In the report on the real estate industry and its impact on the stock market recently released by the research department of SSI Securities Company (SSI Research), this unit assessed that the market in the first months of the year has almost reached its lowest level in recent years when demand has decreased sharply, the number of transactions has decreased by 50% compared to the same period.
However, according to SSI Research, there are currently signs that the real estate market has bottomed out and is showing signs of recovery as interest rates have cooled down sooner than expected.
Specifically, at the beginning of the year, SSI Research predicted that interest rates could peak in mid-2023 and then gradually decrease. However, so far, the reality shows that interest rates have cooled down earlier than expected, starting from mid-March. Although it has not significantly reflected on lending rates, the decrease in interest rates still helps stabilize market sentiment on this issue.
Real estate market recovery.
SSI Research also assessed that in the first 4 months of the year, many solutions to support the real estate market were discussed and issued. Although these measures may need time to have clearer effects, they have partly reflected the Government 's strong determination to solve bottlenecks for the real estate industry.
“ The real estate market has seen more positive moves, mainly from investors and brokers. On the demand side, although the average home loan interest rate has dropped to around 13.5%/year in April from the peak of around 15%/year in January, this is still high and needs to be reduced further to stimulate demand ,” SSI Research commented.
With current home loan interest rates hovering around 13%, SSI Research believes that it may be necessary to cut interest rates by 150 to 200 basis points to stimulate demand in the real estate market, and this is likely to happen in 2024. At that time, liquidity will improve as the Government's measures to ease difficulties in the real estate market and corporate bond market come into practice.
In the context of interest rates decreasing sooner than expected and receiving more active support from the Government, SSI Research believes that the worst may be over for the real estate industry. Although the real estate market is improving, there may still be certain obstacles.
In particular, lending interest rates still need to be reduced further to stimulate demand again. Support policies also need time to really impact the market, especially to remove bottlenecks in the project licensing process.
Besides, SSI Research believes that the risk of default can still occur with investors who cannot negotiate with bondholders to extend payment terms or balance cash flow to repay debt.
Therefore, investors who are less affected by bond issues, own good land funds and have strong development and sales capabilities are the ones who are able to overcome the "headwinds" ahead and benefit from support policies.
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