Apartment prices have fallen an average of 30 per cent compared to previous years, but developers can still sell their properties at a profit.

For example, two weeks ago, the Hoang Anh Gold House project in Nha Be District sold 300 of its 500 apartments at a price that was 25 – 35 per cent lower than the 2009 price.

In mid-2009, the Hoang Anh Gia Lai company sold the Hoang Anh Gold House project to another investor (a company belonging to the Bank of Investment and Development Viet Nam (BIDV). They then sold it to Sai Gon Mekong company.

Although the apartment project cost VND13.1 million (US$650) per sq.m originally, it still sold for VND14.4 million ($710) per sq. m two weeks ago.

A similar situation occurred with PetroViet Nam Power Land Joint-Stock Company.

The company discounted by 30 per cent the price on 85 apartments in its flagship PetroViet Nam Landmark project to VND15.5 million per square metre.

They did so because they needed to begin repaying a VND100 billion ($4.8 million) bank loan.

PetroViet Nam had purchased this project from another investor. But even so, the eventual profit was VND3.2 million per square metre.

In February 2009, many people in HCM City's real estate market were shocked to see a 45 per cent cut in price on apartments for Hoang Anh River View in District 2 and Phu Hoang Anh in District 7.

However, even after the drop in price, investors still made $1,000 profit on each square metre.

According to Hang Quang Huy, director of Nha Viet company, the real estate market in HCM City is expected to set lower prices on property because investors cannot keep their projects for a long time with interest rates of an average 20 per cent per year.

"Apartment investors have become victims because they speculated in a lot of apartments and they can't sell. But they are the people who caused the situation," said Dinh The Hien, a financial expert.

He pointed out that in 2006, the price of each square metre of agricultural land in District 9 was only VND500,000 ($24).

But the price increased five to six times after land plots were sold several times to different investors. Investors of apartment projects did not want to reduce prices.

At that time, it was difficult to define the real price for each project, he said.

"The apartment market should reduce prices by 30 – 50 per cent, to establish the real value. At this price, the market will meet customer demand. They need an apartment to live, not to sell," Hien said.

Professor Dang Hung Vo, former deputy minister of the Ministry of Natural Resources and Environment, agreed with Hien.

"The standard to define the real value of an apartment should be based on the price of land, construction and project management expenditures, including reasonable benefits for investors, not as it was done during the previous land fever," he said.

Vo suggested that luxury apartments in HCM City should be priced at VND15-20 million per square metre, while mid-range apartments should be half of that amount.

(Source: Vietnamnet)