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House prices forecast to increase after steel price hike

Update: March, 19/2016 - 10:02
Real estate developers raised these concerns after the Ministry of Industry and Trade (MoIT) announced additional tariffs to be levied on imported steel products as of Tuesday. — Photo vov

HÀ NỘI (Biz Hub) — The cost of building houses is expected to increase due to the recent rise in steel prices, which will in turn likely cause a spike in home purchase prices.

Real estate developers raised these concerns after the Ministry of Industry and Trade (MoIT) announced additional tariffs to be levied on imported steel products as of Tuesday.

This is a temporary safeguard measure against inexpensive imports that were said to be threatening the domestic industry.

Under the new decision, the import tax imposed on steel billets would increase from 10 per cent to 23.3 per cent while the tax imposed on long steel products would rise to 14.2 per cent from below 5 per cent.

With the new tariff, steel prices are expected to increase by three per cent.

Nguyễn Thế Điệp, deputy chairman of the Hà Nội Real Estate Club, said the prices of steel and cement account for 40 per cent of a real estate project’s construction costs, and thus the hike in steel prices will definitely lead to a surge in house prices.

Property developers whose projects are in the first stage of construction would be the most affected, Điệp said.

Nguyễn Viết Hải, general director of the VIC Investment Joint Stock Company, said that over the past few days, the company had to purchase steel at higher prices.

Steel is the most important material for construction projects, and the hike in building costs would force investors to adjust prices for the final products to gain profits, Hải said.

However, housing developers are unsure how long the price hike will last.

Hải said that decisive factors involving house prices were not only materials, but also labour costs and demand. In addition, the safeguard measure will only be in effect until October.

When prices increase, demand might fall because people tend to wait until prices drop, he said.

Economic expert Ngô Trí Long said the rise in house prices is predictable, but how long the steel price hike would affect the market is hard to say because it depends on the relationship between supply and demand. — VNS

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