A view of HCM City’s skyline seen from Thu Thiem Peninsula in Thu Duc city of HCM City. (Photo: VNS/VNA) The real estate market has faced unprecedented problems with alarge inventory and a sharp drop in liquidity since the middle of last year,said Dr Nguyen Van Dinh, Vice Chairman of the Vietnam Real Estate Association.
Apartment prices in the city plummeted by 40-50% year-on-year inthe last quarter of 2022, while sales declined by 30% year-on-year, accordingto property services company Cushman & Wakefield.
The market has seen a huge imbalance between supply and demand foryears, with an oversupply in the high-end segment but a shortage of affordablehousing products, according to Dinh.
Though real estate accounts for only 3.7% of the city’s GRDP, thesector has organic relationships with many other fields and creates a largenumber of jobs.
In addition, the slow disbursement of public spending remains aproblem, which has caused many key projects in the city to be delayed foryears.
The city disbursed only 4% of public investment in the firstquarter, out of a total 55.2 trillion VND worth of public investment set forthe year.
Speaking at a recent meeting, Nguyen Van Nen, Secretary of themunicipal Party Committee, said the city’s economic recovery would facechallenges with stagnant property and bond markets, and declining industrialproduction for the rest of 2023.
It has put in doubt whether the city will achieve its yearlygrowth target.
The city’s GRDP reached 360 trillion VND (15.4 billion USD) in thefirst quarter, up 0.7% year-on-year, according to a report by the city’sStatistics Office.
Its growth was lower than the national average, ranking 56th outof all 63 cities and provinces across the nation, said the report.
Its total retail sales of goods and services increased by only 5%year-on-year in the first quarter, while its exports reached more than 10billion USD, a drop of 17% year-by-year, the deepest decline in more than twodecades.
Nguyen Phuoc Hung, Vice Chairman of the HCM City Union of BusinessAssociations (HUBA), said there has been a steady decrease in exports in mostindustries, including garments, agriculture, forestry, fishery and woodprocessing, and others.
Businesses are facing an unprecedented year in exports, he said.
Garment exports fell 8%, and handicraft and woodwork exportsdecreased by about 15%, he added.
He attributed the low exports to a lack of export orders frommajor global markets, low cash flows and an inability to borrow from banks, headded.
Stagnant credit growth
Credit growth in HCM City increased by only 0.3% in the firstquarter, according to figures from the central bank.
Since last September, deposit interest rates at banks havecontinuously surged to as much as 12% per year, pushing lending interest ratesup to 15-16% a year.
Pham Quang Anh, Director of Dony Garment Company, said it waschallenging to access loans for businesses.
While the central bank has consistently called on creditinstitutions to cut lending rates to support businesses, getting loansdisbursed has remained a burden for them, he said.
Many firms, especially SMEs, need funds to tackle cash flow issuesor to develop growth strategies, he added.
Several businesses said that they have been rejected by banks eventhough they have collateral and a good credit score.
Other firms said they were facing difficulties in acquiring newloans, with banks only agreeing to lend the amount that they have repaid oncurrent loans.
Companies with week finance contingency plans or withoutcollateral are finding it even more difficult to get loans.
Many companies have delayed their plans to expand and upgradetheir technology because of the cash shortage.
Recent HUBA surveys have found more than 40% of firms in HCM Citysaid they are facing challenges due to the shrinking market, 17.6% due tohigher raw material prices, 11.2% due to human resource shortages and 17.6% dueto a lack of capital.
Recommendations
Despite its shortcomings, the bond market has room to grow due tohigh capital demand from businesses, experts said.
They also pointed out, however, that investor confidence would notreturn unless the Government addresses all the problems they face and safeguardtheir rights.
Experts recommended the government not let the bond marketself-regulate but instead intervene to make it a sustainable channel forcapital mobilisation.
Nguyen Minh Cuong, ADB principal country economist for Vietnam,said Vietnamese financial markets would come under increasing pressure as bondrepayments due in 2023 are estimated at 10 billion USD, of which nearly 43% arefrom the real estate sector.
He said Vietnam could learn from other governments to help thebond and real estate markets recover.
For example, the Korean government has set up a fund to buy backcorporate bond worth up to 11 billion USD, he said.
HUBA recommended the central bank continue rescheduling medium-and long-term loans, and bring down bank loan interest rates to supportbusinesses.
The Government needs to keep the VAT rate at 8% for all sectors,not just a few as at present, until the end of 2024, and ensure tax refunds tobusinesses in a timely manner, it said.
It needs to roll out policies to promote the development of thebond and real estate markets, and speed up public spending to enableenterprises to maintain operations and create jobs.
Experts also said the central Government should assign greaterautonomy to HCM City in order to speed up disbursement of public spending.
They said it was necessary to streamline administrativeprocedures, especially related to the payment of land use fees, and adjustmentsof land use rights and licences.
They have called for real estate developers to diversify housingproducts, especially by increasing affordable housing, and addressing themismatch between supply and demand.
Speaking at a recent meeting, PM Pham Minh Chinh said theGovernment would focus on reforms of the bond, real estate and securitiesmarkets.
The Government has already set up three committees to carry outreforms of liquidity and currency, the property market and corporate bonds.
Credit will be given to priority sectors such as consumption,investment, exports, industrial property development, and social and workerhousing development.
HCM City early this year lowered its growth target for this yearto 7.5-8% compared with 9% last year.
Huynh Phuoc Nghia, a lecturer at the University of Economics ofHCM City, said, however, the yearly growth target is likely be too high toreach.
“Amid a world economy fraught with complex fluctuations andinstability, we cannot expect the city’s economy to recover in 2023,” he noted.
Experts have warned the situation could be much worse withouttimely and appropriate intervention from the Government./.
VNA
