There are signals showing that the local real estate market is facing a great deal of difficulties at present. As an insider, are you fully aware of this situation?
Nguyen Anh Tuan: It is undeniable that the difficulties in the current real estate market are enormous. The supply of new products is rather limited compared to the previous years. This situation has come as the result of the strict legal procedures for investors to apply for a new project development. It’s very difficult to get one project approved. Besides, regular inspection work also causes many troubles for investors.
The decline in real estate supply can be seen most obviously in My Dinh area. This is one of the most developed real estate markets in Hanoi. My Dinh is considered as a new centre or a miniature city in the west of Hanoi with all the necessary amenities and utilities, including schools, reservoir parks, synchronous and modern transport infrastructure systems, elevated railway and the almost-completed Pham Van Dong extended road.
In the near future, the area will add to it other entertainment and sport facilities, like the Formula 1 Racetrack, promising a great potential to bolster the area’s real estate price. Besides, My Dinh also has an advantage in terms of being the first choice for foreigners when it comes to buying a property in Hanoi. Properties in the area, as such, have a high level of liquidity, with the value of apartments and houses, and the rental prices, are superior to other places in Hanoi.
The potential is great, but there are not many real estate projects in this area. New projects are almost unavailable, only existing projects from the prior years are now open for reselling. In the future, the supply of real estate in this area will be inadequate, as the land bank is getting scarce. Projects will be forced to relocate further to the outskirts of Hanoi, such as Highway 32 or the communes of Xuan Phuong and Van Canh.
Does insufficient supply mean projects can be easily sold then?
Nguyen Anh Tuan: It is exactly the opposite in fact.
As the economy grows and becomes more stable, the number of rich people has increased rapidly, buyers have become “more discerning” than ever before.
If property developers are to build products at medium quality as they once did in the past, homebuyers will not be interested in. They now demand for something with higher quality. They have over the years gained more experience and understanding of the market and projects. Should investor offer a low standard or no standard project, buyers will become the inspector themselves to scrutinise and evaluate the products, and then decide whether to buy or not.
Therefore, if investors are not truly responsible for their products and considerate towards their customers, their projects will most likely fail. For high-end real estate products in particular, customers even have higher demand for quality as they are those who have the money and social status.
Accordingly, for high-end real estate projects, investors who want to succeed must understand customers’ desires, hence creating a living space and lifestyle in line with the requirements of homebuyers. Customers in this context require synchronous and up-to-date utilities and services, to enable them to enjoy a fast-paced, civilised and modern life.
The space and design of apartments must also be contemporary. In addition to the application of green and energy-saving technologies, apartments must also be integrated with smart technologies as well as equipped with professional building management and operation services, in a bid to provide residents with the most comfortable living conditions.
More importantly, if one project wants to attract customers, it should not follow the success of other projects but differentiate itself from others to stand out. It must have unique and superior features that others do not have.
For one project to thrive, its quality accounts for 80 per cent and the remaining 20 per cent depends on the marketing strategy and the market. Therefore, investors who build quality products will definitely be profitable.
Making a distinction for a project is not always easy for property developers, is it?
Nguyen Anh Tuan: When researching and developing a new project, HD Mon always spends lots of effort to meet the needs of customers. Both the management team and employees work to our full capacity to bring the best possible products to the market.
For example, the Zei project took HD Moon 10 years to do research, planning and construction. The project adheres to all requirements of a high-class property, from location, design, quality of apartments, utility systems to management and operation when residents move in.
The more utilities being incorporated in a project, the higher the selling prices are. Is this the case why the Zei’s units are sold on a higher price level compared to other projects in the area?
Nguyen Anh Tuan: The selling price is also one of the factors that investors have to consider carefully when developing new projects.
From market perspective, comparing projects with one another to determine their price is rather subjective. To consider whether a project has a high or low selling price, buyers must first experience the product themselves, through which they can fully realise its real value.
For the Zei, it definitely has a slightly higher price than other properties in My Dinh area but the investor has well comprehended the situation beforehand and had a stable ground and confidence in the project to register such high prices.
Before announcing the prices, HD Mon had carried out market research thoroughly. The scale of the investment reached $130 million, so if our calculation was wrong, our project would be immediately die. If we offer unsuitable products to the market, no one but the project owner will be the first to suffer the consequence.
Currently, although the Zei has only been opened for sale in a short while, there are already many customers showing their keen interest. On the day the project open for sale, there were some 200 transactions alone sealed, out of the total 800 apartments available for sale. That proved that the products offered by HD Mon are realistic and well received by customers.
Why has HD Mon priced each square metre at the Zei in the range of $1,700 - $2,260, much higher than the $1,300 per square metre at the Mon City?
Nguyen Anh Tuan: The Zei and Mon City are in different segments. Mon City is a mid-end project with small apartments ranging from 52 to 86 square meters that are not accompanied by many utilities. The Zei, on the other hand, is a high-end one with outstanding apartments and utilities.
If HD Mon was to build another Mon City, it would still be well sold, but HD Mon has chosen something more challenging.
Moving on to a high-end segment, meanwhile, would be easier said than done. Pursuing a high-end product is much more difficult than the mid-end or affordable ones. Property developers must put into it more efforts and a competent and capable team of leaders and employees. When the real estate market is facing many difficulties at present, investors must have the guts or the courage to be able to take on the high-end property segment.
The challenges are huge, but it’s just the right time for HD Mon to switch its investment focus on the high-end products, in a bid to meet the needs of the rising number of middle and high income earners in the country, who have the money and taste of high-quality properties.