Doctoral dissertation: Pricing newly-built commercial house at investment, constru ction and trading house enterprises

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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.

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Nội dung Text: Doctoral dissertation: Pricing newly-built commercial house at investment, constru ction and trading house enterprises

CHAPTER I. INTRODUCTION - Scientists have shown the process, principles of real estate valuation, however has 1.1. Urgency of theme yet to be processes that and principles of newly- build commercial housing prices. With the unique characteristics of their, housing is a particular product and evaluated 1.2.3 These restrictions & gaps need to continue research based on its own principles and methods for this product. In fact, pricing newly-built - Research has not verified comparisons & research at prices that offer, whether there commercial house at investment, construction and trading house enterprises that still many really perfect fit and with the prices that businesses have come up or not. shortcomings specific issues such as: In 2007, The market has witnessed many housing - These research just mentioned aspects and find out the rules for their views in a projects which customers queue to be scrambling to sign up to buy apartments for example: specific market. Vista, Sky Garden, Hoang Anh Gia Lai etc in Ho Chi Minh city; or Nam Cuong project on - Some authors impose its views before executing research, therefore, the research extended Le Van Luong road in Hanoi in 2009; meanwhile, there are plenty of quality process are oriented standpoint and results from previous studies is the lack of objectivity. housing projects, purchase conditions and equivalent positions, especially some of the - The valuation of real estate for newly- build commercial housing not have any projects located adjacent position above projects, it's even on sale earlier but there is little research that go into a full research. customer interest. - Pricing newly-built commercial house mainly qualitative experience for pricing. 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 - Organizations pricing has yet to be unity. inconsistency views about newly- build commercial housing, supply and demand - The World showed quantitative models for pricing applications, however, it is only relationship and the housing value of its. A few Enterprise have also used the results of a suitable for the world, for the real estate markets have developed high stability, the regression function when pricing, however, usually remains localized in a region or a conditions applied in Vietnam does not yet have a specific research. boundary line, which is not associated with the typical parameters of the urban structure 1.3. The purpose and meaning of the thesis specific, so can not make important predictor of price variation of c newly- build 1.3.1. The purpose of the thesis research commercial housing in the size of the whole city. So, a question arises: What pricing models Analysis and evaluation of the current state of pricing newly-built commercial house that suit newly- build commercial housing and What should be the model for effective at investment, construction and trading house enterprises, from there, giving solutions and application in Vietnam. recommendations to complete this work. Stemming from these reasons, the author of the thesis has chosen the theme: “Pricing 1.3.2. Meaning of thesis research newly-built commercial house at investment, construction and trading house enterprises” for his research projects. - Making reference to those who are interested in newly- build commercial housing. 1.2. Research Overview - 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 1.2.1 Synthesis of research works related to research subjects trading. 1.2.2 Comments and evaluation of research works 1.3.3 Research Questions 1.2.2.1. Theoretical Foundations - What’s pricing newly-built commercial house at investment, construction and Most research works are based on the fundamental basis of the methods, principles trading house enterprises, there problems and inadequacies exist? What causes lead to the and processes underlying the valuation of real estate; problems and shortcomings that exist? 1.2.2.2. Research Methodology - Housing prices have valuation, whether in accordance with market needs and ensure Through the research process and learn about the work that shows: Most studies have business goals or not? applied both methods to locate research & quantitative; in which the majority of studies - What're factors affect to pricing of pricing newly-built commercial house at were carried out in-depth research into specific situations, and collecting data through investment, construction and trading house enterprises? observation techniques to use for regression analysis. - Construction investment and trading house Enterprise, What does it take to 1.2.2.3. Contributions and the relation of research works complete the job? - The basis for determining the price of housing and methods of determining the price 1.4. Subjects and scope of research of housing is the most important platform as a basis for determining the base price. 1.4.1. Research Subjects - Scientific studies have shown the complexity of newly- build commercial housing Pricing work for newly- build commercial housing at investment, construction and prices, because pricing newly-built commercial house particular and general real estate trading house enterprises. prices affected by many factors. 1.4.2. Scope of the research 1 2
- Thesis research on newly- build commercial housing at investment, construction Pricing for newly- build commercial housing may be interpreted as follows: Pricing and trading house enterprises for newly- build commercial housing as Owner of investment projects in building - Thesis limited in scope in the field of research on newly- build commercial housing valuation for sale or lease in a specific, at a specified time based on technical at investment, construction and trading house enterprises focused on the period 2008 – criteria, the nature, the location, size of the current situation there and to follow the 2012. market mechanism at the time of pricing. 1.5. The research results are expected So, Pricing for newly- build commercial housing at investment, construction and Based on the research objectives have been set out, the thesis is expected to contribute trading house enterprises may be interpreted as follows: Pricing for newly- build the following new features: commercial housing at investment, construction and trading house enterprises is using valuation methods at the time of valuation businesses need to meet the business - Summary of factors affecting to newly- build commercial housing from it as a basis for objectives of the enterprise. determining the variables for building serves regression. - Proposed solutions to improve and resolve the outstanding issues in newly- build • Time pricing for construction investment and trading house enterprise: commercial housing at investment, construction and trading house enterprises. 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 CHAPTER II. RATIONALE OF PRICING NEWLY- BUILD COMMERCIAL mobilization of investment capital for the project and the selling price when HOUSING AT INVESTMENT, CONSTRUCTION AND TRADING HOUSE completing projects. ENTERPRISES - Pricing for newly- build commercial housing for the construction of the project 2.1. Pricing newly- build commercial housing at investment, construction and trading house document. enterprises. - Pricing for newly- build commercial housing at the time of the mobilization of 2.1.1. The concept of pricing for newly- build commercial housing investment capital of customer under the regulations. 2.1.1.1. The concept of commercial housing - Pricing for newly- build commercial housing at the time of complete frame. Article 3 of Government’s Decree No. 71/2010/ND-CP date 23 June 2010 specified 2.2.2. The purpose, principles and characteristics of pricing for newly- build commercial “Commercial housing investment and construction for sale and leasing demand and market housing at investment, construction and trading house enterprises mechanisms by organizations and individuals of all economic sectors; in which, housing 2.2.2.1. The Purpose: investment and construction for sale and leasing will have two basic forms of investment is The construction investment and trading house enterprise through pricing to perform entirely new construction and the renovation, remodeling and upgrading” (12). their goals. That goal could be: To survive during the economic downturn, to earn 2.1.1.2. The concept of pricing for newly- build commercial housing maximum revenue ahead, to occupy the leading position. • The concept of property pricing 2.2.2.2. The principles of pricing for newly- build commercial housing Property pricing meaning as assessing the value of property in accordance with the 2.2.2.3. The characteristics of pricing for newly- build commercial housing at investment, market at some point, given time in accordance with the standards of the Vietnamese construction and trading house enterprises: or international practice. - Pricing for newly- build commercial housing not only adhere to pricing techniques but also for the purposes of pricing. • The concept of real Estate pricing - Newly- build commercial housing is types of assets can not be moved, so the Real Estate pricing meaning as estimate the value of real estate in the form of a valuation process must have access to the investigation stage, site survey, at the place where specific currency for a purpose defined in the specific conditions and on a certain the immovable property – subject of pricing. market with the appropriate methods. - Each newly- build commercial housing is a unique property (at least in terms of • The concept of house pricing location) reflect the profitability difference between them. House pricing meaning as the estimated value of a home is determined by a form of 2.2 Organizational processes and pricing methods of newly- build commercial housing currency for the purpose of use has been identified, at a specified time. at investment, construction and trading house enterprises • The concept of pricing for newly- build commercial housing 2.2.1. Organizational processes of pricing for newly- build commercial housing at investment, construction and trading house enterprises. 3 4
• Group 1: and structure of the house, neighborhoods and their properties. Here author will clarify on The Enterprise will be established on the basis of mobilizing the members of the this research. relevant functional departments in the enterprise, after specialized team pricing and price • The first: Location Property proposals for Enterprise’s leaders to decide. • The second: Structural Property • Group 2: • The third: Residential Property Enterprise’s leader will be based on the information provided by the department 2.3 Factors affecting pricing in newly- build commercial housing functions in providing Enterprise to conduct direct pricing and decide on prices for Objectives and production costs of Enterprise; Psychological factors of the customer to enterprise's projects which are carried out investment. accept price; organizational methods and pricing procedures in newly- build commercial • Group 3: housing; Selecting the appropriate pricing methods , information systems pricing; Model of organizational processes pricing for newly- build commercial housing, this workforce; elements of natural conditions; regulatory environment - mechanism and policy; group be done as group 2, however, the difference of this group as before Enterprise’s Economic environment; operation of the real estate market; development trends of the real leader pricing decisions, enterprise will rent prices evaluation furniture conduct the estate market, pricing perceptions of the factors that affect price of newly- build commercial proposed pricing to the leadership Team of Enterprise. housing. • Group 4: For this group, the organization of business valuation organization renting the entire CHAPTER III. RESEARCH METHODOLOGY independent pricer to pricing, Enterprise based on price of independent pricer to decide on pricing. 3.1 Theoretical framework and research approach 2.2.2. Pricing methods of newly- build commercial housing at investment, construction Based on the overview of the research in pricing for newly- build commercial and trading house enterprises. housing at investment, construction and trading house enterprises to identify research Current, pricing methods of newly- build commercial housing in Vietnam still the problems, making the dissertation research framework as follows: 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 3.1.1 Theoretical framework 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 Diagram 3.1: Conceptual framework for research on pricing for newly- build applying hedonic models have focused on factors affecting housing prices as: The location commercial housing 5 6
3.1.2 Framework and research approach Research overview and consulted Identifying a Framing theory of pricing experts in the field of real estate research subjects for newly- build pricing Content of pricing Organization for pricing The objective of the work commercial housing for newly- build for newly- build completed pricing for commercial commercial housing at newly- build commercial housing investment, construction housing at investment, Situation analysis of and trading house construction and trading pricing for newly- build Interviews and opinions of experts assessed enterprises house enterprises commercial housing at property. In-depth interview leader; appraiser of investment, construction pricing for newly- build commercial housing at - Characteristics and - Policy & bases of - Selecting and building and trading house investment, construction and trading house principles of pricing enterprise in pricing for organizational model enterprises. enterprises. for newly- build newly- build commercial valuation in accordance Interview clients to identify the factors affecting to commercial housing housing. with enterprise. pricing of newly- build commercial housing. - General model of - The basic organizational - Adjust & build process for Assessment of the status of pricing for newly- build commercial housing at Investigation by questionnaire for customers who pricing organization model has been pricing newly- build investment, construction and trading have purchased newly- build commercial housing in of newly- build implemented in the pricing commercial housing to house enterprises. projects belong to Hanoi city. commercial housing process by construction ensure scientific and - Process pricing investment and trading minimize costs. framework of house enterprise. - Selecting and applying for Proposed solutions to improve pricing work of newly- build commercial housing at investment, newly- build - The process of pricing pricing methods of newly- construction and trading house enterprises. commercial housing newly- build commercial build commercial housing - Pricing method of housing has been consistent with the Diagram 3.3 : Research Process of thesis newly- build implemented by Enterprises. characteristics of business commercial housing - The level of use and and scientific grounds, flexibility and high 3.3. Research Methodology - factors affecting effectiveness of the valuation methods used by feasibility. To solve the problem in accordance with the study research objectives, the thesis uses pricing for newly- the following main methods: build commercial the enterprise. - The conditions and housing. - Policies, methods and personnel; legally database 3.3.1. Methods of analysis, comparison and synthesis basis after adjusting pricing information to respond & 3.3.2. Experts Methodology newly- build commercial perfect target. 3.3.3. In-depth interview method housing. 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): 7 8
CHAPTER 4. ACTUAL STATE OF PRICING NEWLY-BUILT COMMERCIAL 4.2.3. Actual state of organizational model of pricing commercial house at investment and HOUSE AT INVESTMENT, CONSTRUCTION AND TRADING HOUSE trading house enterprises ENTERPRISES The actual research shows that no enterprise acquires a complete organizational model of pricing. The majority of enterprises only establish pricing groups when 4.1. Overview of housing development in Vietnam over the past years implementing projects and then such groups dissolve after determining selling prices for 4.1.1. Results of housing development over the past years those projects. With the polices that the State has promulgated over the past years, the sector of housing has 4.2.3. Actual state of organizational process of pricing commercial house at investment obtained encouraging results. Such results can be evaluated in the following aspects: and trading house enterprises - About number of houses and system of urban areas The actual research and learning about pricing at investment, construction and trading - Growth of number of houses nationwide house enterprises show that all of the 4 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 - About system of urban areas nationwide different and so as the degree of thorough application of such process. The degree of - About growth of number of houses in urban and rural areas application of each process group of enterprises is expressed by the investigation data as: 4.1.2. Growth of area of house Table 4.3: Ratio of investment, construction and trading house enterprises’ - In the national boundary application of groups of newly-built commercial house pricing process in 2012 - Comparison between urban and rural areas Number of enterprises Ratio of enterprises 4.1.3. House quality and flat size No Group of process applying applying (%) 4.1.4. About housing finance 1 Group of process 1 48 58.54 4.1.5. Scale, capacity of enterprises taking part in housing development 2 Group of process 2 17 20.73 The number of real estate enterprises increases by 20-50% annually. By 2012, the number of real estate enterprises has increased by 5 times compared with that in 2002. 3 Group of process 3 5 6.10 4.2. Actual state of pricing newly-built commercial house at investment, construction 4 Group of process 4 12 14.63 and trading house enterprises Total 82 100.00 4.2.1. Actual state of commercial house prices in Vietnam Source: Statistics from the survey and investigation results of the thesis Actual state of prices of commercial house for sales For the market of flats 4.2.3.1. Actual state of investment, construction and trading house enterprises applying - On Ho Chi Minh city market group of process 1 - On Ha Noi city market The variation of prices of newly-built commercial house at different time of pricing in Actual state of prices of commercial house for lease comparison with the average transaction prices on the market is illustrated through the 4.2.2. Actual state of policy and basis for pricing newly-built commercial house at following table: investment, construction and trading house enterprises Table 4.4: Prices set in process 1 at different times of investment, construction and 4.2.2.1. Policies of enterprises of house pricing trading house enterprises in a number of projects Like other trading enterprises, when pricing newly-built commercial house, the Price at the Selling price at enterprises have considered the following policy viewpoints on pricing house which is Price at the time time of record the time finishing determining prices for new products, determining prices with discount and compensation. No. Name of project allowed selling (million project 4.2.2.2. Basis for determining house prices of investment, construction and trading house 2 (million dong/m2) dong/m ) (million dong/m2) enterprises 1 Apartment M3-4 – Nguyen 27.5 32.5 35.5 - Construction unit price Chi Thanh - Framework of land use right transfer price 2 Geleximco apartment 12.5 16.6 17.0 - Interest rate for bank loan 3 An Sinh apartment 5.5 7.5 17.5 - Relationship of housing supply and demand 4 Anh Binh apartment – Tan 8.7 17.1 15.1 9 10
Phu district Table 4.6: Prices set in process 3 at different times of investment, construction and TWIN tower apartment – trading house enterprises in a number of projects 5 6.5 15.8 13.9 Binh Tan Price at the Selling price at Price at the Vuon Xuan apartment – time allowed the time 6 26.5 31.5 31.5 time of record Nguyen Chi Thanh No. Name of project selling finishing project (million Source: the survey and investigation results of the thesis (million (million dong/m2) 4.2.3.2 Actual state of construction investment and trading house enterprise application dong/m2) dong/m2) processes in groups 2 1 Hoa Phat apartment – Giai 26.5 31.5 32.0 The variation of prices of newly-built commercial house at different time of pricing in Phong road comparison with the average transaction prices on the market is illustrated through the 2 Apartment 17 CT – Vinaconex 22.5 29.5 31.0 following table: 3 Vimeco apartment – Hoang 26.0 33.0 33.0 Minh Giam Table 4.5: Prices set in process 2 at different times of investment, construction and 4 Petro Landmark apartment – 17.5 22.5 21.5 trading house enterprises in a number of projects District 2 Price at the Price at the Selling price at the 5 Apartment 143 Doc Ngu 25.5 35.5 35.5 time of record time allowed time finishing Source: the survey and investigation results of the thesis No. Name of project project (million selling (million dong/m2) dong/m2) (million dong/m2) 4.2.4. Current status of target and pricing methods of commercial housing at investment, 1 Le Van Luong apartment – 7.5 13.5 16.0 construction and trading house enterprises. Hacinco 4.2.4.1. Current status of target price of commercial housing at investment, construction 2 Apartment N07 B1Dich 26.5 24.5 25.6 and trading house enterprises Vong urban area In fact research shows that target enterprise valuation of differences in each enterprise 3 Era apartment – Tan Binh 5.2 17.5 14.0 and it may change at different times depending on the actual conditions of trading district enterprises. 4 Hoang Anh GL apartment – 4.8 15.5 11.9 4.2.4.2. Current status of pricing methods of newly- build commercial housing at Da Nang investment, construction and trading house enterprises. 5 Apartment CT2 Ngo Thi 10.5 15.0 17.0 From practical research activities in the construction investment and trading house Nham – HD enterprise show that, most enterprise are using the cost method to calculate price, Besides, 6 Apartment N4 A – B Le 9.7 17.5 21.5 there are a number of enterprises using the formula for determining the price in accordance Van Luong 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 Source: the survey and investigation results of the thesis investment, construction and trading house enterprises. 4.2.3.3. Actual state of construction investment and trading house enterprise application Selling price of commercial housing is defined by the formula: processes in groups 3. Selling price = Overall cost price + Expected profit + VAT 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 Pricing method for newly-built commercial house applied by investment, construction following table: 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 11 12
- Number of story : 30-story C/ Determining the selling price of flats and commercial zone: - Total area of floorage : 88,038 m2 - Allocation of cost: Table 4.8 indicates that the apartment with an area of 120m2, 131 - Total number of flats : 400 flats m2 apartment and the commercial zone is allocated with the total investment of VND The building is designed and built with 30 stories and 02 basements. The service zone 399.7 billion, VND 436.4 billion and VND 217.7 billion, respectively. is from the 1st floor to the 5th floor with floorage area on each floor of 3,512m2. The area - Determining the unit price on each m2 for each area subject to cost allocation: For the from the 6th floor to the 30th floor is divided into 02 sections. The floorage area of each 120m2 flats with the total area of 24,000m2, the pre-tax unit price on each m2 is VND section of 1,200 m2 is used for living (apartment block). Each floor of the section is allocated 16.657 million and the after-tax unit price is VND 18.33 million; similarly for the 08 independent self-contained flats (including sitting room, dining room, kitchen, bed 131m2 flats with the total area of 26,200m2, the pre-tax unit price on each m2 is VND rooms, bathrooms, logia) which are designed under 02 typical design patterns with the area 16.657 million and the after-tax unit price is VND 18.33 million; for the service zone of 131 m2 and 120 m2. with the total area of 13,071m2, the pre-tax unit price on each m2 is VND 16.657 B/ Determining the total cost of the project: million and after-tax unit price is VND 18.33 million. • Assumed conditions to calculate the total cost of the project: - 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 - The unit price to calculate the total investment for the project is taken in accordance price which are 10%, 14% and 19%. With such interest rates, the selling prices of with the works of the same scale, characteristics which have been built. This unit correlative flats are VND 18,400,000/m2, VND 19,083,000/ m2 and VND price does not include VAT. 19,920,000/ m2. - The land amount of the investment project to build the apartment is calculated in Based on the above factors, the enterprise has decided the average selling prices of accordance with Decision No. 4352/QD-UBND of Ha Noi city dated 16 September the flats and the commercial zone with details as: 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. + Commercial zone: average selling price for 1 m2 is VND 23,000,000/ m2; - The interest rate for bank loan is 19%/year. + Flats: average selling price for 1 m2 is VND 20,500,000/ m2; - Corporate income tax is 25% on taxable profits, VAT 10% on total net revenue. 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 - There is no abnormal change in the socio-economic conditions that affect the project calculate the price of newly-built commercial house at the investment and trading such as earthquake, war, etc. enterprises. • Calculating total investment: Specifically, the pricing method for commercial house is used by enterprises as + Costs of construction and equipment follows: + Other costs, costs of project management and other consultancy costs • Pricing method for commercial house: • Total investment of the project: - In case: Sell house by down payment Table 4.8: Total investment cost of BetexcoII Project Formula to determine: No. Content Method of calculation Amount (Dong) Td + L + Bt Gb = x K (4.2.1) 1 Construction cost Appendix Table 1 638,803,728,000 S 2 Equipment cost Appendix Table 1 59,865,840,000 In which: 3 Land cost Appendix Table 2 121,117,213,000 Gb: Selling price of 1m2 of flat use (Dong/ m2); 4 Project management cost, 10% x (CPXL+CPTB) 69,866,956,800 Td: Total construction investment cost of the project; construction investment L: Profit of the project (Dong); consultancy cost, and other costs Bt: Works maintenance cost for the mutual property (Dong); 5 Interest for loans during 19%/ year 15,034,351,739 S: Total area used of the flats of the project; construction K: Floor coefficient on the principle of capital preservation as illustrated in this 6 Provision fees 19.422% x (CPXL+CPTB+4) 149,265,163,847 example: A 5-story apartment can be allocated as: K1=1.2; K2=1.1; K3=1.0; K4=0.9; K5=0.8. Total 1,053,953,253,386 - In case: Sell house by installment payment Source: Betexco Investment and Construction company 13 14
Applicable on the commercial house, the ratio of first payment can change subject to Vd: Construction investment cost of the project allocated annually on the principle of agreement between the buyer and the project investor. The term of installment payment can capital preservation (Dong/ year); also change flexibly in accordance with the financial condition of the buyer. L: Profit of the project allocated by year (Dong/ year); • Method of determining rental of commercial house The pricing for newly-built commercial house applied under this method can be Formula to determine: generally described in the following example: Vd + L + Ql + Bt - Information of the project: Gt = Tdv x K (4.2.2) - Name of the project : An Hoi 3 Apartment Project, Pham Van Chieu street, 12 x S ward 14, Go Vap district, Ho Chi Minh city In which: - Investor : Sai Gon Real Estate Corporation Data of the project is provided as follows: Gt: Rental of 1m2 of flat use in 1 month (Dong/ m2/month); - Total investment cost of the project: Td= 268,170,207 (thousand dong) Vd: Construction investment cost of the project allocated annually on the principle of capital preservation (Dong/ year); - Investment cost allocated annually with n=20, i=14%, Vd= 40,490,000 (thousand dong/ year) Formula to determine Vd: - Annual operation management cost is temporarily calculated at VND 350,000/ flat Td x r(1+r)n which is the popular amount for low-cost to average-cost apartments. Therefore, with the Vd = (4.2.3) (1+r)n-1 total number of flats of the projects of 288, the operation management cost of the building Td: Total construction investment cost of the project; after going into use shall be Ql= 100,800 (thousand dong/ year). r: Interest rate of invested capital preservation (% year); - Works maintenance cost per year: Bt=2%Vd=809,800 (thousand dong/ year). n: The number of years to collect capital depending on specific conditions of each - Coefficient K: For this project, the investor calculates K=1, and target Tdv=0. project, minimum 20 years; - Total area of floorage of flat use S=21,174m2. L: Profit of the project (Dong/ year); Determining the selling price of the flats Ql: Annual operation cost (Dong/ year); - Applying formula 4.2.1, with the investor’s profit of 14%, this project will have the Bt: Works maintenance cost per year (Dong/ year); pre-tax average selling price of the flats of VND 14.5 million/m2, selling price including VAT of VND 16 million/m2. Therefore, the selling price of the smallest 50m2 flat of this Tdv: Revenues from operating services in the apartment in the year such as vehicle project will be around VND 800 million. keeping service, canteen service, revenues (if any) from sports events (Dong/ year); - If the above flat is bought by installment payment with the first assumed payment of S: Total area for use of the project’s flats for rent (m2); 20% the value and the remaining 80% supported by the bank shall be paid in 20 years at an K: Floor coefficient. interest rate of 14%/ year, the monthly payable amount by equal installment payment Rental price is determined by the formula (4.2.4) and the rental price shall be lower method will be VND 7,958,000/ month which does not include yearly operation than that in formula (4.2.2). management cost. Vd + Ql + Bt - Tdv Determining the rental price of the flat: Gt = x K (4.2.4) 12 x S - Rental price of 1m2 of the flat per month, applying formula 4.2.4 is determined at 163 Method of determining price of renting and buying house thousand dong/m2/month, the rental price of a 50m2 flat will be VND 8,147,000/ month Formula to determine: (this price assures that the investor can achieve the profitability of 14%/ year). - If the same flat is rented or bought with the first payment amount of 20% the value, A x (Vd + L) x K + Ql + Bt - Tdv Gtm = x K (4.2.5) the remaining 80% is paid in assumably 10 years. Other values are similar to the above 12 x S calculation, while the 14% profit of the investor on the total cost of the project will be In which: allocated annually together with the total cost. The price of renting and buying determined Gtm: Price of renting and buying 1m2 of flat use by month (Dong/m2/month); by formula (4.2.5) is 188 thousand dong/ m2/month. A: Coefficient illustrating the ratio between the remaining value of the flat (after Monthly payment for a 50m2 flat is VND 9,400,000. If the payment term extends by subtracting the first payment) and the initial value of the flat (A
Comment on the actual state of the pricing method applied by the investment, 4.3.2. Restrictions and causes construction and trading house enterprises • Restrictions in pricing house at the investment, construction and trading house From the factual research of this content, the following comments can be indicated enterprises from the thesis: Firstly: Although the pricing goal has been introduced in the pricing process, the goals - Basically, the pricing methods applied by enterprises to price newly-built commercial chosen by the investors are ambiguous from time to time, as well as stiff and lack of house are accepted by the market and the price can also satisfy enterprises’ minimum target adjustment based on the actual situation on the market. under the angle of profit. Secondly: The pricing method currently applied by the investment, construction and - Variances between the prices fixed by enterprises and the successfully transacted trading house enterprises is too qualitative, dependent much on the factor of experience; prices on the markets are still big. therefore the newly established enterprises or those enterprises having few investment - The investment, construction and trading house enterprises which have rented the projects will encounter a lot of difficulties in organizing pricing while ensuring their goals independent pricing organizations have proposed the prices close to the prices transacted on and getting accepted by the market. the market. Thirdly: The database serving the pricing of the majority of the investment, construction - The application of comparative method is performed in an emotional manner rather and trading house enterprises is still poor. than on the basis of scientific basis and evidence to adjust the prices. Fourthly: The model of pricing organization at the investment, construction and trading 4.2.4.3. Actual state of price adjustment and price change of newly-built commercial house house enterprises is not shaped clearly and lack of professionalism. at investment, construction and trading house enterprises Fifthly: The investment, construction and trading house enterprises have not applied a • Price adjustment complete pricing organization process. Enterprises often adjust the prices on the following coefficients: Sixthly: The staff working on pricing is of poor quality and lack of professionalism. - Coefficient of house location Seventhly: The determination of the market’s demand on the project’ house does not - Coefficient of flat floor receive the adequate appreciation and attention to its role in the pricing process. - Coefficient of house direction • Causes of restrictions After determining the coefficients of house location, floor and direction, the enterprises then Firstly: The viewpoint of the leaders of investment, construction and trading house determine the selling price by the following formula: enterprises show much discrepancy with the development tendency of the present real estate Selling price = standard price (1+coefficient of house location) X (1+coefficient of floor) market in general and the housing market in particular. X (1 x coefficient of house direction) Secondly: Facility, human and facilitation for pricing at the investment, construction and • Price change trading house enterprises are not invested adequately and unsatisfying the increasing Because the enterprises implement and publish the pricing of newly-built commercial house requirement to meet the demand. to the market at the time of starting construction, while the duration of construction and Thirdly: Training and fostering the staff working on pricing at the investment, construction handing over houses to customers is rather long (average 24 months), therefore during this and trading house enterprises is not implemented in a methodical and scientific way. period, a number of fluctuations on the market shall require the enterprises to increase or Fourthly: The information of the newly-built commercial house market in particular and decrease the price accordingly. the real estate market in general is lack of transparency. 4.3. Evaluation of the actual state of newly-built commercial house pricing at the Fifthly: The domestic real estate market shows lack of a database which is large and liable investment, construction and trading house enterprises enough for enterprises to exploit and serve the pricing of newly-built commercial house. 4.3.1. Results obtained Sixthly: To win a project of commercial house investment and construction for sale or On pricing basis: Basically based on scientific basis. for lease, enterprises have to pay for the negative surcharges which cannot be accounted for On pricing procedures: Ensuring the basic principles in the pricing procedure for in the enterprises’ expenses. products in general and for real estate products in particular. Seventhly: The habit of making secret transaction has rooted in the thinking of people - In the pricing process, the investors collected information, analyzed, compared and and enterprises. evaluated the prices of similar projects; Eighthly: The state management agencies have not successfully built economic sanctions - The use of cost method ensures that the investors can compensate for the total cost as well as regulations guiding in detail the pricing of newly-built commercial house at invested and the target profit amount prior calculated. investment, construction and trading house enterprises to act as a basis for enterprises to implement methodically and scientifically. 17 18
CHAPTER 5. SOLUTIONS TO COMPLETE THE PRICING OF NEWLY-BUILT Table 5.2: Results of multivariate regression analysis by stepwise method COMMERICIAL HOUSE AT INVESTMENT, CONSTRUCTION AND TRADING Unstandardized Standardized Multicolinearity HOUSE ENTERPRISES coefficient coefficient test 5.1. Determining viewpoint of newly-built commercial house pricing at investment, Variable t Sig. Standard Toleranc construction and trading house enterprises B Beta VIF deviation e Viewpoint 1: The pricing of newly-built commercial house should ensure the Constant 19.855 3.379 5.876 0.000 reasonable connection between the value and value in use of the house KC_TT -0.814 0.091 -0.377 -8.973 0.000 0.198 5.045 Viewpoint 2: The pricing of newly-built commercial house should reflect the COST 0.712 0.110 0.285 6.487 0.000 0.181 5.511 relationship between supply and demand and the market price KC_MS -0.556 0.243 -0.096 -2.284 0.023 0.197 5.085 Viewpoint 3: The pricing of newly-built commercial house should ensure the harmonization between the profit of enterprises – customers and the state SECURITY 1.563 0.357 0.165 4.379 0.000 0.246 4.065 5.2. Solutions to complete the pricing at investment, construction and trading house ENVIRONMENT 0,889 0.326 0.100 2.727 0.007 0.262 3.822 enterprises Results in Table 5.2 show that all of the 05 variables selected by stepwise method are 5.2.1. Application of Hedonic pricing model for building a regression function of pricing meaningful when their Sig values are smaller than 0.05. Specifically, the variables KC_TT; of newly-built commercial house PRICE; COST; ENVIRONMENT have the reliability of 99%, while the reliability of 5.2.1.1. Reason of selecting the model variable KC_MS is 95%. This proves that apartment’s prices are affected by 5 factors, namely Distance from the apartment to the city center; Cost of apartment; Distance from the The application of the model helps to identify which factors are highly appreciated or apartment to Shopping mall; Security position of the apartment area; Ecological not highly appreciated by the majority of customers. This model not only mentions the basic environment. The regression function built has the following pattern: factors of houses but also measures other factors such as educational level of citizens, living space, and environmental pollution level in the areas that need pricing. PRICE = 19.855 – 0.814 * KC_TT + 0.712 * COST – 0.556 * KC_MS + 1.563 * SECURITY + 0.889 * ENVIRONMENT 5.2.1.2. Steps • Using regression model for pricing specific apartment project Step 1: Collect results of field investigation or analyze stored data to identify variables. From the results of analysis and the built regression function, the author prices a specific apartment project to determine the price, then compares the determined prices by the Step 2: Identify correlation coefficient between dependent variables and each regression model at the price published by the investor and the average prices successfully independent variable (Pearson – r correlation coefficient). transacted on the market of the project. Specific information of the project is as follows: Step 3: Identify the order of independent variables according to criteria of Pearson - Name of the apartment: Bitexco II building correlation coefficient with dependent variables going downward. - Selling price of flat published by the investor: VND 23.5 million/m2 Step 4: Take each variable into regression analysis, the variable with high r will be - Average price successfully transacted on the market: VND 28 million/m2 taken first. This process will end if the regression model does not accept the variable and the - Information of variables under the built model: Distance from the apartment to the accepted variables are selected variables. city center is 15km; Cost of the apartment is VND 16 million/m2; Distance from the 5.2.1.3. Building regression model of newly-built commercial house pricing through case apartment to the shopping mall is 2km; Security position in the apartment area is ranked at study of a commercial apartment in Ho Chi Minh city level 4 (Good) and Ecological environment of the apartment area is ranked at 3 level From the identified variables and built questionnaire, the thesis has investigated 300 (Average). Replacing the information of the variables into the regression model, we have: flats in more than 10 different commercial apartment projects within Ha Noi city. The PRICE = 19.855 - 0.814*15 + 0.712*16 - 0.556*2 + 0.563*4 + 0.889*3 = VND 26.8 million/m2 investigation and supervision projects are implemented with different location and quality of As it can be seen, the price determined by the regression function is VND 26.8 flats. The application of regression function in accordance with Hedonic pricing model is million/m2 which is very close to the average price successfully transacted on the market expanded to suit the variables and research data of the thesis. (VND 28 million/m2) and has the difference of VND 3.5 million/m2 with the price • Building linear regression function reflecting the factors that affect the price of published by the investor. Therefore, if the investors apply the built regression model to newly-built commercial apartment price, the prices published by them will still be accepted by the market while increase a The Ordinary Least Squares used with the dependent variable of GIA (price of the profit amount of VND 3.5 million/m2 for each m2 of the flat sold. flat) and independent variables produces the following results 5.2.1.4. Conclusion 19 20
The multivariate regression function with the dependent variable of Price of the - Improve the activeness in training and fostering in site through specific work guided apartment (PRICE) is built by the author by stepwise method through SPSS 16. By this by the experienced officers. Regularly invite local and foreign experienced experts to quantitative method, the author determined the 5 factor having direct impact on the price of the consult and guide the officers of enterprises in the pricing stage of a specific project. apartment, namely Distance from the apartment to the city center; Cost of apartment; Distance - Promote linkage and cooperation with training facilities. from the apartment to Shopping mall; Security position of the apartment area; Ecological - Build corporate cultural environment, create special characteristics for enterprises environment of the apartment area. The extent accounting for the variation of apartment price such as democracy, collectiveness, attention and responsibility with each other in work, of these 5 variables is 89.3%. Furthermore, the conformance testing of regression function is contributing to improving work quality and sense of responsibility of the employees. ensured and the regression function does not violate any important assumptions. 5.2.4. Completing organizational model of house pricing at investment, construction and 5.2.2. Completing and constructing the database system to serve for the pricing of newly- trading house enterprises built commercial house at investment, construction and trading house enterprises The investment, construction and trade house enterprises can choose one among the 3 5.2.2.1. Data model following organizational models: Data model is a method to implement structurally the image of the field that needs Firstly, the divisions of sales or accounting can take charge of pricing. It means the analyzing. This should be a theoretical model that has relationship but does not depend on employees of these divisions are liable for pricing; however, this requires a specialist in the technical environment. This database system is built on the basis of reflecting charge of collecting information and processing data. information and movement of the current environment, then analyzing and forecasting Secondly, organize an independent pricing department. tendency and the degree of influence of such factors on the house price. Thirdly, investment, construction and trading house enterprises hire outside 5.2.2.2. Function model organizations to price house when their capacity is dissatisfactory or a large number of - Updating function: projects are implemented at a time. However, this should be carefully considered and - Searching function: enterprises should hire the partners experienced in pricing house. - Safety function: 5.2.5. Completing organizational process of house pricing at investment, construction and 5.2.2.3. Output information trading house enterprises Output information of the data system: The organizational process of house pricing at investment, construction and trading house - Providing pictogram of legislation for house pricing. enterprises proposed in the thesis is described in diagram as follows: - Providing pictogram of coefficients influencing the standard price. Establish Group/ Division pricing newly- Group/ Division prices house to do - Providing pictogram monitoring variation of real estate prices on the market. built commercial house of enterprises investment project - Providing pictogram monitoring variation of prices of materials, labor, machine shift, etc. serving for works estimations. Decide on house price to do Independence appraisal - Calculating function of the system serving for a number of analyses. investment project - Providing documents supporting pricing. - Providing pricing methods that have been applied domestically and in the world. 5.2.2.4. Structure of the system Group/ Division prices house at the time Independence to be sold appraisal Function model of the data system includes the main processing functions as follows: - Updating list of data system. - Updating original data. Group/ Division prices house at the time Decide on house price at the time - Updating variation data. finishing project to be sold - Statistics searching, analyzing data. 5.2.3. Developing the personnel for pricing division of investment, construction and trading house enterprises Independence appraisal Decide on house price at the time finishing project - Restructure the available personnel, assign specific work. With an aim to orient, help the officers to encounter specific work regularly, then developing their theoretical and practical knowledge. Diagram 5.3: Process of house pricing proposed to investment, construction and trading house enterprises 21 22
• Application conditions factors affecting the house prices such as house location, utility services, floor coefficient, To effectively apply the organizational process of house pricing, the investment, flat quality, etc. However, these factors are accounted while pricing under the forms of construction and trading house enterprises need to satisfy the following basic conditions: adjusted coefficients which are determined on the basis of experiences and subjective - Change viewpoint of the enterprise leaders: opinions of the appraisers. Therefore, the determining which factors influence the prices of newly-built commercial house and the degree of influence of such factors on the prices has - Enterprises employ qualified personnel: not been based on scientific foundations. - Enterprises need to acquire a database system large enough to serve for pricing: Thirdly, from the problems in the process of pricing newly-built commercial house - Enterprises have to select high quality independent pricing organization that suit that have been indicated, the thesis proposes applying Hedonic model for pricing newly- enterprises’ conditions: built commercial house. The thesis also describes and introduces the basic contents of the 5.3. Recommendations model, especially the application of Hedonic model in the world. It then generalizes and Promulgate regulations on service fees applicable on newly-built commercial houses; determines the factors (variables) mostly used when the Hedonic model is used for house Build storage center providing national information of real estate in general and pricing, which is an important basis in determining variables to apply in building pricing newly-built commercial house in particular; model in Vietnam. By using the data collected from investigating 300 flats in Ha Noi city, the thesis applies Enter method and Stepwise method to build the pricing model applicable Promulgate regulations on standardizing real estate pricing and consulting on newly-built commercial apartment. After research, the thesis identifies 5 factors and companies in Vietnam coefficients affecting newly-built commercial house prices in Ha Noi which are (1) Distance from the apartment to the city center; (2) Cost of apartment; (3) Distance from the apartment CONCLUSION to Shopping mall; (4) Security position of the apartment area; (5) Ecological environment of Completing the pricing of newly-built commercial house at investment, construction the apartment area. and trading house enterprises will contribute to a shakeout on the housing market in Fourthly, from the actual state of pricing newly-built commercial house at particular and on the real estate market in general. It will also help enterprises to determine investment, construction and trading house enterprises, the thesis gives its viewpoint of reasonable prices in line with their business goals on a scientific basis and ensure that the pricing and proposes 5 solution groups to complete and surmount the mentioned existing prices are accepted by the target market. Topic entitled “Pricing newly-built commercial problems. Besides the proposal of applying Hedonic model to build regression function of house at investment, construction and trading house enterprises” concentrated on studying pricing newly-built commercial house, the thesis proposes building a database system to the pricing activities at investment, construction and trading house enterprises in Vietnam, serve for creating regression function of pricing types of houses in different locations as well supplementing additional materials into the system of research works related to house as completing the organization of pricing, pricing regulations and developing a personnel pricing in particular and real estate pricing in general. After the research process, the thesis working on pricing newly-built commercial house for investment, construction and trading is able to answer the research question raised. Specifically: house enterprises. These solutions will act as the basis for the enterprises to do applied Firstly, results of research show that prices of newly-built commercial house priced research with an aim to complete and surmount the existing problems in pricing commercial by investment, construction and trading house enterprises partly satisfy the enterprises’ house. goals under the economic angle when such prices include the expected profits of enterprises; Together with the introduced solution groups, the thesis also recommends 3 issues the majority of newly-built commercial house products at the time of little variation on the related to promulgation of regulations on flat service fees, standardization of consultant and market reaches the consumption rate of more than 90%, which proves that the prices of pricing companies and building of national center for storage providing real estate newly-built commercial house priced by investment, construction and trading house information, creating favorable conditions for investment, construction and trading house enterprises are accepted by the market. However, these prices are still high in comparison enterprises to complete their pricing of newly-built commercial house. with the average prices successfully transacted on the market for the same project of enterprises. This results in the fact that enterprises’ profit maximization goals are not sustained. Besides, houses of many newly-built commercial house projects cannot be sold due to various reasons but the basic reason is that the prices given by investment, construction and trading house enterprises do not suit with the demand at the time selling and the prices do not take into account the factors affecting the house prices of enterprises for adjustment. Secondly, in the organizational process of pricing newly-built commercial house, the investment, construction and trading house enterprises have taken into account several 23 24