The credit crisis is suffocating the real estate sector


The sales struggle

The drop in cash was attributed to a rise in real estate inventory and a drop in down payments from homebuyers, which made it more difficult to manage businesses and cash flow, as credit was stifled and the corporate bond issuance channel has tightened.

Some investors have joked that a down payment is a business savings because it will be recorded in an income statement. However, according to corporate financial statements, the first half of the year saw a decline in down payments, while real estate inventories soared.

This signals that the real estate market will have difficulties ahead.

No Va Land Investment Group Corporation announced that its unsold proceeds reached over VND 125.5 trillion at the end of the second quarter and increased by 14% year-on-year. During this time, they were prepaid only VND 12.6 trillion.

Similarly, the Sai Gon Thuong Tin Real Estate JSC saw a 27% drop in deposits from around VND 1.3 trillion to VND 986 billion.

VINACONEX Transportation Joint Stock, Ha Do Group JSC and Van Phu Invest also suffered the same fate, with their “down payments” decreasing by 61%, 12% and 20% respectively.

Similarly, Dat Xanh Group saw a sharp increase in its total assets, adding some VND 2 trillion. But asset quality only increased from around VND11.2 trillion to VND12.5 trillion, as the increase came mainly from inventories, in which unfinished goods rose from more than 8.7 trillion VND to 10.2 trillion VND.

Meanwhile, its debts have increased by more than VND1 trillion, while sales revenue and profits have fallen by 56% and 28% in the first half of this year.

Similarly, the financial situation of Khang Dien House Trading and Investment JSC looks grim. At the end of the second quarter, its inventories and receivables increased from VND 7.7 trillion to VND 12.1 trillion. This led its negative profit to reach VND 2 trillion from the VND 843 billion recorded at the start of the period.

Quoc Cuong Gia Lai joint-stock company posted its inventory value reaching more than VND 7.1 trillion for the same period, while its cash position was below VND 40 billion.

Many other real estate companies are also facing the same problem.

While it is difficult to generate income from sales, tighter control over credit and bonds blocks access to these two fundraising channels. In July, the whole sector saw very few companies issuing bonds and the value of real estate bonds fell by 98%.

According to Ngo Quang Phuc, managing director of Phu Dong Group, the current capital shortage in the sector has been attributed to measures taken by banks to tighten credit in April. Real estate companies have been unable to access loans in recent months, and some of them have had to suspend construction.

Businesses can hold out until next year when the market recovers and credit allocation is more appropriate, Phuc said.

The real estate sector faces overlapping debt as bonds issued by real estate companies will soon mature, as well as pressure in capital and equity markets, said Ngo Duc Son, managing director of DRH Holdings. . They will go bankrupt if the policies are not revised.

Nguyen Van Dinh, president of the Vietnam Association of Realtors, said the housing market was entering a phase of rebalancing. House prices would increase due to increased costs and reduced cash. Investors are also cautious in their decisions.

“As things stand, the market could fall into a frozen state, so policies need to be revised to help the market rebalance and reduce losses,” Dinh noted.

Difficult for middle-income buyers

Rising interest rates and tighter credit have made buying a home more difficult.

Nguyen Quang Tuan, a resident of Binh Thanh district, who put down a deposit on an apartment worth VND2.3 billion in Thu Duc town, is still waiting for banks to disburse it. Although he has priority, he still cannot take out a loan unless some borrowers repay their loans.

Previously, he had applied for a loan from another bank. Even though he met the loan conditions, he was refused, because the bank had exhausted its credit growth quota.

In May, homebuyers learned that banks had raised lending rates, discouraging them from taking out a mortgage.

Home prices have risen 5% to 15% so far. Most apartment prices exceeded VND2 billion per unit. If a home buyer gets a loan of 1 billion VND, he will have to pay the bank 13 to 15 million VND per month. Thus, his income should be around 40 million VND per month to settle his debt.

The shortage of housing market capital has also influenced other relevant sectors, putting the supply chain at risk. And the construction sector would be the hardest hit due to the huge unpaid debt of developers.

According to the Vietnamese Construction Contractors Association, almost all construction contractors face outstanding debts ranging from hundreds of billions to trillions of Vietnamese dong.

There are solutions to the current situation, said an executive of a HCMC-based property company. Businesses can reduce profit margins, cut costs and offer discounts.

However, it will be difficult to do so, as project costs always seem to increase. To find a way out, companies must wait for credit reallocation or raise capital through mergers and acquisitions.

Source: Saigon Times


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