With the way liquidity has been plunging in Vietnam’s property market, it could experience a recession next year, says Le Hoang Chau, chairman of the Ho Chi Minh City Real Estate Association (HoREA).
“A number of property companies are facing the risk of falling liquidity and might have to make painful decisions to survive,” he told VnExpress on the sidelines of a meeting between the Government Office and representatives of the property industry that aimed to identify and discuss measures to tackle market challenges.
Many property developers are scaling down their business as can be seen by suspensions, investment or construction delays, he said.
They have also stopped deploying new projects, issuing new shares or launching initial public offerings, he noted, adding that such actions will have an impact on economic recovery and reduce government’s revenues, he added.
Property developers have been cutting down their workforce, some by up to 50%, Chau said.
With bank’s credit quotas full and tighter controls over the bond market, property developers are “hungry” for capital and must borrow from unofficial lenders at high interest rate (up to 40-50% of contract value), which means future projects carry great risks.
Furthermore, the selloff of many projects could create an opportunity for foreign investors to take over and steal the advantages hitherto enjoyed by domestic companies, which have been leading the market.
With a global economic recession and supply chain disruption anticipated next year, Vietnam’s property market could take a serious hit, he added.
An estimated VND790 trillion ($31.76 billion) worth of bonds are set to mature in 2023 and 2024, presenting a big repayment pressure on property developers, and the government needs to issue policies to help streamline this market.
One positive sign is that many developers are making an effort to buy back their bonds, with the total value of such transactions reaching VND142 trillion in the first nine months. This will reduce risks for investors, Chau said.
Still, unsold inventory of 45 major property developers in the first nine months was valued at VND273.37 trillion, accounting for more than half of their combined asset value.
This is a risk as many unsold inventories are at unfinished projects and policies are needed to help untie the legal knot at these locations, he added.
The chairman of HoREA proposed several solutions, including completing amendments to land laws and creating favorable conditions for homebuyers to access loans affordable housing.
The State Bank of Vietnam (SBV) could also consider increasing its credit quota by 1 or 2% points for the remaining weeks in this year as a boost to the industry, he said.
Allowing amateur investors to purchase bonds under a certain cap will also help relax the capital bottleneck property developers are facing, Chau added.
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