rules about vulnerable areas that are barred from commercial investments.
Nhan said the government should instead simplify regulations to encourage the new buyers.
Economist Dinh The Hien said that although affordable housing could thaw the market, large cities like Hanoi and HCMC still need modern luxury urban areas. Viet kieu and foreign customers will fill that supply, he said.
Luxury property developer Phu My Hung in HCMC said 90 percent of a recent villa project has been sold for VND22-72 billion ($1-3.4 million) per unit since sales opened in May 2012.
It sold 48 villas from another project at more than VND11 billion apiece in January.
Keppel Land has also sold 80 of 96 villas from a project in District 9 on the city’s outskirts for VND15-30 billion each.
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