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CHAPTER I INTRODUCTION Urgency of theme With the unique characteristics of their, housing is a particular product and evaluated based on its own principles and methods for this product In fact, pricing newly-built commercial house at investment, construction and trading house enterprises that still many shortcomings specific issues such as: In 2007, The market has witnessed many housing projects which customers queue to be scrambling to sign up to buy apartments for example: Vista, Sky Garden, Hoang Anh Gia Lai etc in Ho Chi Minh city; or Nam Cuong project on extended Le Van Luong road in Hanoi in 2009; meanwhile, there are plenty of quality housing projects, purchase conditions and equivalent positions, especially some of the projects located adjacent position above projects, it's even on sale earlier but there is little customer interest One of the main reasons leading to above situation is due to the enterprise applied the comparative method newly- build commercial housing, but this method is built on the inconsistency views about newly- build commercial housing, supply and demand relationship and the housing value of its A few Enterprise have also used the results of a regression function when pricing, however, usually remains localized in a region or a boundary line, which is not associated with the typical parameters of the urban structure specific, so can not make important predictor of price variation of c newly- build commercial housing in the size of the whole city So, a question arises: What pricing models that suit newly- build commercial housing and What should be the model for effective application in Vietnam Stemming from these reasons, the author of the thesis has chosen the theme: “Pricing newly-built commercial house at investment, construction and trading house enterprises” for his research projects 1.2 Research Overview 1.2.1 Synthesis of research works related to research subjects 1.2.2 Comments and evaluation of research works 1.2.2.1 Theoretical Foundations Most research works are based on the fundamental basis of the methods, principles and processes underlying the valuation of real estate; 1.2.2.2 Research Methodology Through the research process and learn about the work that shows: Most studies have applied both methods to locate research & quantitative; in which the majority of studies were carried out in-depth research into specific situations, and collecting data through observation techniques to use for regression analysis 1.2.2.3 Contributions and the relation of research works - The basis for determining the price of housing and methods of determining the price of housing is the most important platform as a basis for determining the base price - Scientific studies have shown the complexity of newly- build commercial housing prices, because pricing newly-built commercial house particular and general real estate prices affected by many factors 1.1 - Scientists have shown the process, principles of real estate valuation, however has yet to be processes that and principles of newly- build commercial housing prices 1.2.3 These restrictions & gaps need to continue research - Research has not verified comparisons & research at prices that offer, whether there really perfect fit and with the prices that businesses have come up or not - These research just mentioned aspects and find out the rules for their views in a specific market - Some authors impose its views before executing research, therefore, the research process are oriented standpoint and results from previous studies is the lack of objectivity - The valuation of real estate for newly- build commercial housing not have any research that go into a full research - Pricing newly-built commercial house mainly qualitative experience for pricing - Organizations pricing has yet to be unity - The World showed quantitative models for pricing applications, however, it is only suitable for the world, for the real estate markets have developed high stability, the conditions applied in Vietnam does not yet have a specific research 1.3 The purpose and meaning of the thesis 1.3.1 The purpose of the thesis research Analysis and evaluation of the current state of pricing newly-built commercial house at investment, construction and trading house enterprises, from there, giving solutions and recommendations to complete this work 1.3.2 Meaning of thesis research - Making reference to those who are interested in newly- build commercial housing - Help for Enterprise's managers have a more scientific basis for pricing newly-built commercial house to reference in the process of decision making for the management and trading 1.3.3 Research Questions - What’s pricing newly-built commercial house at investment, construction and trading house enterprises, there problems and inadequacies exist? What causes lead to the problems and shortcomings that exist? - Housing prices have valuation, whether in accordance with market needs and ensure business goals or not? - What're factors affect to pricing of pricing newly-built commercial house at investment, construction and trading house enterprises? - Construction investment and trading house Enterprise, What does it take to complete the job? 1.4 Subjects and scope of research 1.4.1 Research Subjects Pricing work for newly- build commercial housing at investment, construction and trading house enterprises 1.4.2 Scope of the research - Thesis research on newly- build commercial housing at investment, construction and trading house enterprises - Thesis limited in scope in the field of research on newly- build commercial housing at investment, construction and trading house enterprises focused on the period 2008 – 2012 1.5 The research results are expected Based on the research objectives have been set out, the thesis is expected to contribute the following new features: - Summary of factors affecting to newly- build commercial housing from it as a basis for determining the variables for building serves regression - Proposed solutions to improve and resolve the outstanding issues in newly- build commercial housing at investment, construction and trading house enterprises CHAPTER II RATIONALE OF PRICING NEWLY- BUILD COMMERCIAL HOUSING AT INVESTMENT, CONSTRUCTION AND TRADING HOUSE ENTERPRISES 2.1 Pricing newly- build commercial housing at investment, construction and trading house enterprises 2.1.1 The concept of pricing for newly- build commercial housing 2.1.1.1 The concept of commercial housing Article of Government’s Decree No 71/2010/ND-CP date 23 June 2010 specified “Commercial housing investment and construction for sale and leasing demand and market mechanisms by organizations and individuals of all economic sectors; in which, housing investment and construction for sale and leasing will have two basic forms of investment is entirely new construction and the renovation, remodeling and upgrading” (12) 2.1.1.2 The concept of pricing for newly- build commercial housing • The concept of property pricing Property pricing meaning as assessing the value of property in accordance with the market at some point, given time in accordance with the standards of the Vietnamese or international practice • The concept of real Estate pricing Real Estate pricing meaning as estimate the value of real estate in the form of a specific currency for a purpose defined in the specific conditions and on a certain market with the appropriate methods • The concept of house pricing House pricing meaning as the estimated value of a home is determined by a form of currency for the purpose of use has been identified, at a specified time • The concept of pricing for newly- build commercial housing Pricing for newly- build commercial housing may be interpreted as follows: Pricing for newly- build commercial housing as Owner of investment projects in building valuation for sale or lease in a specific, at a specified time based on technical criteria, the nature, the location, size of the current situation there and to follow the market mechanism at the time of pricing So, Pricing for newly- build commercial housing at investment, construction and trading house enterprises may be interpreted as follows: Pricing for newly- build commercial housing at investment, construction and trading house enterprises is using valuation methods at the time of valuation businesses need to meet the business objectives of the enterprise • Time pricing for construction investment and trading house enterprise: Typically, construction investment and trading house enterprise will pricing for newly- build commercial housing in 03 times in project investment process that is: Pricing service for the construction of the project document, pricing at the time of the mobilization of investment capital for the project and the selling price when completing projects - Pricing for newly- build commercial housing for the construction of the project document - Pricing for newly- build commercial housing at the time of the mobilization of investment capital of customer under the regulations - Pricing for newly- build commercial housing at the time of complete frame 2.2.2 The purpose, principles and characteristics of pricing for newly- build commercial housing at investment, construction and trading house enterprises 2.2.2.1 The Purpose: The construction investment and trading house enterprise through pricing to perform their goals That goal could be: To survive during the economic downturn, to earn maximum revenue ahead, to occupy the leading position 2.2.2.2 The principles of pricing for newly- build commercial housing 2.2.2.3 The characteristics of pricing for newly- build commercial housing at investment, construction and trading house enterprises: - Pricing for newly- build commercial housing not only adhere to pricing techniques but also for the purposes of pricing - Newly- build commercial housing is types of assets can not be moved, so the valuation process must have access to the investigation stage, site survey, at the place where the immovable property – subject of pricing - Each newly- build commercial housing is a unique property (at least in terms of location) reflect the profitability difference between them 2.2 Organizational processes and pricing methods of newly- build commercial housing at investment, construction and trading house enterprises 2.2.1 Organizational processes of pricing for newly- build commercial housing at investment, construction and trading house enterprises • Group 1: The Enterprise will be established on the basis of mobilizing the members of the relevant functional departments in the enterprise, after specialized team pricing and price proposals for Enterprise’s leaders to decide • Group 2: Enterprise’s leader will be based on the information provided by the department functions in providing Enterprise to conduct direct pricing and decide on prices for enterprise's projects which are carried out investment • Group 3: Model of organizational processes pricing for newly- build commercial housing, this group be done as group 2, however, the difference of this group as before Enterprise’s leader pricing decisions, enterprise will rent prices evaluation furniture conduct the proposed pricing to the leadership Team of Enterprise • Group 4: For this group, the organization of business valuation organization renting the entire independent pricer to pricing, Enterprise based on price of independent pricer to decide on pricing 2.2.2 Pricing methods of newly- build commercial housing at investment, construction and trading house enterprises Current, pricing methods of newly- build commercial housing in Vietnam still the most commonly used as comparative method and cost method In the framework of the thesis, author will analyze three basic methods are comparative method; cost method and method investments Two other methods are profits and surpluses are generated by the three methods above method 2.2.3 Hedonic method a Rationale Hedonic is used to describe “The proportion of the relative importance of the different components in comparison with other components to create performance indicators on capacity and desired” ( Goodman, 1998:292 (59) Rosen (1974: 34) (87) b Theoretical background hedonic pricing model In a study in 2003, Malpezzi (78) has had a profound statement about the development of theoretical hedonic pricing model He pointed out, hedonic model is an estimate of the value of many individual elements Hedonic equation not only measure the factors that influence preference measure but buyers how to impact house price c The early history of the hedonic model d Facts about the research & application of hedonic models e The components of hedonic models Since the process of understanding the above research shows, the majority of studies applying hedonic models have focused on factors affecting housing prices as: The location and structure of the house, neighborhoods and their properties Here author will clarify on this research • The first: Location Property • The second: Structural Property • The third: Residential Property 2.3 Factors affecting pricing in newly- build commercial housing Objectives and production costs of Enterprise; Psychological factors of the customer to accept price; organizational methods and pricing procedures in newly- build commercial housing; Selecting the appropriate pricing methods , information systems pricing; workforce; elements of natural conditions; regulatory environment - mechanism and policy; Economic environment; operation of the real estate market; development trends of the real estate market, pricing perceptions of the factors that affect price of newly- build commercial housing CHAPTER III RESEARCH METHODOLOGY 3.1 Theoretical framework and research approach Based on the overview of the research in pricing for newly- build commercial housing at investment, construction and trading house enterprises to identify research problems, making the dissertation research framework as follows: 3.1.1 Theoretical framework Diagram 3.1: Conceptual framework for research on pricing for newly- build commercial housing 3.1.2 Framework and research approach Content of pricing for newly- build commercial housing - Characteristics and principles of pricing for newly- build commercial housing - General model of pricing organization of newly- build commercial housing - Process pricing framework of newlybuild commercial housing - Pricing method of newlybuild commercial housing - factors affecting pricing for newlybuild commercial housing Organization for pricing for newly- build commercial housing at investment, construction and trading house enterprises - Policy & bases of enterprise in pricing for newly- build commercial housing - The basic organizational model has been implemented in the pricing process by construction investment and trading house enterprise - The process of pricing newly- build commercial housing has been implemented by Enterprises - The level of use and effectiveness of the valuation methods used by the enterprise - Policies, methods and basis after adjusting pricing newly- build commercial housing The objective of the work completed pricing for newly- build commercial housing at investment, construction and trading house enterprises - Selecting and building organizational model valuation in accordance with enterprise - Adjust & build process for pricing newlybuild commercial housing to ensure scientific and minimize costs - Selecting and applying for pricing methods of newlybuild commercial housing consistent with the characteristics of business and scientific grounds, flexibility and high feasibility - The conditions and personnel; legally database information to respond & perfect target Research overview and consulted experts in the field of real estate pricing Situation analysis of pricing for newly- build commercial housing at investment, construction and trading house enterprises Assessment of the status of pricing for newly- build commercial housing at investment, construction and trading house enterprises Identifying a research subjects Interviews and opinions of experts assessed property In-depth interview leader; appraiser of pricing for newly- build commercial housing at investment, construction and trading house enterprises Interview clients to identify the factors affecting to pricing of newly- build commercial housing Investigation by questionnaire for customers who have purchased newly- build commercial housing in projects belong to Hanoi city Proposed solutions to improve pricing work of newly- build commercial housing at investment, construction and trading house enterprises Diagram 3.3 : Research Process of thesis 3.3 Research Methodology To solve the problem in accordance with the study research objectives, the thesis uses the following main methods: 3.3.1 Methods of analysis, comparison and synthesis 3.3.2 Experts Methodology 3.3.3 In-depth interview method 3.3.4 Quantitative method Diagram 3.2: Research framework on pricing for newly- build commercial housing to complete the pricing work of newly- build commercial housing at investment, construction and trading house enterprises 3.2 Research Process To accomplish the research objectives, Thesis research conducted in accordance with the following (Diagram 1.2): Framing theory of pricing for newly- build commercial housing CHAPTER ACTUAL STATE OF PRICING NEWLY-BUILT COMMERCIAL HOUSE AT INVESTMENT, CONSTRUCTION AND TRADING HOUSE ENTERPRISES 4.1 Overview of housing development in Vietnam over the past years 4.1.1 Results of housing development over the past years With the polices that the State has promulgated over the past years, the sector of housing has obtained encouraging results Such results can be evaluated in the following aspects: - About number of houses and system of urban areas - Growth of number of houses nationwide - About system of urban areas nationwide - About growth of number of houses in urban and rural areas 4.1.2 Growth of area of house - In the national boundary - Comparison between urban and rural areas 4.1.3 House quality and flat size 4.1.4 About housing finance 4.1.5 Scale, capacity of enterprises taking part in housing development The number of real estate enterprises increases by 20-50% annually By 2012, the number of real estate enterprises has increased by times compared with that in 2002 4.2 Actual state of pricing newly-built commercial house at investment, construction and trading house enterprises 4.2.1 Actual state of commercial house prices in Vietnam
Actual state of prices of commercial house for sales
For the market of flats - On Ho Chi Minh city market - On Ha Noi city market
Actual state of prices of commercial house for lease 4.2.2 Actual state of policy and basis for pricing newly-built commercial house at investment, construction and trading house enterprises 4.2.2.1 Policies of enterprises of house pricing Like other trading enterprises, when pricing newly-built commercial house, the enterprises have considered the following policy viewpoints on pricing house which is determining prices for new products, determining prices with discount and compensation 4.2.2.2 Basis for determining house prices of investment, construction and trading house enterprises - Construction unit price - Framework of land use right transfer price - Interest rate for bank loan - Relationship of housing supply and demand 4.2.3 Actual state of organizational model of pricing commercial house at investment and trading house enterprises The actual research shows that no enterprise acquires a complete organizational model of pricing The majority of enterprises only establish pricing groups when implementing projects and then such groups dissolve after determining selling prices for those projects 4.2.3 Actual state of organizational process of pricing commercial house at investment and trading house enterprises The actual research and learning about pricing at investment, construction and trading house enterprises show that all of the groups of process illustrated in section 3.2.3.1 of the thesis are applied However, the number of enterprises applying the groups of process are different and so as the degree of thorough application of such process The degree of application of each process group of enterprises is expressed by the investigation data as: Table 4.3: Ratio of investment, construction and trading house enterprises’ application of groups of newly-built commercial house pricing process in 2012 Number of enterprises Ratio of enterprises No Group of process applying applying (%) Group of process 48 58.54 Group of process 17 20.73 Group of process 6.10 Group of process 12 14.63 Total 82 100.00 Source: Statistics from the survey and investigation results of the thesis 4.2.3.1 Actual state of investment, construction and trading house enterprises applying group of process The variation of prices of newly-built commercial house at different time of pricing in comparison with the average transaction prices on the market is illustrated through the following table: Table 4.4: Prices set in process at different times of investment, construction and trading house enterprises in a number of projects Selling price at Price at the Price at the time the time finishing time of record allowed selling No Name of project project (million (million dong/m2) dong/m ) (million dong/m2) Apartment M3-4 – Nguyen 27.5 32.5 35.5 Chi Thanh Geleximco apartment 12.5 16.6 17.0 An Sinh apartment 5.5 7.5 17.5 Anh Binh apartment – Tan 8.7 17.1 15.1 10 Phu district TWIN tower apartment – Binh Tan Vuon Xuan apartment – Nguyen Chi Thanh 6.5 15.8 13.9 26.5 31.5 31.5 Source: the survey and investigation results of the thesis 4.2.3.2 Actual state of construction investment and trading house enterprise application processes in groups The variation of prices of newly-built commercial house at different time of pricing in comparison with the average transaction prices on the market is illustrated through the following table: Table 4.5: Prices set in process at different times of investment, construction and trading house enterprises in a number of projects No Name of project Le Van Luong apartment – Hacinco Apartment N07 B1Dich Vong urban area Era apartment – Tan Binh district Hoang Anh GL apartment – Da Nang Apartment CT2 Ngo Thi Nham – HD Apartment N4 A – B Le Van Luong Price at the Price at the Selling price at the time of record time allowed time finishing project selling (million (million dong/m2) (million dong/m2) dong/m2) 7.5 13.5 16.0 26.5 24.5 25.6 5.2 17.5 14.0 4.8 15.5 11.9 10.5 15.0 17.0 9.7 17.5 21.5 Source: the survey and investigation results of the thesis 4.2.3.3 Actual state of construction investment and trading house enterprise application processes in groups The variation of prices of newly-built commercial house at different time of pricing in comparison with the average transaction prices on the market is illustrated through the following table: 11 Table 4.6: Prices set in process at different times of investment, construction and trading house enterprises in a number of projects Price at the Selling price at Price at the time allowed the time time of record selling finishing project No Name of project (million (million (million dong/m2) dong/m2) dong/m2) Hoa Phat apartment – Giai 26.5 31.5 32.0 Phong road Apartment 17 CT – Vinaconex 22.5 29.5 31.0 Vimeco apartment – Hoang 26.0 33.0 33.0 Minh Giam Petro Landmark apartment – 17.5 22.5 21.5 District Apartment 143 Doc Ngu 25.5 35.5 35.5 Source: the survey and investigation results of the thesis 4.2.4 Current status of target and pricing methods of commercial housing at investment, construction and trading house enterprises 4.2.4.1 Current status of target price of commercial housing at investment, construction and trading house enterprises In fact research shows that target enterprise valuation of differences in each enterprise and it may change at different times depending on the actual conditions of trading enterprises 4.2.4.2 Current status of pricing methods of newly- build commercial housing at investment, construction and trading house enterprises From practical research activities in the construction investment and trading house enterprise show that, most enterprise are using the cost method to calculate price, Besides, there are a number of enterprises using the formula for determining the price in accordance with Circular 15/2009/TT-BXD issued by the Ministry of Construction on 30 June 2009
Actual expense method to calculate price for newly- build commercial housing at investment, construction and trading house enterprises Selling price of commercial housing is defined by the formula: Selling price = Overall cost price + Expected profit + VAT Pricing method for newly-built commercial house applied by investment, construction and trading house enterprises can be described generally in a specific project as: A/ Information of the project: - Name of the project : Betexco II Apartment - Area of the land : 5,930 m2 - Total area for building : 5,367 m2 12 - Number of story : 30-story - Total area of floorage : 88,038 m2 - Total number of flats : 400 flats The building is designed and built with 30 stories and 02 basements The service zone is from the 1st floor to the 5th floor with floorage area on each floor of 3,512m2 The area from the 6th floor to the 30th floor is divided into 02 sections The floorage area of each section of 1,200 m2 is used for living (apartment block) Each floor of the section is allocated 08 independent self-contained flats (including sitting room, dining room, kitchen, bed rooms, bathrooms, logia) which are designed under 02 typical design patterns with the area of 131 m2 and 120 m2 B/ Determining the total cost of the project: • Assumed conditions to calculate the total cost of the project: - The unit price to calculate the total investment for the project is taken in accordance with the works of the same scale, characteristics which have been built This unit price does not include VAT - The land amount of the investment project to build the apartment is calculated in accordance with Decision No 4352/QD-UBND of Ha Noi city dated 16 September 2011; accordingly, the value of land use right is equivalent to VND 29,146,000/m2 and the land rental VND 8,400,000/ m2 - The interest rate for bank loan is 19%/year - Corporate income tax is 25% on taxable profits, VAT 10% on total net revenue - There is no abnormal change in the socio-economic conditions that affect the project such as earthquake, war, etc • Calculating total investment: + Costs of construction and equipment + Other costs, costs of project management and other consultancy costs • Total investment of the project: Table 4.8: Total investment cost of BetexcoII Project No Content Method of calculation Amount (Dong) Construction cost Appendix Table 638,803,728,000 Equipment cost Appendix Table 59,865,840,000 Land cost Appendix Table 121,117,213,000 Project management cost, 10% x (CPXL+CPTB) 69,866,956,800 construction investment consultancy cost, and other costs Interest for loans during 19%/ year 15,034,351,739 construction Provision fees 19.422% x (CPXL+CPTB+4) 149,265,163,847 Total 1,053,953,253,386 Source: Betexco Investment and Construction company C/ Determining the selling price of flats and commercial zone: - Allocation of cost: Table 4.8 indicates that the apartment with an area of 120m2, 131 m2 apartment and the commercial zone is allocated with the total investment of VND 399.7 billion, VND 436.4 billion and VND 217.7 billion, respectively - Determining the unit price on each m2 for each area subject to cost allocation: For the 120m2 flats with the total area of 24,000m2, the pre-tax unit price on each m2 is VND 16.657 million and the after-tax unit price is VND 18.33 million; similarly for the 131m2 flats with the total area of 26,200m2, the pre-tax unit price on each m2 is VND 16.657 million and the after-tax unit price is VND 18.33 million; for the service zone with the total area of 13,071m2, the pre-tax unit price on each m2 is VND 16.657 million and after-tax unit price is VND 18.33 million - Determining the selling price of flats and commercial zone on the market: In this project, the enterprise chooses three levels of interest rates to calculate the selling price which are 10%, 14% and 19% With such interest rates, the selling prices of correlative flats are VND 18,400,000/m2, VND 19,083,000/ m2 and VND 19,920,000/ m2 Based on the above factors, the enterprise has decided the average selling prices of the flats and the commercial zone with details as: + Commercial zone: average selling price for m2 is VND 23,000,000/ m2; + Flats: average selling price for m2 is VND 20,500,000/ m2;
The actual state of application of the method in accordance with guidance in Circular No 15/2009/TT-BXD issued by Ministry of Construction on 30 June 2009 to calculate the price of newly-built commercial house at the investment and trading enterprises Specifically, the pricing method for commercial house is used by enterprises as follows: • Pricing method for commercial house: - In case: Sell house by down payment Formula to determine: Td + L + Bt Gb = x K (4.2.1) S In which: Gb: Selling price of 1m2 of flat use (Dong/ m2); Td: Total construction investment cost of the project; L: Profit of the project (Dong); Bt: Works maintenance cost for the mutual property (Dong); S: Total area used of the flats of the project; K: Floor coefficient on the principle of capital preservation as illustrated in this example: A 5-story apartment can be allocated as: K1=1.2; K2=1.1; K3=1.0; K4=0.9; K5=0.8 - In case: Sell house by installment payment 13 14 Applicable on the commercial house, the ratio of first payment can change subject to agreement between the buyer and the project investor The term of installment payment can also change flexibly in accordance with the financial condition of the buyer • Method of determining rental of commercial house Formula to determine: Vd + L + Ql + Bt Tdv Gt = x K (4.2.2) 12 x S In which: Gt: Rental of 1m2 of flat use in month (Dong/ m2/month); Vd: Construction investment cost of the project allocated annually on the principle of capital preservation (Dong/ year); Formula to determine Vd: Td x r(1+r)n Vd = (4.2.3) (1+r)n-1 Td: Total construction investment cost of the project; r: Interest rate of invested capital preservation (% year); n: The number of years to collect capital depending on specific conditions of each project, minimum 20 years; L: Profit of the project (Dong/ year); Ql: Annual operation cost (Dong/ year); Bt: Works maintenance cost per year (Dong/ year); Tdv: Revenues from operating services in the apartment in the year such as vehicle keeping service, canteen service, revenues (if any) from sports events (Dong/ year); S: Total area for use of the project’s flats for rent (m2); K: Floor coefficient Rental price is determined by the formula (4.2.4) and the rental price shall be lower than that in formula (4.2.2) Vd + Ql + Bt - Tdv Gt = x K (4.2.4) 12 x S Method of determining price of renting and buying house Formula to determine: A x (Vd + L) x K + Ql + Bt - Tdv Gtm = x K (4.2.5) 12 x S In which: Gtm: Price of renting and buying 1m2 of flat use by month (Dong/m2/month); A: Coefficient illustrating the ratio between the remaining value of the flat (after subtracting the first payment) and the initial value of the flat (A