“To my knowledge, real estate pricing in Viet Nam is quite lower than in some countries in the same region. Therefore, there could be no absolute answer to the question of whether our house is reasonably priced or not. As of now, every decision lies in the hand of house buyers.”
Said MIKGroup CEO Nguyen Vinh Tran, in response to mixed reviews on house pricing in Viet Nam, of which, many believes that two of the factors driving real estate market into an uneventful period and preventing many young families from buying their own houses are currently high house pricing in Viet Nam.
“In my opinion, modern Vietnamese go into house buying session with a more open mind than before. Recently, many people may accept the rate that even real estate developers and investors could not think of before. To my observation, many are willing to spend a lot of money to buy houses priced at USD5-10 thousands/m2 or 30-50 billions VND to buy a villa. This, in fact, surprises even us.
Hence, we believe that selling price is a factor that is not as important as before in the real estate market. On the market, each customer segment, from common population to the elite, has their own rate of clients but all with good liquidity. To me, this is such a positive signal for the real estate market.” Mr. Tran said in an interview with our reporter.
It means that the common population and house buyer’s incomes increased significantly, doesn’t it?
It not just about income as people’s income is associated with the whole economy’s GDP growth. What matters is the development of many factors, including expressively increased macro indexes, providing peace of mind for more people. Another one is the heavily improved property accumulation among all population, which present many a chance to make their residence better or buy a more beautiful, spacious and modernly equipped house.
Another thing worth mentioning is that I expect management agencies to soon acquire statistics on first time house buyers because they are quite many to my view. They are actual potential targets of the real estate market.
In response to a national assembly member’s opinion in the ongoing meeting session that the current house pricing still quite high, Mr. Pham Hong Ha, Minister of Construction, said that, the only way to decrease house pricing is increasing supply. What is your view on this? Is it reasonable?
Well, that, in fact, is generally how the market works. When there are too many projects for the same product in the same segment, real estate developers are forced to reduce price to make competition possible. Actual market development in recent years witnessed this scenario in most segments.
However, there always exists a lot of new products with different price range, from VND20 millions/m2 to VND200 millions/m2, all are possible. The final choices are put in buyers’ hands, which depend on their demand.
House pricing changes, whether increase or decrease, are partly due to house buyers’ crowd psychology. Does this sounded correct to you?
This is absolutely normal in project marketing. This trend is also a selling trick of several real estate developers. However, in my opinion, current house buyers are smarter. They know the market, they understand the products and even selling prices. They are indeed decision makers so they only decide to buy if they deemed it reasonable.
Therefore, to real estate developers like our MIKGroup, we constantly strive to create products matching customers’ preferences and demands including buyers for investing and buyers for residential purposes, and buyers from foreign countries... alike.
Nowadays, developing a project require more a lot more factors than before, not just pricing alone.
There is a popular speculation that the current high pricing of housing is because of real estate agencies’greatly or even “super” benefits. Do you think it is true?
As a matter of fact, the concept of “super-profit” should be acknowledged in a larger picture. If a project collects only five or seven billions VND in profit in tens of billions VND revenue, it is not super-profited.
Therefore, for example, if a project’s profit margin reaches 50%, it is deemed to be super-profited, however, if that 50% only equivalent to 50 billions VND, it is not anymore.
As of now, a suitable project profit margin is normally 15%. Hence, real estate agencies’ profit depends on the number of sold product, not its pricing.
What do you think about current house pricing. Does it reasonable and possible to decrease?
As I mentioned earlier, the reasonableness lies inside buyers’ minds. As for investors, they always want their selling prices reach a certain level to achieve planned profit margin so they will do their best to minimize risks and cut down on unnecessary costs during the course of project investment and development.
As for buyers, the reasonableness of a certain project’ pricing are from their own judgment. In one hand, a project with a price being VND20 millions/m2 could not be considered reasonable if its location is too far away from downtown and its construction quality is too poor.
On the other hand, projects priced at VND200 millions/m2 but occupying premium locations or right in downtown and of high quality are deemed as reasonable for many.
In conclusion, reasonable house pricing is an abstract concept and have no absolute answer. As a matter of fact, current market’s deciding factor is house buyers, not real estate developers, whose role is merely presenting options to consumers for consideration.
So, at the moment, is it hard to own a house in Hanoi or Ho Chi Minh City?
At present, the decision of buying a house in Hanoi or Ho Chi Minh City depends on location and traffic. If you want to have a reasonably-priced house, you have to chose one in the suburb, far away from downtown.
For example, 10 years ago, land and house price in District 9 is extremely cheap but, as of now, with a developed traffic infrastructure and road network, it skyrockets. The same could be applied to Hanoi. Such areas as Long Bien, Gia Lam or in the west such as My Dinh, Me Tri... gradually becomes downtowns so cheap areas move further away.
In the view of a real estate agency, in your opinion, it is worth to invest in the current market?
It is really worthwhile, I think. And in fact, many domestic investors are one step behind foreign investors because they recognized the potential of Viet Nam’ real estate market many years ago and bought quite a lot.
Real estate pricing in Viet Nam is quite low in comparison to neighboring markets. I also believe that the market will witness a busier session with more revolutionary products at the end of the year. We experienced the market’s ups and downs. Current market scale is quite large with the participation of many domestic and international developers so it is quite impossible for previous scenarios of limited supply to repeat themselves.
Measures implemented by management agencies will partly help take the heat off the market right when there is signs of a demand surge.