Pinpointing the bottom of the market

“At present, the market has yet to reach its pricing bottom, but it is forming one, which is likely to appear in 2023,” said Nguyen Thi Bich Ngoc, founder and general director of Sen Vang Group.

This year cash flow has been an issue for the real estate market, as many companies are relying mainly on borrowed money, and the market has yet to witness any major merger and acquisition (M&A) deals.

Ngoc said that when key players conduct mega M&A deals to consolidate the market, the bottom will be formed.

“This development is expected to bring opportunities for individual investors. Those who have experienced a crisis in the past can identify some major market tendencies, from bust to recovery and growth,” Ngoc said.

Pinpointing the bottom of the market, illustration photo

The real estate market has its own rules so that investors can analyse the trends based on information, and it does not fluctuate erratically like the stock market, according to Ngoc.

“If you look at the market history, when M&A deals have taken place, the cash flow will return. The market will start a new growth cycle. Amid the current changes in macro and market conditions, the quiet period may not last as long as the previous crises,” Ngoc said.

Le Xuan Nga, general director of BHS Group, said that the real estate market is unlikely to freeze or burst its bubble in comparison to the previous period.

“This is attributable to the government’s experience in dealing with the market. The government has issued flexible policies to limit the abnormal volatility of the market,” Nga said.

According to Nga, products that meet the real demand with reasonable prices will receive more attention. These products include apartments, residential housing, social housing, and land plots near industrial zones, as well as serviced apartments and hotels in potential resorts at affordable prices.

“These products will lead the market in the next few years with a higher return in the new phase of market development,” Nga added.

Nga said that the real estate market may witness fluctuations like the stock market and investors can search for products with good discounts to buy.

“However, they should pay special attention to the legality of the product and the developer’s potential. Developers should be capable of implementing the project in line with their commitments. Thus, investors can evaluate the possibility of leasing the properties,” Nga said.

Market history has shown that there will be a new price level after recessions. The end of 2022 brings opportunities for investors, as many projects offer great discounts. Some projects in Vinh Yen of Vinh Phuc province, for example, with full legality are offered a discount from $1,200-1,400 to $600-700 per square metre.

The correct actions

A major problem for investors when the market is entering a quiet period is how to act when products have reduced prices.

According to Giap Van Kiem, chairman of AVLand Group, when the market entered a difficult period, many investors hit troubles due to the recent land fever in many areas. At this stage, they need to be brave enough to cut losses to protect capital and find profitable opportunities, instead of trying to wait for prices to increase.

While land plots are of interest to many, high profits often come with great risks. Therefore, investors need to determine the market sentiment in advance and boldly cut losses to minimise the damages, according to Kiem.

“If you don’t want to get stuck, you have to reduce the burden and incur fewer losses. Therefore, those who have invested at the top of the cycle should cut their losses as quickly as possible to find new opportunities,” Kiem stressed.

Instead of short-term investment, financiers need to focus on the medium- and long-term directions to keep up with the upward trend sustainably. In addition, as Kiem said, they should also pay attention to the government’s moves to promote public investment and some new potential areas such as Phu Yen province in the central or Lao Cai province in the north.

Another common point shared by many market participants is that the macroeconomic context and the investment story in the market have changed significantly compared to previous periods. For example, in the past, many individual financiers used leverage at a very high rate, often over 50 per cent. This group is more careful, using leverage at a lower proportion. This makes them more tolerant of market fluctuations.

Meanwhile, the sell-off period is shorter than the previous period. Therefore, if investors want to make a profit from the market during the down period, they need to carefully understand the product and be decisive, Kiem explained.

Economist Nguyen Tri Hieu said that cash flow is a matter of concern to all market players in the current context.

“Currently, confidence in corporate bonds is declining. This issue also negatively affects the financial health of businesses, including many real estate businesses that cannot turn around their cash flows,” Hieu said.

Therefore, it is imperative to deal with the due corporate bonds. If there is no money to pay, it will easily lead to default, thereby creating a domino effect from one corporate bond to other corporate bonds.

“The government should soon come up with a programme to delay repayment for mature corporate bonds, with a delay of one year along with conditions,” Hieu said. “Of course, we still know that corporate bonds are self-borrowing under a civil contract, so it is necessary to avoid intervention by administrative orders.”

“However, in this special situation, the government needs to act to avoid any impact on the economy,” he added.

Industrial property expansion supported by long-term goals As the economy retains a strong growth rate in 2023, the expansion potential of the industrial real estate market will continue to pique the interest of investors.

Cash burden alleviation now called for The domestic real estate market is starting to recover, but it would benefit from more governmental assistance, such as softer bank loans and credit.

The prospects in real estate M&A As Vietnam’s population hit the 100 million mark before the end of 2022, the need for housing, affordable or otherwise, is becoming even more acute.