Gold price influence on RE [Article]



Fancy that!

Gold price increases spell trouble for real estate
16:45' 11/01/2008 (GMT+7)

VietNamNet Bridge ? As the gold price increases, the value of houses goes up and, resultantly, prospective house purchasers are faced with higher prices.

In Vietnam, houses are valuated based on their value in gold. It is clear why house purchasers want a reduced gold price.

A lot of people have cancelled their plans to buy houses because of increasingly high prices concurrent with the value of gold which recently hit VND17mil/tael ($1,062.5).

Director of a real estate brokerage center on Nguyen Phuc Nguyen Street in District 3, HCM City, said they have been losing clients since the gold price climbed to VND16mil/tael, though now is usually the best season for real estate firms. Vietnamese people always buy houses prior to the Lunar New Year as they want to celebrate in their new home.

Director of another real estate center complained that the number of transactions has decreased by 50% over the same period of the previous year. Though the center sees many customers each day, they just ask for information but do not intend to buy houses.

Bui Tien Thang, Deputy General Director of Sacomreal, said that sellers are also wary of making deals right now, because they fear they won?t be able to buy another house due to either high prices or a limited available market.

However, Mr Thang says gold price increases do not affect transactions of luxury apartments, because investors valuate apartments in VND or dollars.

On January 9, 2008, the gold price was VND17.2mil/tael, increasing by VND2mil/tael compared to November 2007 (up by 13%). Those, who buy houses valued at 100 taels in January will have to pay VND200mil ($12,500) more than those bought in November 2007.

Vo Dinh Quoc, Deputy Director of ACB Real Estate, said that people now tend to pay in cash instead of gold in order to avoid the risk of gold price fluctuations. However, in some cases, sellers and buyers cannot agree on the payment method. Sellers want the payment in gold, while buyers want to make payment in cash.

Real estate brokers said that a lot of real estate trading floors may have to shut down if the gold price keeps increasing, because no one will have enough gold to buy houses.

(Source: Tuoi tre)