Realty market slump leaves speculators stranded

He had borrowed to buy lands and a villa in five provinces in the south.

He owns residential and agricultural lands in Lam Dong, Binh Duong, Long An, and Binh Phuoc provinces and the villa in Dong Nai, but is always short of money to pay the banks.

He has to pay principal and interest adding up to nearly VND200 million (US$8,500) a month.

One bank has repeatedly warned him that a loan of VND6 billion could turn into a bad debt.

Tan said he and his wife are a manager and specialist in the consumer goods industry with high salaries, but their incomes have fallen in recent times due to the economic situation.

He is unable to sell any of his properties either because of the property market slump, he said.

“I have offered discounts of 25-30% for lands in Bao Loc (in Lam Dong province), Binh Duong, Long An, and Binh Phuoc, and more than VND2 billion on the villa in a large urban project in Dong Nai. Three quarters have passed, but I have found no buyers.

“A year ago it would have been hard to imagine that the assets once expected to be profitable would leave me in the lurch.”

Minh of Thu Duc City, Ho Chi Minh City, is also stuck with two villas that cost VND27 billion and slated for delivery next year in Dong Nai.

He borrowed from two banks and was paying principal and interest on one loan since the developer subsidized interest on the other.

But recently the developer stopped paying the interest of 9% and so Minh has to pay that too.

In recent months he has had to sell his family gold and borrow money from relatives to pay the banks.

He said: “I bought the two villas, planning to sell one when prices increase and keeping the other. But their prices have decreased by 20-25% and nobody wants to buy. I have to pay hundreds of millions of dong a month. I want to cut my losses now. I cannot take it any more.”

It is the same story in locality after locality.

The prices of agricultural lands in Lam Dong have fallen by 30-40%, even 50%, but there are no buyers.

Hong, a construction contractor in Bao Loc city, said agricultural lands fetched speculators profits of VND2-3 billion in just a couple of months in 2020-21 and early 2022, but there have been few transactions since the second quarter of last year.

“People own hectares of land, but have no cash. They offer to sell lands at losses but nobody is buying. Creditors, including banks, are foreclosing.”

Huynh Phuoc Nghia of business consultancy GIBC said: “This is an inevitable consequence of excessive investment and use of financial leverage.”

Speculators obtain large loans and are left holding their assets and debts when the economy and property market tank, he said.

“This scenario is not new. It has been repeated many times cyclically.”

The market has shown no signs of recovery, the economic difficulties might prolong and interest rates are unlikely to fall sharply, and so investors with financial leverage have to shoulder a bigger burden in the near future, he warned.

The property sell-off season would not end any time soon, he warned.