Calls for real estate market overhaul

HoREA head Le Hoang Chau stated that the real estate market is challenging. The most critical obstacles to overcome are legal problems and a lack of financial resources.

"It's not just small firms, even huge organisations and multinationals have significant financial issues," Chau warned.

According to the chairman of HoREA, transactions in the real estate market have decreased to the point where it is no longer viable to mobilise funds from clients. Access to financing is problematic not just for enterprises but also for homeowners and investors.

Regarding the reason, Chau said that in addition to the difficulties imposed by the state's intentional removal of processes and rules, businesses also have a financial burden.

"Enterprises spend heavily without measuring their performance and the product structure is not market-appropriate," he said.

This results in market phase differences and an imbalance in product development. Both affordable and social housing is in short supply, despite the fact that residents need it.

In 2020, only 1 per cent of the available housing in Ho Chi Minh City was affordable (at or below $1,280 per square metre). Since 2021, there have been no commercial affordable housing developments. In the meantime, the share of luxury homes climbed steadily. In 2020, high-end housing accounted for 70 per cent of the market share, which rose to 80 per cent between 2021 and 2022. The remainder was made up of mid-range housing.

There is a severe scarcity of affordable housing on the market, which has resulted in skyrocketing housing costs. Currently, social housing units cost up to $1,066 per sq.m, although the original goal was roughly $640 per sq.m.

"Many firms have made attempts to reorganise and restructure their investments," said Chau while discussing remedies.

"We requested a price reduction on homes. It is better to sell at a loss and determine how much property you still have than to have a false expectation of profit and then drown and lose all your assets because you can't sell," stated the HoREA's chairman.

Regarding bonds, Chau said that the entire value of corporate bonds due in the first quarter of 2023 is around $5.07 billion. Therefore, he urged that the State Bank pay careful attention and facilitate firms' access to credit capital.

Nevertheless, according to Nguyen Quoc Hung, general secretary of the Vietnam Banks Association, the banking sector is exercising extreme caution. If it failed in this regard, credit capital would be supplied to compensate for the maturation of corporate bonds.

Hung said, "Property management is exceedingly hazardous."

Economic expert Vo Tri Thanh said that financial and monetary legality are connected. If the legal difficulties are not resolved, the connection between financial institutions, banks, and real estate enterprises will not return to a state of ordinary cash flows.

Citing the case of China's Evergrande Real Estate Group, Thanh said that it is vital to eliminate obstacles in order to sustain credit flows and guarantee that certain requirements are not too stringent. At the same time, corporations must be able to continue issuing bonds to repay debt or deploy other cash-generating initiatives.

China's policy has switched to emphasise development based on actual supply and demand, with an increased focus on inexpensive and social housing.

"It is critical to adopt a comprehensive approach to reforming, reconstructing, and overhauling the industry from the macro level (policy level) to the micro level (business level) to enable the real estate market to recover," Thanh said.

Pauses put paid to real estate M&A Difficulties in legal procedures are slowing down the flow of real estate mergers and acquisitions from foreign investors, with some units pausing or restructuring their strategies.

Ho Chi Minh City suburban real estate market set for revival After a lengthy period of inactivity, the real estate market in and around Ho Chi Minh City is resuming deals, mostly in new full-scale developments.

Several consequences to be felt in real estate in 2023 Although there have been supportive signs for the market, real estate in 2023 is expected to be still affected by the declining confidence of homebuyers, obstacles in the legal framework, and scarce capital sources.