Experts say real estate prices have hit bottom but rising input costs will push them up soon
Visitors look at models of residential towers of a real estate development project during an exhibition on construction and property held in Hanoi.
Property developers have slashed prices drastically to stimulate buying interest in a flagging real estate market, but they are not likely to go down further, industry insiders say.
Le Quoc Duy, deputy general director of real estate developer Hoa Binh Corp., said many investors are now accepting to sell houses at prices that won't fetch big profits, and some are even ready to suffer losses as they need to pay off bank loans.
However, with the prices of construction materials prices and labor costs continuing to increase, home prices may not fall further, he said.
Prices of materials like steel, cement, sand and bricks have gone up by 25-30 percent compared with late last year.
According to contractors, these increases have pushed building costs for an apartment in Ho Chi Minh City to VND14-15 million (US$680-$730) per square meter from VND10 million at the end of last year.
Real housing demand in Vietnam, especially in big cities, is very large, but buying interest is still low despite the lower prices.
Experts say this is partly because the government has restricted credit for the real estate sector.
Early in March, the State Bank of Vietnam had ordered all lenders to limit credit to non-production sectors at 22 percent of total loans by June 30, and at 16 percent by the end of the year.
Following the central bank's policy, lenders have tightened lending for real estate and stock market transactions and raised interest rates to as high as 22 percent per annum to these sectors.
Acknowledging that the current high interest rates are a burden for homebuyers, many property developers have been offering more incentives.
Thanh Tung Company, investor of the Happy Plaza project in HCMC's Binh Chanh District, said it will refund interest payments to those who've taken out bank loans to purchase its apartments until they are completed and handed over.
The company will also pay an average interest of 17 percent per annum, during the construction period, for those buying apartments with their own money, the company said.
Across many southern provinces like Binh Duong, Dong Nai, and Long An, developers have launched different promotions to sell land lots.
On April 23, the Kim Oanh Company gave cash awards ranging from VND3 million to VND50 million to those purchasing land in Binh Duong's My Phuoc Urban Area and Dong Nai's An Vien Residential Area.
"The real estate sector is facing its toughest time in the past four years. That's why developers have opted for promotions," Nguyen Vinh Minh Thanh, general director of property firm An Cu Lac Nghiep, told news website VnExpress late last month.
Experts say that while many people cannot afford to buy houses due to the government's tight monetary policy and high rates, others that can buy are waiting for further falls in home prices.
But Duy of Hoa Binh Corp. said homebuyers should not wait any more as housing prices have hit bottom.
"Now is a good time to buy real estate. Property developers that are finding it hard to deal with rising input costs may increase prices in the near future," he said.
In fact, some investors have already raised prices.
For example, the Vinh Phong Thai Company, investor in the Golden Dynasty building in HCMC's Binh Tan District, is selling apartments at VND19 million per square meter, up VND3 million from January.
Le Hoang Chau, chairman of the HCMC Real Estate Association, said the property market has been quiet for a long time, and this offers a good opportunity for homebuyers to choose their dream home.
It's no longer a seller's market, he said.
Considering that prices of many other products have experienced an inflationary surge, homebuyers now have a very good deal to purchase property at reasonable prices, Chau added.