Property developers are facing high inflation, tightening monetary policy and decreasing housing prices. Vu Quang Hoi, president of Bitexco, talked about the market and the strategies needed to survive. The economy is slowing down, labour and building material prices are increasing and property loans are being tightened. How will developers cope with these problems?
Vu Quang Hoi, president of BitexcoAll developers are now facing difficulties because of high building material prices and interest rates on bank loans. Total costs in many projects have increased 20-30 per cent compared to initial estimations. This is putting not only developers but also construction contractors in a plight. Those projects, which are still under construction but have sold out products, will have low profits. Some will even incur losses since they continue building as committed with their customers. This is a common situation and we have to accept. Businesses have to recalculate their investment portfolios and phase them in.How has Bitexco dealt with contractors at the time of skyrocketing prices?We sit down together to work out solutions acceptable to all so that construction of our projects will not be interrupted. It is in our expectation if the costs are 5 per cent higher our initial estimations. If the prices have increased more than 5 per cent compared to initial estimations, we the developers have to shoulder the burdens with construction contractors. If the prices have increased too much, contractors will face losses and they will stop working and as a result, construction will be halted. Therefore, both developers and contractors have to share the increased costs caused by higher prices of building materials, labour and interest rates. The construction of our residential, office, hotel and shopping mall projects such as Financial Tower, The Manor in Ho Chi Minh City and the Garden in Hanoi will finish on schedule. Is this the time the market will squeeze out dodgy developers and investors?I think real estate is one of the most difficult businesses. To be successful, developers must combine a lot of elements such as vision, prestige, location, economic growth, environment, technology and professionalism. Even when the market is growing well, it is still difficult for professional developers to sell products at high prices as the buyers are very discerning and they look very carefully before spending a huge amount of money on a property. Over the last few years, there are new real estate projects planned for areas far from cities’ centre. And those projects still have buyers. However, let’s look at those projects now. Are they under construction? If yes, have they attracted buyers to live there? There exist projects that do not have residents, they actually have no real value and they are probably a result of speculation. Many speculators who want to make quick buck can no longer exist now from these projects. In the current situation, a lot of projects are in danger of collapse. The market will correct itself and only those projects with good values and accepted by customers can survive. How will speculators and dodgy developers suffer from this market situation?It is not so easy to earn profits in real estate development. To build high-quality projects like The Manor we have had to pay high and accept lower profits because we spend a lot to create good products. Huge profits will only come from those projects selling products, which are still on paper. The developers can not survive if they do not have long-term vision, good business strategy and high-quality products. The real estate market’s transparency is still low and many developers can earn quick buck by selling their projects on paper. When the market is more transparent, this business can not survive. We will wait and see. As I have said, there are many investors and developers making quick buck in recent times and they have created the chaos in the real estate market. As a result, it is difficult to assess the real property values as well as real housing demand. Property prices have skyrocketed beyond their actual values and those in need can not buy. Yet, speculators will suffer when the market is down and this is true when land and housing prices are now decreasing. Some say it is now time for foreign developers. What’s your idea?It is obvious foreign investors come to build. However, foreign developers will meet more difficulties than us as we are Vietnamese and we are doing business in our own land. Although foreign developers may have financial strength and experience, it is not easy for them to know the real demand of the market, which is not always like what is reported in the media.
No comments:
Post a Comment