Tough times for real estate businesses

Difficulties clinging real estate businesses too weary

The fourth quarter of 2022 was an extremely difficult period for real estate businesses when most had meagre business results, with record-high losses for many.

In Ho Chi Minh City, Thuong Tin Real Estate JSC (TTC Land), in the fourth quarter of 2022, reported revenue of more than VND319 billion ($13.87 million), but financial revenue dropped sharply, making a gross profit of only $3.5 million.

Although gross profit was positive, after-tax profit declined due to increasing financial expenses when the company recovered short-term. As a result, TTC Land suffered a loss of more than $3.95 million in the fourth quarter of 2022, a first loss since 2020.

Also in the group of enterprises with record losses, LDG Investment JSC (LDG) reported revenue of nearly $2 million in the fourth quarter of 2022. However, due to the increase in selling and administrative expenses, LDG saw an after-tax loss of nearly $1.7 million, the first time LDG has made a loss since the third quarter of 2016.

The loss was caused by the high financial expense when LDG had to spend more than $652,000 on interest expenses, $1.35 million in sharing the benefits of investment cooperation, and $869,500 on other financial expenses. In 2022, LDG achieved $12 million in net revenue, and $174,000 in after-tax profit, equivalent to only 12 per cent of the revenue target and 1.3 per cent of the profit target.

The revenue of the fourth quarter of 2022 of Dat Xanh Group JSC also dropped deeply to only $42.8 million, down 57 per cent on-year. However, because the business was profitable at the beginning of the year, Dat Xanh still recorded a profit of $20.4 million in 2022, down 71 per cent.

Numerous other well-known enterprises in the industry saw a sharp decline in revenues and profits in the fourth quarter of 2022. For example, in 2022, Khang Dien achieved a net revenue of $126 million, down 22 per cent; profit after tax of $46.95 million, down 10.2 per cent compared to 2021. The company accomplished 73 per cent of its yearly revenue target and 77 per cent of the profit target.

Meanwhile, Phat Dat Real Estate Development JSC had to struggle with bond debts and a sell off assets, so net revenue was only $652,000 in the fourth quarter of 2022, while interest fees loans doubled. This is a crisis quarter for Phat Dat when the stock plummeted for 28 sessions, pulling the company's capitalisation down sharply from $1.6 million to less than VND10 trillion.

Calls for real estate market overhaul Reforming the real estate market is contingent not only on restoring cash flows and market operations but also on adopting a broader perspective, according to the head of the Ho Chi Minh City Real Estate Association (HoREA).

Hunting for real estate investment opportunities after Tet Although the market faced a standstill at the end of 2022, wealthy investors are still hunting for potential business opportunities after the Lunar New Year holiday.