Continuous decline
According to DKRA Vietnam statistics, although it has entered the second quarter of 2023, the real estate market in Ho Chi Minh City in particular and neighboring provinces in general is still in a state of stagnation, with no signs of recovery. Real estate businesses and investors are waiting together, because investors do not want to open projects for sale, and investors do not want to put money down for fear of being tied up in capital, not finding an outlet... However, the real estate market still records positive signs in terms of supply and transactions in a number of apartment projects with favorable locations, invested by reputable investors and ensuring on-time delivery.
For real estate enterprises developing projects, they are still continuing to narrow down their investment and business activities, many of which have had to drastically restructure, restructure investments, change appropriate business plans, and even stop or postpone investment activities and construction of new projects. Regarding the sluggish real estate market, the Vietnam Real Estate Brokers Association said that in terms of supply, from the beginning of 2022 to the beginning of the second quarter of 2023, the market has always been in a state of "thirst" for supply, especially the supply of affordable housing, suitable for the financial capacity of the majority of people.
In addition, the lack of suitable real estate supply combined with weak cash flow and decreased customer confidence has caused the number of transactions to decrease since the beginning of 2023. The overall absorption rate of the whole market in the first quarter of 2023 was only about 11%, equivalent to more than 2,700 transactions, down more than 50% compared to the same period in 2022. In the first quarter of 2023, the revenue of real estate businesses also decreased by 6.46% compared to the same period in 2022, and after-tax profit decreased by 38.6% compared to the same period in 2022.
Need to be cleared
According to the Ho Chi Minh City Real Estate Association (HoREA), in the first 5 months of 2023, the number of real estate businesses dissolved and temporarily suspended continued to increase. Businesses that have been operating have tried to gradually eliminate factors that reduce the burden of operating costs but are still not strong enough to "rise up". The majority of real estate brokers who have quit their jobs are "newbies" and "amateurs" who have not been properly trained in the profession as well as the ability to respond to difficult situations in the current market.
HoREA forecasts that if the market situation continues to be as difficult as it is now, only 20% of real estate businesses may be able to maintain operations until the end of the third quarter of 2023, 40% of businesses will survive until the end of 2023, while businesses with potential and strong finances will be able to maintain business in the long term. Real estate businesses need to understand the current situation, so they must accept to reduce selling prices to create liquidity and cash flow; proactively negotiate with banks on loan programs for first-time home buyers; at the same time, accept to create a new price base suitable for people's purchasing power and cannot maintain the view that the real estate market will not decrease in price.
In order for the real estate market to have a natural purification, banks should soon have a new set of criteria to assess credit for real estate businesses and standardize the transfer of projects or evaluate the financial capacity of businesses "requesting" project policies... This is very important to consider the capacity and reputation of businesses, thus partly ending the situation of incompetent investors in project development, helping the real estate market to recover soon and develop more healthily in the future.
Mr. Le Hoang Chau - Chairman of HoREA
Economist Tran Nguyen Dan commented that the real estate market in the South in general and Ho Chi Minh City in particular is lacking capital. The reason is not that banks do not arrange capital for real estate businesses, but because the market has grown too hot, pushing real estate prices up virtually. It is forecasted that 2023 will be a decisive year for real estate businesses if they are not supported to resolve cash flow issues to ensure liquidity. Currently, legal problems with real estate projects account for 70% of the difficulties of businesses. Next is the issue of real estate corporate bonds that have matured, credit loans that have matured and turned into bad debt or transferred to a worse debt group.
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