Discounts fail to drag apartment market out of slump

In Ho Chi Minh City, liquidity was low in January and February and weakened further in March.

In the secondary market, investors who are under stronger pressure to repay bank loans or pay higher interest, are offering bigger discounts but still struggle to find buyers.

Nguyen, an apartment broker in HCMC’s Thu Duc City, said apartment owners are reconciled to average losses of VND500-600 million.

“One investor, who had bought an apartment for VND3 billion and paid half the amount, just sold it for half a billion dong to cut losses.”

In the primary market, developers of many projects in Districts 2 and 9 and Thu Duc City have stopped selling since last year. Concerned about the low market sentiment, they said they would wait until the end of the second quarter of this year to consider selling their apartments.

Amid the huge discounts and lack of liquidity, many buyers liquidate their apartment contracts with developers despite a penalty of 20-30% of the value.

Minh, who bought an apartment in a project in Thu Duc City, said he liquidated his contract in February and accepted a penalty of 20%, or nearly VND300 million.

He had tried to sell the apartment for the last 18 months at a loss of VND200 million, but found no buyers, he said.

Because his income was shrinking and his loan interest rate remained high, he was forced to liquidate the contract, he said.

According to real estate service provider DKRA Vietnam, the supply of new apartments this year in HCMC and southern provinces fell by 56% year-on-year and demand has been weak too.

Prices remained high in the primary market, but declined in the secondary market along with liquidity, it said.

The average selling price in the secondary market is down 6% since the end of last year. In Hanoi too developers are offering big discounts but to little avail.

In mid-February an apartment project in Hoang Mai District offered a 38% discount to customers paying 95% of the price in advance. Others are offering discounts of 7.5-20%.

But none of it is making a difference to demand since people are leery about the slow progress of projects amid the difficult economic situation.

Vo Hong Thang, R&D deputy director at DKRA Vietnam, said credit tightening, unresolved legal bottlenecks, and high interest rates continued to put pressure on the apartment market.

But prices in the primary market remain high, he said.