At a general meeting of shareholders on June 29, CEO of Quoc Cuong Gia Lai JSC (QCG) Nguyen Thi Nhu Loan said the company decided to choose the slow investment policy for H2/2022, while waiting for legal bottlenecks to be settled. QCG does not intend to expand investment as it doesn’t know how long the current situation will last.

Loan said the firm fell into a difficult situation in 2007-2011 because of the financial crisis, but there are more difficulties at this time because of dual problems – capital flow is blocked and legal problems have not been solved yet.

In the last three years, QCG could not implement many projects because of legal bottlenecks. Meanwhile, other projects have been implemented, but sales are going very slowly as people who buy houses with bank loans still cannot get disbursement.

“Projects are facing legal problems, and are not eligible for sale. The congestion in cash flow and the capital shortage have out pressure on the market,” Loan said.

Difficulties are encircling most real estate firms, including healthy ones. They have to shrink back after consuming all their reserved resources as they cannot access bank loans.

Nguyen Minh Nhat, CEO of Van Xuan Group, said his company got approval for a loan worth VND2 trillion to develop a project. However, when the company kicked off the project, the bank stopped the disbursement, saying that it was running out of credit room.

Vo Thi Hong Mai, deputy CEO of Asian Holding, complained that she has had difficulties in selling real estate as clients are worried about credit tightening. People dare not buy houses as they find it difficult to get bank loans. 

“I hope that the banking sector lifts the credit limits for both clients and realtors, so the real estate market can recover in the last six months of the year,” Mai said.

Le Huu nghia, CEO of Le Thanh, said the stagnation in real estate project development, the increase in selling prices and weak liquidity may lead to the death of many real estate firms. If the scenario occurs, this will be worrisome for the real estate market in particular and the economy in general.

Le Hoang Chau, chair of the HCM City Real Estate Association (HOREA), said that under the Land Law, real estate firms need to have 15-20 percent of total investment capital in projects, and they can seek the remaining 80-85 percent of capital from other sources, including bank loans, bond issuance, capital from buyers and foreign investments.

Meanwhile, it has been very difficult to access credit sources since April, which has adversely affected the operation of real estate firms.

“Credit is the foundation of the economy and the blood vessels and oxygen tank of the real estate market. Unable to get capital, businesses are nearly suffocating, and people cannot buy houses,” Chau said.

Supply shortage, price increases keep buyers away

The tendency of the market at this moment is operating at a moderate level, waiting for policies to be issued, while market demand remains high.

In Q1/2022, there were only 2,800 housing products on offer in Hanoi and 2,150 in HCM City, according to Savills. The figure was just a "drop of water in the ocean" compared to the cities' population.

Therefore, analysts say, waiting for real estate prices to decrease to buy houses at lower prices is not a wise decision. The prices won’t decrease because realtors will count their increased costs when setting up prices for housing products. This means that the more tightening, the sharper the real estate price increases will be.

“As real estate firms contract their investments, the housing shortage will become more serious. The prices will keep increasing until the supply improves,” an analyst said.

Nguyen Quoc Hiep, chair of GP Invest and chair of the Vietnam Association of Construction Contractors, said businesses have never had so many difficulties because of the lack of projects. If the situation lasts, many contractors won’t be able to exist five years from now.

Mai Nguyen