Vietnam: building booms as construction costs drop

Vietnam: building booms as construction costs drop
Published: 10 November 2008

A building boom is taking place throughout Vietnam as contractors take advantage of falling prices for materials to complete delayed building projects.

The boom is aided by falling interest rates and a call by the State Bank for all banks to give priority to real-estate projects that are feasible.

The building and real-estate industries are now expected to revive from a long slump and keep busy for at least a year.

Buyers have also shown renewed interest as the price per square metre of construction falls by 10 USD or more, creating more stability in the real-estate market.

The cost of steel, cement, bricks and many other building materials is falling steadily as the world economic recession bites harder.

The boom is aided by falling interest rates and a call by the State Bank for all banks to give priority to real-estate projects that are feasible.

The building and real-estate industries are now expected to revive from a long slump and keep busy for at least a year.

Buyers have also shown renewed interest as the price per square metre of construction falls by 10 USD or more, creating more stability in the real-estate market.

The cost of steel, cement, bricks and many other building materials is falling steadily as the world economic recession bites harder.

In September, the price of steel was 16 million VND (1,000 USD), 3 million VND (180 USD) a tonne lower than in July.

And at the beginning of this month, the price fell to 14 million VND (870 USD) per tonne.

At Van Phu residential area in Hanoi , which is being built by Quang Ninh Construction Investments and the House Trading Joint Stock Company, construction prices being quoted have fallen twice in a month. In September, as the steel price fell to 16 million VND, the price buyers paid for one square metre of house was cut from 3.1 million VND (180 USD) to 2.8 million VND (170 USD).

The price was again reduced to 2.6 million VND (170 USD) as the steel price fell to 14 million VND (870 USD) in October.

The price of bricks has also started to fall after trebling in just one year from 380 VND to 1,200 VND each.

At Van Phu, 11 contractors have sped up construction to ensure the work is completed within the agreed contract period, according to Ta Huu Long, deputy director of Quang Ninh Constructions and House Trading.

Work by other contractors at Van Khe and Sa La residential areas in Hanoi is also zooming ahead.

The Vietnamese real-estate market is expected to become busy, even hectic, by the end of next year.

“This is the best chance for contractors to speed up work,” said Nguyen Quoc Hiep, deputy chairman of the Vietnam Association of Contractors.

And recently announced higher costs for power and water are also bound to have an effect if and when they are introduced.

Another element that could dampen the boom slightly will be a national increase in wages and salaries on January 1 to cope with higher consumer prices.

However, the rises will not be as burdensome as the 35 to 40 percent increases in workers’ wages in 2007-2008.

But, everything taken into consideration, now seems the best time for contractors to make a move.

(Source: VNA)