Cost optimization, a brain-wrenching problem for real estate businesses

Optimizing costs is one of the solutions that real estate businesses must "think hard" about to reduce costs.

Costs increase, house prices increase, businesses worry about difficult sales

In the strategy to anticipate the new growth cycle, Ms. Nguyen Thanh Huong, Investment Director of Nam Long Company, said that the laws taking effect from August 1, 2024 have created a flexible approach for businesses, including project acquisition, land use conversion, M&A and auction participation.

However, participating in land auctions is posing a challenge in terms of input costs, causing housing prices to increase, affecting the accessibility of home buyers. Businesses must carefully consider to offer reasonable prices, meeting the needs of buyers while still ensuring profits.

“Auctioning land increases the input costs of investors. This is a difficult problem, especially in the context of land prices and other costs increasing,” Ms. Huong said, adding that real estate prices are inevitably on the rise due to increasingly high input costs.

Many investors are wondering whether they should invest in the project when input costs increase, because in addition to factors that can be proactively cut such as management costs, investors must certainly ensure profits to maintain the apparatus and develop in the future.

To reduce housing price pressure and meet real housing needs, it is necessary to expand urban development to suburban areas.

“In the context of rising costs, investors only have two options. One is to do it if it can be sold, or two is not to do it. Doing it must be profitable and the business must develop, but when costs are too high, how can we do it?”, Ms. Huong said.

The market report recently released by CBRE Vietnam also confirmed that real estate prices in Ho Chi Minh City will continue the upward trend of 2024, in the context of insignificant improvement in housing supply, the gap between segments is still very large. In particular, the City is expected to have only 9,000 more apartments and 2,000 townhouses, 83% of which are high-end and luxury segments with prices above 60 million VND/m2.

Mr. Le Huu Nghia, General Director of Le Thanh Company, said that the real estate market in Ho Chi Minh City is facing a major problem: the imbalance between market segments. While the demand for housing for middle- and low-income people accounts for the majority, most resources are concentrated in high-end projects - which have limited demand.

Mr. Nghia said that real estate prices in Ho Chi Minh City currently fluctuate at 45 - 50 million VND/m2, equivalent to about 3 billion VND for a 60 m2 apartment.

“Land prices and financing costs play a big role in pushing up housing prices. In particular, borrowing costs and project delays significantly increase pressure on prices,” said Mr. Nghia.

Sharing the same view, Mr. Tran Thanh Hai, Head of VinaLiving Investment Department (under VinaCapital) said that not only this year, but also in the next one or two years, housing prices will continue to increase when the new land price list is applied. Enterprises themselves will also be under no small amount of pressure when land prices increase sharply, along with land use costs that investors must pay. These factors will push the final selling price to a level that is difficult to access.

How to reduce house price?

The real estate market entered 2025 with many new growth expectations, but speaking to reporters from Dau Tu Newspaper, the leader of a real estate company in Ho Chi Minh City said that the market is still suffering many injuries and market confidence is only gradually recovering. As for businesses, many companies are still facing difficulties due to legal issues, large inventories and disrupted cash flow.

Not to mention, the implementation of new projects as well as handling old backlog issues still face obstacles, leading to increased costs, and the longer the legal waiting time, the higher the costs.

This person believes that businesses must cooperate extensively and increase M&A transactions to attract new capital. The most important thing is how to resolve legal problems quickly and effectively, reducing costs. Businesses must also choose the right market, the right segment and target the right potential customers, balancing investment costs and reasonable profits to have real houses, real real estate and its true value.

Mr. Le Hoang Chau, Chairman of the Ho Chi Minh City Real Estate Association, said that in 2024, for the first time, the high-end housing segment will dominate the entire Ho Chi Minh City real estate market and currently, there is no longer a supply of mid-range and affordable housing in commercial housing projects. This reality further distorts the housing product structure in the Ho Chi Minh City real estate market.

To reduce housing prices, Mr. Chau said, it is necessary to increase housing supply, especially affordable housing. But to increase supply, more than 148 projects that are stuck and have backlogs must be resolved. “HCMC and businesses need to increase housing products, especially affordable housing products. At the same time, if 1 million social housing units are successfully implemented, it will reduce housing prices,” Mr. Chau said.

From another perspective, Ms. Duong Thuy Dung, CEO of CBRE Vietnam, said that to reduce housing price pressure and meet real housing needs, it is necessary to expand urban development to suburban areas. This requires synchronous investment in infrastructure such as transportation systems, metro, bridges and roads, to ensure convenient connection between the suburbs and the city center.

However, in Ho Chi Minh City, the development of suburban areas such as Cu Chi or Nha Be still faces many obstacles due to the lack of infrastructure connection. To improve, the government needs to prioritize investment in beltways and expressways, thereby creating conditions for the development of land funds at reasonable prices for commercial housing.

Source: https://baodautu.vn/batdongsan/toi-uu-chi-phi-bai-toan-can-nao-cua-doanh-nghiep-dia-oc-d240602.html