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The dollar price increase has made real estate investors anxious and real estate developers worried sick. Meanwhile, the house prices are predicted to increase sharply in 2011.
High grade apartment buyers suffer
“I lost 200 million dong overnight,” An, who lives in Cau Giay District in Hanoi, complained. The problem is that last year, he purchased to purchase an apartment on Xuan Thuy Road at the price of $2000 per square meter. To date, An has paid 40 percent of the value of the apartment, and he still needs to pay some two billion dong more. However, he could not imagine that the dollar price would increase so sharply. The latest dollar price increase cost him 200 million dong.
An is not alone. As real estate project developers still quote sale prices in dollars, buyers always have to suffer when the dollar price increases. The projects include Dolphin Plaza which has quoted prices at $1920-2000 per square meter, Indochina Plaza $2600-3000 per square meter, Royal City $1900-2350, Sky City Tower $2300-2450 per square meter. Ciputra Luxury’s apartments are selling at $2200-2600 per square meter, Mulberry Lane’s at $1600-2000, Tricon Tower’s $1500-3600, Richland Southern’s $1800-1900 and Eco Park’s at $1250 per square meter.
However, when talking with Dau Tu Chung Khoan’s reporters, representatives from the companies all said their products have quoted prices in Vietnam dong and that the transactions have been taking place as usual. A marketing officer of Indochina Land has affirmed that the company’s operation has been running in a normal track and the managers of the companies have not made any decisions relating to the adjustment of the sale prices.
An officer of Viglacera Land real estate trading floor said that in fact, real estate developers of high end projects are still defining the sale prices in dollars. However, since the current laws do not allow them to quote prices in dollars, they inform the prices in Vietnam dong. There is always a provision in the apartment sale contract which states that in the case of the dong/dollar exchange rate adjustments, the seller has the right to change the sale prices of the products.
House prices will increase
When asked about the possible impacts of the dong/dollar exchange rate adjustments, Nguyen Manh Ha, Director of the Ministry of Construction’s House and Real Estate Market Management Department, said that in the immediate time, the adjustment would not have considerable impacts on the house prices. However, he said in the future, the prices would increase, because houses will be built with imported construction materials which will increase due to higher dollar prices.
Steel mills have raised the sale prices by 200,000-500,000 dong per ton. Meanwhile, the cement price has increased by 60,000 dong per ton.
As for cement enterprises which have a high percentage of loans in dollars and euros, analysts say, the exchange rate adjustment will have negative impacts on them because they will have to pay higher prices to collect dollars and euros to pay bank debts. This will worsen their predicament. Plastics enterprises will also suffer from the exchange rate adjustments, because the input materials are mostly imports.
Construction companies weeping
Meanwhile, construction companies complain that the new dollar prices will make their production costs increase, while they cannot demand higher prices, because contracts have been already been signed with fixed prices.
Nguyen Manh Ha, Director of the Construction Company under the Ministry of National Defense, said that his company has won the bid for a project on building a pre-engineered steel mill in Thai Nguyen. The contract was signed in early January 2011.
“As the cement and steel prices have increased, we may take loss with the contract. If we can well manage, we may break even,” he complained
Not only contractors, but real estate developers are also anxious because of the dollar price increase. Dang Thanh Lam, General Director of Thanh Lam real estate company complained that everything is getting more expensive, from construction materials to labor costs. “With such a high inflation rate and, high interest rates, the real estate market will continue freezing,” he said.
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