Many people borrowed money to invest in property in 2022, hoping to make quick profits but lost instead as tightened credit drove up interest rates and hit liquidity.
In late 2021, Nu bought an apartment for VND2.5 billion (US$104,000) in the southern province of Binh Duong, hoping to resell it within a few months for a profit of hundreds of millions of dong.
But in late 2022, when bank interest rates went up, she had to sell the apartment for a loss of over VND300 million.
She said: “The broker told me that apartment prices kept increasing from 2016 to 2021, and so I bought the apartment hoping for a profit of hundreds of millions of dong in six to eight months. But I was shocked that I was forced to sell it at a loss.”
Nu’s situation was common in the southern apartment market in the second half of this year.
In December, Lu put on sale an apartment he had bought for VND3 billion in HCMC’s Thu Duc city. This time he accepted a loss of VND600 million after the discount of VND300 million he had offered in August found no takers.
He said: “The interest rate has increased from 9% to over 13%, there have been no buyers, and I still had to pay the loan and interest every month. All of these forced me to accept losses of more than half a billion dong. It is a shock to me because in recent years apartment prices in HCMC have only increased.”
Many investors in land have suffered similar losses this year.
Early in 2022 Phuc borrowed VND1.5 billion to buy a plot of land near an industrial park in a province bordering HCMC after a broker said he could resell it within eight months for a profit of 10-15%.
But Phuc has yet to find a buyer while the loan interest rate has surged to nearly 14%. Most of his monthly income goes toward paying the interest.
He said: “I have already lowered the offer price to the original buying price. I don’t know if I can hold out [for much longer].”
In the first quarter of the year Ha paid VND3 billion, 70% of it coming from loans, to buy a plot of agricultural land in Bao Loc city in the central highlands province of Lam Dong. He and his wife now use 80% of their monthly income to pay the interest which is currently at a rate of 15%.
He lamented: “The pressure to pay interest every month has turned our investment, our hope for a big profit, into a time bomb. If I cannot afford to pay interest, the land has to be liquidated at lower than the market price.”
Huynh Phuoc Nghia, a senior consultant at advisory firm GIBC, said 2022 was a shocking year for realty investors who relied on loans.
The real estate market has been quiet for the last eight months, especially in the third and fourth quarters. Investors using financial leverage are most vulnerable to low liquidity, rising interest rates and credit control, especially when these appear at the same time.
Luong Dinh Thuy Van, CEO of investment consultancy Mogin Holdings, said most short-term investors, who dream of getting rich in six to 12 months, racked up losses in 2022.
She sounded a warning: “The property market would not be favorable to cash-strapped investors in 2023 either.”
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