Pricing newly built commercial house at investment, construction and trading house enterprises

CHAPTER I. INTRODUCTION
Urgency of theme
With the unique characteristics of their, housing is a particular product and evaluated
based on its own principles and methods for this product. In fact, pricing newly-built
commercial house at investment, construction and trading house enterprises that still many
shortcomings specific issues such as: In 2007, The market has witnessed many housing
projects which customers queue to be scrambling to sign up to buy apartments for example:
Vista, Sky Garden, Hoang Anh Gia Lai etc in Ho Chi Minh city; or Nam Cuong project on
extended Le Van Luong road in Hanoi in 2009; meanwhile, there are plenty of quality
housing projects, purchase conditions and equivalent positions, especially some of the
projects located adjacent position above projects, it's even on sale earlier but there is little
customer interest.
One of the main reasons leading to above situation is due to the enterprise applied the
comparative method newly- build commercial housing, but this method is built on the
inconsistency views about newly- build commercial housing, supply and demand
relationship and the housing value of its. A few Enterprise have also used the results of a
regression function when pricing, however, usually remains localized in a region or a
boundary line, which is not associated with the typical parameters of the urban structure
specific, so can not make important predictor of price variation of c newly- build
commercial housing in the size of the whole city. So, a question arises: What pricing models
that suit newly- build commercial housing and What should be the model for effective
application in Vietnam.
Stemming from these reasons, the author of the thesis has chosen the theme: “Pricing
newly-built commercial house at investment, construction and trading house enterprises”
for his research projects.
1.2. Research Overview
1.2.1 Synthesis of research works related to research subjects
1.2.2 Comments and evaluation of research works
1.2.2.1. Theoretical Foundations
Most research works are based on the fundamental basis of the methods, principles
and processes underlying the valuation of real estate;

1.2.2.2. Research Methodology
Through the research process and learn about the work that shows: Most studies have
applied both methods to locate research & quantitative; in which the majority of studies
were carried out in-depth research into specific situations, and collecting data through
observation techniques to use for regression analysis.
1.2.2.3. Contributions and the relation of research works
- The basis for determining the price of housing and methods of determining the price
of housing is the most important platform as a basis for determining the base price.
- Scientific studies have shown the complexity of newly- build commercial housing
prices, because pricing newly-built commercial house particular and general real estate
prices affected by many factors.
1.1.

1

- Scientists have shown the process, principles of real estate valuation, however has
yet to be processes that and principles of newly- build commercial housing prices.
1.2.3 These restrictions & gaps need to continue research
- Research has not verified comparisons & research at prices that offer, whether there
really perfect fit and with the prices that businesses have come up or not.
- These research just mentioned aspects and find out the rules for their views in a
specific market.
- Some authors impose its views before executing research, therefore, the research
process are oriented standpoint and results from previous studies is the lack of objectivity.
- The valuation of real estate for newly- build commercial housing not have any
research that go into a full research.
- Pricing newly-built commercial house mainly qualitative experience for pricing.
- Organizations pricing has yet to be unity.
- The World showed quantitative models for pricing applications, however, it is only
suitable for the world, for the real estate markets have developed high stability, the

conditions applied in Vietnam does not yet have a specific research.
1.3. The purpose and meaning of the thesis
1.3.1. The purpose of the thesis research
Analysis and evaluation of the current state of pricing newly-built commercial house
at investment, construction and trading house enterprises, from there, giving solutions and
recommendations to complete this work.
1.3.2. Meaning of thesis research
- Making reference to those who are interested in newly- build commercial housing.
- Help for Enterprise's managers have a more scientific basis for pricing newly-built
commercial house to reference in the process of decision making for the management and
trading.
1.3.3 Research Questions
- What’s pricing newly-built commercial house at investment, construction and
trading house enterprises, there problems and inadequacies exist? What causes lead to the
problems and shortcomings that exist?
- Housing prices have valuation, whether in accordance with market needs and ensure
business goals or not?
- What're factors affect to pricing of pricing newly-built commercial house at
investment, construction and trading house enterprises?
- Construction investment and trading house Enterprise, What does it take to
complete the job?
1.4. Subjects and scope of research
1.4.1. Research Subjects
Pricing work for newly- build commercial housing at investment, construction and
trading house enterprises.
1.4.2. Scope of the research
2


- Thesis research on newly- build commercial housing at investment, construction

and trading house enterprises
- Thesis limited in scope in the field of research on newly- build commercial housing
at investment, construction and trading house enterprises focused on the period 2008 –
2012.
1.5. The research results are expected
Based on the research objectives have been set out, the thesis is expected to contribute
the following new features:
- Summary of factors affecting to newly- build commercial housing from it as a basis for
determining the variables for building serves regression.
- Proposed solutions to improve and resolve the outstanding issues in newly- build
commercial housing at investment, construction and trading house enterprises.

CHAPTER II. RATIONALE OF PRICING NEWLY- BUILD COMMERCIAL
HOUSING AT INVESTMENT, CONSTRUCTION AND TRADING HOUSE
ENTERPRISES
2.1. Pricing newly- build commercial housing at investment, construction and trading house
enterprises.
2.1.1. The concept of pricing for newly- build commercial housing
2.1.1.1. The concept of commercial housing
Article 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
Property pricing meaning as assessing the value of property in accordance with the
market at some point, given time in accordance with the standards of the Vietnamese
or international practice.
• The concept of real Estate pricing

Real Estate pricing meaning as estimate the value of real estate in the form of a
specific currency for a purpose defined in the specific conditions and on a certain
market with the appropriate methods.
• The concept of house pricing
House pricing meaning as the estimated value of a home is determined by a form of
currency for the purpose of use has been identified, at a specified time.
• The concept of pricing for newly- build commercial housing
3

Pricing for newly- build commercial housing may be interpreted as follows: Pricing
for newly- build commercial housing as Owner of investment projects in building
valuation for sale or lease in a specific, at a specified time based on technical
criteria, the nature, the location, size of the current situation there and to follow the
market mechanism at the time of pricing.
So, Pricing for newly- build commercial housing at investment, construction and
trading house enterprises may be interpreted as follows: Pricing for newly- build
commercial housing at investment, construction and trading house enterprises is using
valuation methods at the time of valuation businesses need to meet the business
objectives of the enterprise.
• Time pricing for construction investment and trading house enterprise:
Typically, construction investment and trading house enterprise will pricing for
newly- build commercial housing in 03 times in project investment process that is:
Pricing service for the construction of the project document, pricing at the time of the
mobilization of investment capital for the project and the selling price when
completing projects.
- Pricing for newly- build commercial housing for the construction of the project
document.
- Pricing for newly- build commercial housing at the time of the mobilization of
investment capital of customer under the regulations.
- Pricing for newly- build commercial housing at the time of complete frame.

2.2.2. The purpose, principles and characteristics of pricing for newly- build commercial
housing at investment, construction and trading house enterprises
2.2.2.1. The Purpose:
The construction investment and trading house enterprise through pricing to perform
their goals. That goal could be: To survive during the economic downturn, to earn
maximum revenue ahead, to occupy the leading position.
2.2.2.2. The principles of pricing for newly- build commercial housing
2.2.2.3. The characteristics of pricing for newly- build commercial housing at investment,
construction and trading house enterprises:
- Pricing for newly- build commercial housing not only adhere to pricing techniques
but also for the purposes of pricing.
- Newly- build commercial housing is types of assets can not be moved, so the
valuation process must have access to the investigation stage, site survey, at the place where
the immovable property – subject of pricing.
- Each newly- build commercial housing is a unique property (at least in terms of
location) reflect the profitability difference between them.
2.2 Organizational processes and pricing methods of newly- build commercial housing
at investment, construction and trading house enterprises
2.2.1. Organizational processes of pricing for newly- build commercial housing at
investment, construction and trading house enterprises.
4


• Group 1:
The Enterprise will be established on the basis of mobilizing the members of the
relevant functional departments in the enterprise, after specialized team pricing and price
proposals for Enterprise’s leaders to decide.
• Group 2:
Enterprise’s leader will be based on the information provided by the department
functions in providing Enterprise to conduct direct pricing and decide on prices for

enterprise's projects which are carried out investment.
• Group 3:
Model of organizational processes pricing for newly- build commercial housing, this
group be done as group 2, however, the difference of this group as before Enterprise’s
leader pricing decisions, enterprise will rent prices evaluation furniture conduct the
proposed pricing to the leadership Team of Enterprise.
• Group 4:
For this group, the organization of business valuation organization renting the entire
independent pricer to pricing, Enterprise based on price of independent pricer to
decide on pricing.
2.2.2. Pricing methods of newly- build commercial housing at investment, construction
and trading house enterprises.
Current, pricing methods of newly- build commercial housing in Vietnam still the
most commonly used as comparative method and cost method. In the framework of the
thesis, author will analyze three basic methods are comparative method; cost method and
method investments. Two other methods are profits and surpluses are generated by the three
methods above method.
2.2.3. Hedonic method
a. Rationale.
Hedonic is used to describe “The proportion of the relative importance of the
different components in comparison with other components to create performance
indicators on capacity
and desired” ( Goodman, 1998:292 (59). Rosen (1974: 34) (87)
b. Theoretical background hedonic pricing model.
In a study in 2003, Malpezzi (78) has had a profound statement about the
development of theoretical hedonic pricing model. He pointed out, hedonic model is an
estimate of the value of many individual elements. Hedonic equation not only measure the
factors that influence preference measure but buyers how to impact house price.
c. The early history of the hedonic model
d. Facts about the research & application of hedonic models

e. The components of hedonic models
Since the process of understanding the above research shows, the majority of studies
applying hedonic models have focused on factors affecting housing prices as: The location
5

and structure of the house, neighborhoods and their properties. Here author will clarify on
this research.
• The first: Location Property
• The second: Structural Property
• The third: Residential Property
2.3 Factors affecting pricing in newly- build commercial housing
Objectives and production costs of Enterprise; Psychological factors of the customer to
accept price; organizational methods and pricing procedures in newly- build commercial
housing; Selecting the appropriate pricing methods , information systems pricing;
workforce; elements of natural conditions; regulatory environment - mechanism and policy;
Economic environment; operation of the real estate market; development trends of the real
estate market, pricing perceptions of the factors that affect price of newly- build commercial
housing.
CHAPTER III. RESEARCH METHODOLOGY
3.1 Theoretical framework and research approach
Based on the overview of the research in pricing for newly- build commercial
housing at investment, construction and trading house enterprises to identify research
problems, making the dissertation research framework as follows:
3.1.1 Theoretical framework

Diagram 3.1: Conceptual framework for research on pricing for newly- build
commercial housing
6

3.1.2 Framework and research approach
Content of pricing
for newly- build
commercial
housing

- Characteristics and
principles of pricing
for newly- build
commercial housing
- General model of
pricing organization
of newly- build
commercial housing
- Process pricing
framework
of
newlybuild
commercial housing
- Pricing method of
newlybuild
commercial housing
- factors affecting
pricing for newlybuild commercial
housing.

Organization for pricing
for newly- build
commercial housing at
investment, construction

and trading house
enterprises
- Policy & bases of
enterprise in pricing for
newly- build commercial
housing.
- The basic organizational
model
has
been
implemented in the pricing
process by construction
investment and trading
house enterprise.
- The process of pricing
newly- build commercial
housing
has
been
implemented by Enterprises.
- The level of use and
effectiveness
of
the
valuation methods used by
the enterprise.
- Policies, methods and
basis after adjusting pricing
newly- build commercial
housing.

The objective of the work
completed pricing for
newly- build commercial
housing at investment,
construction and trading
house enterprises
- Selecting and building
organizational
model
valuation in accordance
with enterprise.
- Adjust & build process for
pricing
newlybuild
commercial housing to
ensure
scientific
and
minimize costs.
- Selecting and applying for
pricing methods of newlybuild commercial housing
consistent
with
the
characteristics of business
and scientific grounds,
flexibility
and
high

feasibility.
- The conditions and
personnel; legally database
information to respond &
perfect target.

Research overview and consulted
experts in the field of real estate
pricing

Situation analysis of
pricing for newly- build
commercial housing at
investment, construction
and trading house
enterprises.

Assessment of the status of pricing for
newly- build commercial housing at
investment, construction and trading
house enterprises.

Identifying a
research subjects

Interviews and opinions of experts assessed
property. In-depth interview leader; appraiser of
pricing for newly- build commercial housing at
investment, construction and trading house
enterprises.

Interview clients to identify the factors affecting to
pricing of newly- build commercial housing.
Investigation by questionnaire for customers who
have purchased newly- build commercial housing in
projects belong to Hanoi city.

Proposed solutions to improve pricing work of newly- build commercial housing at investment,
construction and trading house enterprises.

Diagram 3.3 : Research Process of thesis
3.3. Research Methodology
To solve the problem in accordance with the study research objectives, the thesis uses
the following main methods:
3.3.1. Methods of analysis, comparison and synthesis
3.3.2. Experts Methodology
3.3.3. In-depth interview method
3.3.4. Quantitative method

Diagram 3.2: Research framework on pricing for newly- build commercial housing to
complete the pricing work of newly- build commercial housing at investment,
construction and trading house enterprises.
3.2. Research Process
To accomplish the research objectives, Thesis research conducted in accordance with
the following (Diagram 1.2):

7

Framing theory of pricing
for newly- build
commercial housing

8


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
4.1.2. Growth of area of house
- In the national boundary
- Comparison between urban and rural areas
4.1.3. House quality and flat size
4.1.4. About housing finance
4.1.5. Scale, capacity of enterprises taking part in housing development
The number of real estate enterprises increases by 20-50% annually. By 2012, the
number of real estate enterprises has increased by 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
Actual state of prices of commercial house for sales
For the market of flats
- On Ho Chi Minh city market
- On Ha Noi city market

Actual state of prices of commercial house for lease
4.2.2. Actual state of policy and basis for pricing newly-built commercial house at
investment, construction and trading house enterprises
4.2.2.1. Policies of enterprises of house pricing
Like other trading enterprises, when pricing newly-built commercial house, the
enterprises have considered the following policy viewpoints on pricing house which is
determining prices for new products, determining prices with discount and compensation.
4.2.2.2. Basis for determining house prices of investment, construction and trading house
enterprises
- Construction unit price
- Framework of land use right transfer price
- Interest rate for bank loan
- Relationship of housing supply and demand
9

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:
Table 4.3: Ratio of investment, construction and trading house enterprises’
application of groups of newly-built commercial house pricing process in 2012

Number of enterprises
Ratio of enterprises
No
Group of process
applying
applying (%)
1 Group of process 1
48
58.54
2 Group of process 2
17
20.73
3 Group of process 3
5
6.10
4 Group of process 4
12
14.63
Total
82
100.00
Source: Statistics from the survey and investigation results of the thesis
4.2.3.1. Actual state of investment, construction and trading house enterprises applying
group of process 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
Selling price at

Price at the
Price at the time
the time finishing
time of record
allowed selling
Name of project
No.
project
(million
(million dong/m2)
2
dong/m )
(million dong/m2)
1 Apartment M3-4 – Nguyen
27.5
32.5
35.5
Chi Thanh
2 Geleximco apartment
12.5
16.6
17.0
3 An Sinh apartment
5.5
7.5
17.5
4 Anh Binh apartment – Tan
8.7
17.1
15.1

10


5
6

Phu district
TWIN tower apartment –
Binh Tan
Vuon Xuan apartment –
Nguyen Chi Thanh

6.5

15.8

13.9

26.5

31.5

31.5

Source: the survey and investigation results of the thesis
4.2.3.2 Actual state of construction investment and trading house enterprise application
processes in groups 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:

Table 4.5: Prices set in process 2 at different times of investment, construction and
trading house enterprises in a number of projects

No.
1
2
3
4
5
6

Name of project
Le Van Luong apartment –
Hacinco
Apartment N07 B1Dich
Vong urban area
Era apartment – Tan Binh
district
Hoang Anh GL apartment –
Da Nang
Apartment CT2 Ngo Thi
Nham – HD
Apartment N4 A – B Le
Van Luong

Price at the
Price at the Selling price at the
time of record time allowed
time finishing
project

selling (million
(million
dong/m2)
dong/m2)
(million dong/m2)
7.5
13.5
16.0
26.5

24.5

25.6

5.2

17.5

14.0

4.8

15.5

11.9

10.5

15.0

17.0

9.7

17.5

21.5

Source: the survey and investigation results of the thesis
4.2.3.3. Actual state of construction investment and trading house enterprise application
processes in groups 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:

11

Table 4.6: Prices set in process 3 at different times of investment, construction and
trading house enterprises in a number of projects
Price at the
Selling price at
Price at the
time allowed
the time
time of record
selling
finishing project
No.
Name of project
(million

(million
(million
dong/m2)
dong/m2)
dong/m2)
1 Hoa Phat apartment – Giai
26.5
31.5
32.0
Phong road
2 Apartment 17 CT – Vinaconex
22.5
29.5
31.0
3 Vimeco apartment – Hoang
26.0
33.0
33.0
Minh Giam
4 Petro Landmark apartment –
17.5
22.5
21.5
District 2
5 Apartment 143 Doc Ngu
25.5
35.5
35.5
Source: the survey and investigation results of the thesis
4.2.4. Current status of target and pricing methods of commercial housing at investment,

construction and trading house enterprises.
4.2.4.1. Current status of target price of commercial housing at investment, construction
and trading house enterprises
In fact research shows that target enterprise valuation of differences in each enterprise
and it may change at different times depending on the actual conditions of trading
enterprises.
4.2.4.2. Current status of pricing methods of newly- build commercial housing at
investment, construction and trading house enterprises.
From practical research activities in the construction investment and trading house
enterprise show that, most enterprise are using the cost method to calculate price, Besides,
there are a number of enterprises using the formula for determining the price in accordance
with Circular 15/2009/TT-BXD issued by the Ministry of Construction on 30 June 2009.
Actual expense method to calculate price for newly- build commercial housing at
investment, construction and trading house enterprises.
Selling price of commercial housing is defined by the formula:
Selling price = Overall cost price + Expected profit + VAT
Pricing method for newly-built commercial house applied by investment, construction
and trading house enterprises can be described generally in a specific project as:
A/ Information of the project:
- Name of the project
: Betexco II Apartment
- Area of the land
: 5,930 m2
- Total area for building : 5,367 m2
12


- Number of story
: 30-story
- Total area of floorage

: 88,038 m2
- Total number of flats
: 400 flats
The building is designed and built with 30 stories and 02 basements. The service zone
is from the 1st floor to the 5th floor with floorage area on each floor of 3,512m2. The area
from the 6th floor to the 30th floor is divided into 02 sections. The floorage area of each
section of 1,200 m2 is used for living (apartment block). Each floor of the section is allocated
08 independent self-contained flats (including sitting room, dining room, kitchen, bed
rooms, bathrooms, logia) which are designed under 02 typical design patterns with the area
of 131 m2 and 120 m2.
B/ Determining the total cost of the project:
• Assumed conditions to calculate the total cost of the project:
- The unit price to calculate the total investment for the project is taken in accordance
with the works of the same scale, characteristics which have been built. This unit
price does not include VAT.
- The land amount of the investment project to build the apartment is calculated in
accordance with Decision No. 4352/QD-UBND of Ha Noi city dated 16 September
2011; accordingly, the value of land use right is equivalent to VND 29,146,000/m2
and the land rental VND 8,400,000/ m2.
- The interest rate for bank loan is 19%/year.
- Corporate income tax is 25% on taxable profits, VAT 10% on total net revenue.
- There is no abnormal change in the socio-economic conditions that affect the project
such as earthquake, war, etc.
• Calculating total investment:
+ Costs of construction and equipment
+ Other costs, costs of project management and other consultancy costs
• Total investment of the project:
Table 4.8: Total investment cost of BetexcoII Project
No.
Content

Method of calculation
Amount (Dong)
1 Construction cost
Appendix Table 1
638,803,728,000
2 Equipment cost
Appendix Table 1
59,865,840,000
3 Land cost
Appendix Table 2
121,117,213,000
4 Project management cost,
10% x (CPXL+CPTB)
69,866,956,800
construction investment
consultancy cost, and other costs
5 Interest for loans during
19%/ year
15,034,351,739
construction
6 Provision fees
19.422% x (CPXL+CPTB+4) 149,265,163,847
Total
1,053,953,253,386
Source: Betexco Investment and Construction company

C/ Determining the selling price of flats and commercial zone:
- Allocation of cost: Table 4.8 indicates that the apartment with an area of 120m2, 131
m2 apartment and the commercial zone is allocated with the total investment of VND
399.7 billion, VND 436.4 billion and VND 217.7 billion, respectively.

- Determining the unit price on each m2 for each area subject to cost allocation: For the
120m2 flats with the total area of 24,000m2, the pre-tax unit price on each m2 is VND
16.657 million and the after-tax unit price is VND 18.33 million; similarly for the
131m2 flats with the total area of 26,200m2, the pre-tax unit price on each m2 is VND
16.657 million and the after-tax unit price is VND 18.33 million; for the service zone
with the total area of 13,071m2, the pre-tax unit price on each m2 is VND 16.657
million and after-tax unit price is VND 18.33 million.
- Determining the selling price of flats and commercial zone on the market: In this
project, the enterprise chooses three levels of interest rates to calculate the selling
price which are 10%, 14% and 19%. With such interest rates, the selling prices of
correlative flats are VND 18,400,000/m2, VND 19,083,000/ m2 and VND
19,920,000/ m2.
Based on the above factors, the enterprise has decided the average selling prices of
the flats and the commercial zone with details as:
+ Commercial zone: average selling price for 1 m2 is VND 23,000,000/ m2;
+ Flats: average selling price for 1 m2 is VND 20,500,000/ m2;
The actual state of application of the method in accordance with guidance in
Circular No. 15/2009/TT-BXD issued by Ministry of Construction on 30 June 2009 to
calculate the price of newly-built commercial house at the investment and trading
enterprises.
Specifically, the pricing method for commercial house is used by enterprises as
follows:
• Pricing method for commercial house:
- In case: Sell house by down payment
Formula to determine:
Td + L + Bt
Gb =
x K (4.2.1)
S
In which:

Gb: Selling price of 1m2 of flat use (Dong/ m2);
Td: Total construction investment cost of the project;
L: Profit of the project (Dong);
Bt: Works maintenance cost for the mutual property (Dong);
S: Total area used of the flats of the project;
K: Floor coefficient on the principle of capital preservation as illustrated in this
example: A 5-story apartment can be allocated as: K1=1.2; K2=1.1; K3=1.0; K4=0.9; K5=0.8.
- In case: Sell house by installment payment

13

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Applicable on the commercial house, the ratio of first payment can change subject to
agreement between the buyer and the project investor. The term of installment payment can
also change flexibly in accordance with the financial condition of the buyer.
• Method of determining rental of commercial house
Formula to determine:
Vd + L + Ql + Bt Tdv
x K (4.2.2)
Gt =
12 x S
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
capital preservation (Dong/ year);
Formula to determine Vd:
Td x r(1+r)n
Vd =

(4.2.3)
(1+r)n-1
Td: Total construction investment cost of the project;
r: Interest rate of invested capital preservation (% year);
n: The number of years to collect capital depending on specific conditions of each
project, minimum 20 years;
L: Profit of the project (Dong/ year);
Ql: Annual operation cost (Dong/ year);
Bt: Works maintenance cost per year (Dong/ year);
Tdv: Revenues from operating services in the apartment in the year such as vehicle
keeping service, canteen service, revenues (if any) from sports events (Dong/ year);
S: Total area for use of the project’s flats for rent (m2);
K: Floor coefficient.
Rental price is determined by the formula (4.2.4) and the rental price shall be lower
than that in formula (4.2.2).
Vd + Ql + Bt - Tdv
Gt =
x K (4.2.4)
12 x S
Method of determining price of renting and buying house
Formula to determine:
A x (Vd + L) x K + Ql + Bt - Tdv
x K (4.2.5)
Gtm =
12 x S
In which:
Gtm: Price of renting and buying 1m2 of flat use by month (Dong/m2/month);
A: Coefficient illustrating the ratio between the remaining value of the flat (after
subtracting the first payment) and the initial value of the flat (A<1);

Vd: Construction investment cost of the project allocated annually on the principle of
capital preservation (Dong/ year);
L: Profit of the project allocated by year (Dong/ year);
The pricing for newly-built commercial house applied under this method can be
generally described in the following example:
Information of the project:
- Name of the project
: An Hoi 3 Apartment Project, Pham Van Chieu street,
ward 14, Go Vap district, Ho Chi Minh city
- Investor
: Sai Gon Real Estate Corporation
Data of the project is provided as follows:
- 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)
- 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).
- 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
- 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.
- 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.
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).
- 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
20 years, the monthly payment shall decrease to VND 7,446,000/ month.

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Comment on the actual state of the pricing method applied by the investment,
construction and trading house enterprises
From the factual research of this content, the following comments can be indicated
from the thesis:
- 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.
- 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.
- The application of comparative method is performed in an emotional manner rather
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
• Price adjustment
Enterprises often adjust the prices on the following coefficients:
- Coefficient of house location
- Coefficient of flat floor
- Coefficient of house direction
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
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
On pricing basis: Basically based on scientific basis.
On pricing procedures: Ensuring the basic principles in the pricing procedure for
products in general and for real estate products in particular.
- 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.

4.3.2. Restrictions and causes
• Restrictions in pricing house at the investment, construction and trading house
enterprises
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.
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.
Thirdly: The database serving the pricing of the majority of the investment, construction
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.
Fifthly: The investment, construction and trading house enterprises have not applied a
complete pricing organization process.
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.
• 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.
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.
Seventhly: The habit of making secret transaction has rooted in the thinking of people
and enterprises.
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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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
Viewpoint 1: The pricing of newly-built commercial house should ensure the
reasonable connection between the value and value in use of the house
Viewpoint 2: The pricing of newly-built commercial house should reflect the
relationship between supply and demand and the market price
Viewpoint 3: The pricing of newly-built commercial house should ensure the
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
Step 1: Collect results of field investigation or analyze stored data to identify
variables.
Step 2: Identify correlation coefficient between dependent variables and each
independent variable (Pearson – r correlation coefficient).
Step 3: Identify the order of independent variables according to criteria of Pearson
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

Table 5.2: Results of multivariate regression analysis by stepwise method
Unstandardized Standardized
Multicolinearity
coefficient
coefficient
test
Variable
t
Sig.
Standard
Toleranc
B
Beta
VIF
e
deviation
Constant
19.855 3.379
5.876 0.000
KC_TT
-0.814 0.091
-0.377
-8.973 0.000 0.198
5.045
COST
0.712 0.110
0.285
6.487 0.000 0.181

5.511
KC_MS
-0.556 0.243
-0.096
-2.284 0.023 0.197
5.085
SECURITY
1.563 0.357
0.165
4.379 0.000 0.246
4.065
ENVIRONMENT 0,889 0.326
0.100
2.727 0.007 0.262
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:
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:
- 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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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 newlybuilt commercial house at investment, construction and trading house enterprises

5.2.2.1. Data model
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
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.
- 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
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
- 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.

- 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.
- 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.
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:

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Establish Group/ Division pricing newlybuilt commercial house of enterprises

Group/ Division prices house to do
investment project

Decide on house price to do
investment project

Independence appraisal

Group/ Division prices house at the time
to be sold

Independence
appraisal

Group/ Division prices house at the time
finishing project

Decide on house price at the time
to be sold

Decide on house price at the time
finishing project

Independence appraisal

Diagram 5.3: Process of house pricing proposed to investment, construction and
trading house enterprises

• 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:
- 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
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:
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
23

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.
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 newlybuilt 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.
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.

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