- Scientists have shown the process, principles of real estate valuation, however has CHAPTER I. INTRODUCTION 1.1. 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. 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.
The purpose and meaning of the thesis
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.
- 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. 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
Research Overview
- 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
Most research works are based on the fundamental basis of the methods, principles - 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? 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. 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 and processes underlying the valuation of real estate; 1.2.2.2. Research Methodology - 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 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 Subjects and scope of research of housing is the most important platform as a basis for determining the base price.
Pricing work for newly- build commercial housing at investment, construction and
- 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.
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complete the job? 1.4. 1.4.1. Research Subjects trading house enterprises. 1.4.2. Scope of the research
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- 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 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. determining the variables for building serves regression. • Time pricing for construction investment and trading house enterprise: - Proposed solutions to improve and resolve the outstanding issues in newly- build 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 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.
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 3 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
- 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 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. 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 valuation process must have access to the investigation stage, site survey, at the place where the immovable property – subject of 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. - Each newly- build commercial housing is a unique property (at least in terms of • 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 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.
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• Group 1: and structure of the house, neighborhoods and their properties. Here author will clarify on this research.
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: • The first: Location Property • The second: Structural Property • The third: Residential Property
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. 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. • Group 4: CHAPTER III. RESEARCH METHODOLOGY
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. 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
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
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Diagram 3.1: Conceptual framework for research on pricing for newly- build commercial housing
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Identifying a research subjects
Research overview and consulted experts in the field of real estate pricing
Framing theory of pricing for newly- build commercial housing
3.1.2 Framework and research approach Content of pricing for newly- build commercial housing
construction
and
Situation analysis of pricing for newly- build commercial housing at investment, construction and trading house enterprises.
Interviews and opinions of experts assessed property. In-depth interview leader; appraiser of pricing for newly- build commercial housing at investment, trading house enterprises. Interview clients to identify the factors affecting to pricing of newly- build commercial housing.
Assessment of the status of pricing for newly- build commercial housing at investment, construction and trading house enterprises.
scientific
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.
has with Diagram 3.3 : Research Process of thesis
scientific and of To solve the problem in accordance with the study research objectives, the thesis uses
conditions
- Characteristics and principles of pricing for newly- build commercial housing - General model of pricing organization of newly- build commercial housing - Process pricing framework of newly- build commercial housing - Pricing method of newly- build commercial housing - factors affecting pricing for 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 build pricing newly- to commercial housing ensure and minimize costs. - Selecting and applying for pricing methods of newly- build commercial housing the consistent characteristics of business grounds, and flexibility high feasibility. - The and personnel; legally database information to respond & perfect target.
3.3. Research Methodology 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 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 been has implemented in the pricing construction process by trading and investment house enterprise. - The process of pricing newly- build commercial been housing implemented by Enterprises. - The level of use and effectiveness the valuation methods used by the enterprise. - Policies, methods and basis after adjusting pricing newly- build commercial housing.
To accomplish the research objectives, Thesis research conducted in accordance with
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 the following (Diagram 1.2):
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CHAPTER 4. 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 4.2.3. 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 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 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:
4.1.2. Growth of area of house - In the national boundary - Comparison between urban and rural areas Group of process No Table 4.3: Ratio of investment, construction and trading house enterprises’ application of groups of newly-built commercial house pricing process in 2012 Ratio of enterprises Number of enterprises applying (%) applying
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
1 Group of process 1 2 Group of process 2 3 Group of process 3 4 Group of process 4 48 17 5 12 82 Total 58.54 20.73 6.10 14.63 100.00 Source: Statistics from the survey and investigation results of the thesis
number of real estate enterprises has increased by 5 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 (cid:1) Actual state of prices of commercial house for sales (cid:1) For the market of flats - On Ho Chi Minh city market - On Ha Noi city market (cid:1) Actual state of prices of commercial house for lease 4.2.3.1. Actual state of investment, construction and trading house enterprises applying group of process 1 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 1 at different times of investment, construction and trading house enterprises in a number of projects 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
No. Name of project Price at the time allowed selling (million dong/m2) 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 1 Apartment M3-4 – Nguyen Price at the time of record (million dong/m2) 27.5 Selling price at the time finishing project (million dong/m2) 35.5 32.5 Chi Thanh
- Construction unit price - Framework of land use right transfer price - Interest rate for bank loan - Relationship of housing supply and demand 2 Geleximco apartment 3 An Sinh apartment 4 Anh Binh apartment – Tan 16.6 7.5 17.1 17.0 17.5 15.1 12.5 5.5 8.7
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Table 4.6: Prices set in process 3 at different times of investment, construction and trading house enterprises in a number of projects 5 6.5 15.8 13.9
6 26.5 31.5 31.5 Phu district TWIN tower apartment – Binh Tan Vuon Xuan apartment – Nguyen Chi Thanh No. Name of project
Price at the time of record (million dong/m2)
Price at the time allowed selling (million dong/m2) 31.5 Selling price at the time finishing project (million dong/m2) 32.0 1 26.5 Hoa Phat apartment – Giai Phong road
29.5 33.0 31.0 33.0 2 Apartment 17 CT – Vinaconex 3 Vimeco apartment – Hoang 22.5 26.0 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 2 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: Minh Giam 22.5 21.5 4 Petro Landmark apartment – 17.5 Table 4.5: Prices set in process 2 at different times of investment, construction and trading house enterprises in a number of projects District 2 5 Apartment 143 Doc Ngu 25.5 35.5 35.5 Source: the survey and investigation results of the thesis No. Name of project
Price at the time of record (million dong/m2) 7.5 Price at the time allowed selling (million dong/m2) 13.5 Selling price at the time finishing project (million dong/m2) 16.0 1 Le Van Luong apartment – Hacinco 2 Apartment N07 B1Dich 26.5 24.5 25.6 Vong urban area 3 Era apartment – Tan Binh 5.2 17.5 14.0 district 4 Hoang Anh GL apartment – 4.8 15.5 11.9 Da Nang 5 Apartment CT2 Ngo Thi 10.5 15.0 17.0 Nham – HD 6 Apartment N4 A – B Le 9.7 17.5 21.5 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. Van Luong (cid:1) 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: 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 3. 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:
A/ Information of the project: - Name of the project - Area of the land - Total area for building : Betexco II Apartment : 5,930 m2 : 5,367 m2
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C/ Determining the selling price of flats and commercial zone:
- Number of story - Total area of floorage - Total number of flats : 30-story : 88,038 m2 : 400 flats - 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. 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.
- 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:
- 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
+ Commercial zone: average selling price for 1 m2 is VND 23,000,000/ m2; + Flats: average selling price for 1 m2 is VND 20,500,000/ m2; (cid:1) 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:
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: • Pricing method for commercial house: - In case: Sell house by down payment Formula to determine: Table 4.8: Total investment cost of BetexcoII Project Content Method of calculation x K (4.2.1) Gb = Td + L + Bt S
Appendix Table 1 Appendix Table 1 Appendix Table 2 10% x (CPXL+CPTB) Amount (Dong) 638,803,728,000 59,865,840,000 121,117,213,000 69,866,956,800
5 19%/ year 15,034,351,739
No. 1 Construction cost 2 Equipment cost 3 Land cost 4 Project management cost, construction investment consultancy cost, and other costs Interest for loans during construction 6 Provision fees 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. 19.422% x (CPXL+CPTB+4) - In case: Sell house by installment payment 149,265,163,847 1,053,953,253,386 Source: Betexco Investment and Construction company Total
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Vd: Construction investment cost of the project allocated annually on the principle of
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. L: Profit of the project allocated by year (Dong/ year); The pricing for newly-built commercial house applied under this method can be • Method of determining rental of commercial house Formula to determine: capital preservation (Dong/ year); generally described in the following example: Information of the project: - Name of the project : An Hoi 3 Apartment Project, Pham Van Chieu street, x K (4.2.2) Gt = ward 14, Go Vap district, Ho Chi Minh city Vd + L + Ql + Bt - Tdv 12 x S - Investor : Sai Gon Real Estate Corporation Data of the project is provided as follows:
In which: Gt: Rental of 1m2 of flat use in 1 month (Dong/ m2/month); Vd: Construction investment cost of the project allocated annually on the principle of - Total investment cost of the project: Td= 268,170,207 (thousand dong) - Investment cost allocated annually with n=20, i=14%, Vd= 40,490,000 (thousand dong/ year) capital preservation (Dong/ year); Formula to determine Vd:
(4.2.3) Vd = Td x r(1+r)n (1+r)n-1 - Annual operation management cost is temporarily calculated at VND 350,000/ flat which is the popular amount for low-cost to average-cost apartments. Therefore, with the total number of flats of the projects of 288, the operation management cost of the building after going into use shall be Ql= 100,800 (thousand dong/ year).
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
- Works maintenance cost per year: Bt=2%Vd=809,800 (thousand dong/ year). - Coefficient K: For this project, the investor calculates K=1, and target Tdv=0. - Total area of floorage of flat use S=21,174m2. Determining the selling price of the flats
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 - Applying formula 4.2.1, with the investor’s profit of 14%, this project will have the 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 project will be around VND 800 million.
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 project, minimum 20 years; keeping service, canteen service, revenues (if any) from sports events (Dong/ year); than that in formula (4.2.2). - If the above flat is bought by installment payment with the first assumed payment of 20% the value and the remaining 80% supported by the bank shall be paid in 20 years at an interest rate of 14%/ year, the monthly payable amount by equal installment payment method will be VND 7,958,000/ month which does not include yearly operation management cost.
x K (4.2.4) Gt =
Vd + Ql + Bt - Tdv 12 x S Method of determining price of renting and buying house Formula to determine:
Determining the rental price of the flat: - Rental price of 1m2 of the flat per month, applying formula 4.2.4 is determined at 163 thousand dong/m2/month, the rental price of a 50m2 flat will be VND 8,147,000/ month (this price assures that the investor can achieve the profitability of 14%/ year).
A x (Vd + L) x K + Ql + Bt - Tdv 12 x S
x K (4.2.5) Gtm =
- If the same flat is rented or bought with the first payment amount of 20% the value, the remaining 80% is paid in assumably 10 years. Other values are similar to the above calculation, while the 14% profit of the investor on the total cost of the project will be allocated annually together with the total cost. The price of renting and buying determined by formula (4.2.5) is 188 thousand dong/ m2/month. Monthly payment for a 50m2 flat is VND 9,400,000. If the payment term extends by 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 20 years, the monthly payment shall decrease to VND 7,446,000/ month. subtracting the first payment) and the initial value of the flat (A<1);
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(cid:1) 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 chosen by the investors are ambiguous from time to time, as well as stiff and lack of adjustment based on the actual situation on the market. - Basically, the pricing methods applied by enterprises to price newly-built commercial house are accepted by the market and the price can also satisfy enterprises’ minimum target under the angle of profit. - Variances between the prices fixed by enterprises and the successfully transacted prices on the markets are still big.
Secondly: The pricing method currently applied by the investment, construction and trading house enterprises is too qualitative, dependent much on the factor of experience; therefore the newly established enterprises or those enterprises having few investment projects will encounter a lot of difficulties in organizing pricing while ensuring their goals and getting accepted by the market. - The investment, construction and trading house enterprises which have rented the independent pricing organizations have proposed the prices close to the prices transacted on 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. Fourthly: The model of pricing organization at the investment, construction and trading house enterprises is not shaped clearly and lack of professionalism. than on the basis of scientific basis and evidence to adjust the prices. 4.2.4.3. Actual state of price adjustment and price change of newly-built commercial house 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. Seventhly: The determination of the market’s demand on the project’ house does not receive the adequate appreciation and attention to its role in the pricing process. - Coefficient of house location - Coefficient of flat floor - Coefficient of house direction
• Causes of restrictions Firstly: The viewpoint of the leaders of investment, construction and trading house enterprises show much discrepancy with the development tendency of the present real estate market in general and the housing market in particular. After determining the coefficients of house location, floor and direction, the enterprises then determine the selling price by the following formula: Selling price = standard price (1+coefficient of house location) X (1+coefficient of floor) X (1 x coefficient of house direction) • Price change Secondly: Facility, human and facilitation for pricing at the investment, construction and trading house enterprises are not invested adequately and unsatisfying the increasing requirement to meet the demand. Thirdly: Training and fostering the staff working on pricing at the investment, construction and trading house enterprises is not implemented in a methodical and scientific way. Fourthly: The information of the newly-built commercial house market in particular and the real estate market in general is lack of transparency. Fifthly: The domestic real estate market shows lack of a database which is large and liable enough for enterprises to exploit and serve the pricing of newly-built commercial house.
Sixthly: To win a project of commercial house investment and construction for sale or for lease, enterprises have to pay for the negative surcharges which cannot be accounted for in the enterprises’ expenses. On pricing basis: Basically based on scientific basis. On pricing procedures: Ensuring the basic principles in the pricing procedure for Seventhly: The habit of making secret transaction has rooted in the thinking of people Because the enterprises implement and publish the pricing of newly-built commercial house to the market at the time of starting construction, while the duration of construction and handing over houses to customers is rather long (average 24 months), therefore during this period, a number of fluctuations on the market shall require the enterprises to increase or decrease the price accordingly. 4.3. Evaluation of the actual state of newly-built commercial house pricing at the investment, construction and trading house enterprises 4.3.1. Results obtained products in general and for real estate products in particular. and enterprises. - In the pricing process, the investors collected information, analyzed, compared and evaluated the prices of similar projects; - The use of cost method ensures that the investors can compensate for the total cost invested and the target profit amount prior calculated. Eighthly: The state management agencies have not successfully built economic sanctions as well as regulations guiding in detail the pricing of newly-built commercial house at investment, construction and trading house enterprises to act as a basis for enterprises to implement methodically and scientifically.
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Table 5.2: Results of multivariate regression analysis by stepwise method Standardized coefficient Unstandardized coefficient Multicolinearity test Variable t Sig. Beta B VIF Toleranc e Standard deviation Viewpoint 1: The pricing of newly-built commercial house should ensure the
Viewpoint 2: The pricing of newly-built commercial house should reflect the
Viewpoint 3: The pricing of newly-built commercial house should ensure the
19.855 3.379 Constant -0.814 0.091 KC_TT 0.110 0.712 COST -0.556 0.243 KC_MS 0.357 SECURITY 1.563 0.326 ENVIRONMENT 0,889 -0.377 0.285 -0.096 0.165 0.100 5.876 0.000 -8.973 0.000 0.198 6.487 0.000 0.181 -2.284 0.023 0.197 4.379 0.000 0.246 2.727 0.007 0.262 5.045 5.511 5.085 4.065 3.822
Results in Table 5.2 show that all of the 05 variables selected by stepwise method are meaningful when their Sig values are smaller than 0.05. Specifically, the variables KC_TT; PRICE; COST; ENVIRONMENT have the reliability of 99%, while the reliability of 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 apartment to Shopping mall; Security position of the apartment area; Ecological environment. The regression function built has the following pattern:
Step 1: Collect results of field investigation or analyze stored data to identify
Step 2: Identify correlation coefficient between dependent variables and each
PRICE = 19.855 – 0.814 * KC_TT + 0.712 * COST – 0.556 * KC_MS + 1.563 * SECURITY + 0.889 * ENVIRONMENT • Using regression model for pricing specific apartment project 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 regression model at the price published by the investor and the average prices successfully 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
CHAPTER 5. SOLUTIONS TO COMPLETE THE PRICING OF NEWLY-BUILT COMMERICIAL HOUSE AT INVESTMENT, CONSTRUCTION AND TRADING HOUSE ENTERPRISES 5.1. Determining viewpoint of newly-built commercial house pricing at investment, construction and trading house enterprises reasonable connection between the value and value in use of the house relationship between supply and demand and the market price harmonization between the profit of enterprises – customers and the state 5.2. Solutions to complete the pricing at investment, construction and trading house enterprises 5.2.1. Application of Hedonic pricing model for building a regression function of pricing of newly-built commercial house 5.2.1.1. Reason of selecting the model The application of the model helps to identify which factors are highly appreciated or not highly appreciated by the majority of customers. This model not only mentions the basic 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. 5.2.1.2. Steps variables. independent variable (Pearson – r correlation coefficient). correlation coefficient with dependent variables going downward. Step 4: Take each variable into regression analysis, the variable with high r will be taken first. This process will end if the regression model does not accept the variable and the accepted variables are selected variables. 5.2.1.3. Building regression model of newly-built commercial house pricing through case study of a commercial apartment in Ho Chi Minh city From the identified variables and built questionnaire, the thesis has investigated 300 flats in more than 10 different commercial apartment projects within Ha Noi city. The investigation and supervision projects are implemented with different location and quality of flats. The application of regression function in accordance with Hedonic pricing model is expanded to suit the variables and research data of the thesis. • Building linear regression function reflecting the factors that affect the price of newly-built commercial apartment The Ordinary Least Squares used with the dependent variable of GIA (price of the flat) and independent variables produces the following results - Name of the apartment: Bitexco II building - Selling price of flat published by the investor: VND 23.5 million/m2 - Average price successfully transacted on the market: VND 28 million/m2 - Information of variables under the built model: Distance from the apartment to the city center is 15km; Cost of the apartment is VND 16 million/m2; Distance from the apartment to the shopping mall is 2km; Security position in the apartment area is ranked at level 4 (Good) and Ecological environment of the apartment area is ranked at 3 level (Average). Replacing the information of the variables into the regression model, we have: PRICE = 19.855 - 0.814*15 + 0.712*16 - 0.556*2 + 0.563*4 + 0.889*3 = VND 26.8 million/m2 As it can be seen, the price determined by the regression function is VND 26.8 million/m2 which is very close to the average price successfully transacted on the market (VND 28 million/m2) and has the difference of VND 3.5 million/m2 with the price published by the investor. Therefore, if the investors apply the built regression model to price, the prices published by them will still be accepted by the market while increase a profit amount of VND 3.5 million/m2 for each m2 of the flat sold. 5.2.1.4. Conclusion
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- Improve the activeness in training and fostering in site through specific work guided by the experienced officers. Regularly invite local and foreign experienced experts to consult and guide the officers of enterprises in the pricing stage of a specific project.
The multivariate regression function with the dependent variable of Price of the apartment (PRICE) is built by the author by stepwise method through SPSS 16. By this quantitative method, the author determined the 5 factor having direct impact on the price of the apartment, namely Distance from the apartment to the city center; Cost of apartment; Distance from the apartment to Shopping mall; Security position of the apartment area; Ecological environment of the apartment area. The extent accounting for the variation of apartment price of these 5 variables is 89.3%. Furthermore, the conformance testing of regression function is ensured and the regression function does not violate any important assumptions. 5.2.2. Completing and constructing the database system to serve for the pricing of newly- built commercial house at investment, construction and trading house enterprises 5.2.2.1. Data model - Promote linkage and cooperation with training facilities. - Build corporate cultural environment, create special characteristics for enterprises such as democracy, collectiveness, attention and responsibility with each other in work, contributing to improving work quality and sense of responsibility of the employees. 5.2.4. Completing organizational model of house pricing at investment, construction and trading house enterprises The investment, construction and trade house enterprises can choose one among the 3 following organizational models:
Firstly, the divisions of sales or accounting can take charge of pricing. It means the employees of these divisions are liable for pricing; however, this requires a specialist in charge of collecting information and processing data.
Data model is a method to implement structurally the image of the field that needs analyzing. This should be a theoretical model that has relationship but does not depend on the technical environment. This database system is built on the basis of reflecting information and movement of the current environment, then analyzing and forecasting tendency and the degree of influence of such factors on the house price. 5.2.2.2. Function model - Updating function: - Searching function: - Safety function: 5.2.2.3. Output information
Establish Group/ Division pricing newly- built commercial house of enterprises
Group/ Division prices house to do investment project
Output information of the data system: - Providing pictogram of legislation for house pricing. - Providing pictogram of coefficients influencing the standard price. - Providing pictogram monitoring variation of real estate prices on the market. - Providing pictogram monitoring variation of prices of materials, labor, machine shift, etc. serving for works estimations.
Independence appraisal
Decide on house price to do investment project
- Calculating function of the system serving for a number of analyses. - Providing documents supporting pricing. - Providing pricing methods that have been applied domestically and in the world. 5.2.2.4. Structure of the system
Independence appraisal
Group/ Division prices house at the time to be sold
Group/ Division prices house at the time finishing project
Decide on house price at the time to be sold
Function model of the data system includes the main processing functions as follows: - Updating list of data system. - Updating original data. - Updating variation data. - Statistics searching, analyzing data.
5.2.3. Developing the personnel for pricing division of investment, construction and trading house enterprises
Decide on house price at the time finishing project
Independence appraisal
Secondly, organize an independent pricing department. Thirdly, investment, construction and trading house enterprises hire outside organizations to price house when their capacity is dissatisfactory or a large number of projects are implemented at a time. However, this should be carefully considered and enterprises should hire the partners experienced in pricing house. 5.2.5. Completing organizational process of house pricing at investment, construction and trading house enterprises The organizational process of house pricing at investment, construction and trading house enterprises proposed in the thesis is described in diagram as follows:
- 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
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• Application conditions To effectively apply the organizational process of house pricing, the investment, construction and trading house enterprises need to satisfy the following basic conditions:
factors affecting the house prices such as house location, utility services, floor coefficient, flat quality, etc. However, these factors are accounted while pricing under the forms of adjusted coefficients which are determined on the basis of experiences and subjective 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 not been based on scientific foundations.
- Change viewpoint of the enterprise leaders: - Enterprises employ qualified personnel: - Enterprises need to acquire a database system large enough to serve for pricing: - Enterprises have to select high quality independent pricing organization that suit
enterprises’ conditions: 5.3. Recommendations
Promulgate regulations on service fees applicable on newly-built commercial houses; Build storage center providing national information of real estate in general and newly-built commercial house in particular; Promulgate regulations on standardizing real estate pricing and consulting companies in Vietnam
CONCLUSION Thirdly, from the problems in the process of pricing newly-built commercial house that have been indicated, the thesis proposes applying Hedonic model for pricing newly- built commercial house. The thesis also describes and introduces the basic contents of the model, especially the application of Hedonic model in the world. It then generalizes and determines the factors (variables) mostly used when the Hedonic model is used for house pricing, which is an important basis in determining variables to apply in building pricing 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 on newly-built commercial apartment. After research, the thesis identifies 5 factors and 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 to Shopping mall; (4) Security position of the apartment area; (5) Ecological environment of the apartment area.
Completing the pricing of newly-built commercial house at investment, construction and trading house enterprises will contribute to a shakeout on the housing market in particular and on the real estate market in general. It will also help enterprises to determine reasonable prices in line with their business goals on a scientific basis and ensure that the prices are accepted by the target market. Topic entitled “Pricing newly-built commercial house at investment, construction and trading house enterprises” concentrated on studying the pricing activities at investment, construction and trading house enterprises in Vietnam, supplementing additional materials into the system of research works related to house pricing in particular and real estate pricing in general. After the research process, the thesis is able to answer the research question raised. Specifically:
Fourthly, from the actual state of pricing newly-built commercial house at investment, construction and trading house enterprises, the thesis gives its viewpoint of pricing and proposes 5 solution groups to complete and surmount the mentioned existing problems. Besides the proposal of applying Hedonic model to build regression function of pricing newly-built commercial house, the thesis proposes building a database system to serve for creating regression function of pricing types of houses in different locations as well as completing the organization of pricing, pricing regulations and developing a personnel working on pricing newly-built commercial house for investment, construction and trading house enterprises. These solutions will act as the basis for the enterprises to do applied research with an aim to complete and surmount the existing problems in pricing commercial house.
Together with the introduced solution groups, the thesis also recommends 3 issues related to promulgation of regulations on flat service fees, standardization of consultant and pricing companies and building of national center for storage providing real estate information, creating favorable conditions for investment, construction and trading house enterprises to complete their pricing of newly-built commercial house.
Firstly, results of research show that prices of newly-built commercial house priced by investment, construction and trading house enterprises partly satisfy the enterprises’ goals under the economic angle when such prices include the expected profits of enterprises; the majority of newly-built commercial house products at the time of little variation on the market reaches the consumption rate of more than 90%, which proves that the prices of newly-built commercial house priced by investment, construction and trading house enterprises are accepted by the market. However, these prices are still high in comparison 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
