Vietnam's real estate market faces challenges due to difficulty in accessing credit capital. Many commercial banks have increased deposit interest rates after the State Bank raised the operating interest rates earlier. With the newly increased rate, people will deposit money in banks, limiting cash flow into real estate. On the other hand, when lending interest rates increase, investors using financial leverage will be unable to repay their loans and will be forced to sell real estate to cut losses. Because the real estate business operates mainly on bank loans, the homebuyers have to borrow money, so the real estate market will suffer double effects.
According to a report by the Hanoi Department of Construction, the city’s housing supply is scarce in the third quarter of 2022. Accordingly, the main real estate supply comes from projects that have been approved for investment policies before. A tighter credit policy and the difficulties in procedures make many projects impossible to implement. Product consumption is also low. The market has not shown any signs of improvement.
The cause of the decrease in real estate transactions is the legal barrier, and the provinces are still slow to approve real estate projects. In addition, recently, credit capital into real estate is strictly managed, and credit room is stricter, making cash flow into the real estate market even more scarce. Meanwhile, investors who want to invest in real estate products but do not have enough financial resources can hardly do so, leading to a decrease in transaction volume.
Vietnam's real estate is forecasted to be gloomy from now to 2023.
In the third quarter, many real estate survey consultants reported that the market's signs of deceleration were getting stronger and forecasted a difficult cycle that could last for several coming quarters. The Ho Chi Minh City Real Estate Association (HoREA) said that in the first nine months of 2022, real estate transactions decreased by 50%, depending on the project and region. The market is at risk of prolonged depression when the supporting capital flows are congested.
According to Cushman & Wakefield, housing liquidity in Ho Chi Minh City dropped by more than 50% when market demand slowed from July-August onwards. According to Savills Vietnam, in the third quarter, the absorption rate of apartments in Ho Chi Minh City was only 15%, the lowest since 2019. Apartments inventory was the largest in the recent 4 years, accounting for about 66% of the primary supply. The Vietnam Association of Realtors (VARs) also warned that the absorption rate of real estate in the third quarter was only 33.5%, a sharp drop compared to the first half of the year.
The market has also reacted poorly in terms of online data. Nguyen Quoc Anh, deputy general director of Batdongsan, said that large markets such as Ho Chi Minh City, Hanoi, Da Nang, and Can Tho, have recorded a decline in the interest in online real estate searchers with a decrease of 14-19%. All types of real estate also decreased by 9-50%.
Mr. Quoc Anh assessed that the market was going through an extremely difficult period when most projects stopped working due to a lack of capital. Many real estate investors have fallen into a state of capital thirst since the beginning of the year.
Huynh Phuoc Nghia, GIBC Senior Consultant, assessed that Vietnam's real estate market’s nature is to invest in assets to make a profit, and investors aim for sustainable growth. If the investments are profitable, they continue to add capital or convert part of the cash flow to another channel. If the market moves sideways or decelerates and profits are low, or if there is a risk of loss, investors will soon sell their properties and withdraw.
According to Mr. Nghia, the instability of cash flow in the market shows that despite its large value, real estate is still a sensitive and volatile investment channel. He also commented that low liquidity in recent quarters, plus a lack of supportive capital inflows, might push the real estate market into a long quiet scenario in the coming time.
Source: The Ministry of Industry and Trade, vnexpress
Compiled by VietnamCredit