Real estate companies in Vietnam are currently facing serious difficulties, with most localities implementing strict social distancing measures due to the outbreak of the fourth wave of the Covid-19 pandemic.
Marketing and sales activities are at a standstill, while promotional events to present new projects are on hold. Potential buyers or investors are not allowed to visit the project sites, resulting in huge losses.
Sell to reduce losses
Vietnam has faced four waves of the Covid-19 pandemic since it emerged in early 2020. All the while, markets have been faced with continued turmoil. This desperate situation continues forcing investors to find ways of sustaining themselves. Mr Tran Khanh Quang, a real estate expert, said investors have prepared financial resources for the proceeds of this fourth wave of the pandemic which has been raging for two months. However, if this situation were to continue for another two to three months, some investors would have no choice but to sell at discount rates to reduce losses, especially products valued above $ 10 billion. VND.
According to Mr. Quang, in the real estate investment market, there are still two customer segments. The first is the group of customers who buy products with their own financial resources, not by borrowing. Second, the group of clients who invest with financial leverage, especially through bank loans. Therefore, if the pandemic situation lasts for a long time, they will be forced to sell at a discount to reduce losses. In the time to come, Mr. Quang hoped that some clients would pour the money from securities and stocks into real estate.
According to many experts, if there is a stable source of finance, investors and clients will consider buying real estate at competitive prices. As many investors have problems with the flow of investment capital, income is affected by the pandemic and cannot pay banks, many therefore have to sell some assets to survive. In these difficult times, many investors are willing to sell nearly 50 million VND or even 100 million VND below market price, to solve their financial problems. Additionally, buyers with stable finances from many sources may consider buying more, using bank loans of around 20-30% of the property’s value. However, the pandemic shows no signs of abating, so purchases will be cautious, and only legally authorized and competitively priced transactions will take place.
As reporters from the Ho Chi Minh City Real Estate Exchange noted, trading or learning about projects is very limited. Sellers and buyers are wary of the Covid-19 pandemic situation with limited face-to-face contact activities. Mr. Doan Chi Thanh, chairman of Hoang Anh Holding, said the company is currently preparing to roll out an apartment project in Binh Duong province. The legal aspects of the project have been completed, but the sales implementation has been put on hold due to the pandemic. Mr Thanh explained that they had organized a sales training to introduce and get customers to see the project, but all activities in the current situation have been suspended due to strict restrictions under the current wave of the pandemic.
Still fragile market
According to Ms. Nguyen Thu Huong, Managing Director of Van Phuc Land, the first six months of the year have passed quite contrary to optimistic forecasts at the start of the year. Two consecutive and prolonged pandemic waves have upset all the plans and programs of the real estate companies. The market is almost at a standstill in this current fourth pandemic wave. This dealt a direct blow to the real estate market. Any business that has moved quickly between the two pandemic waves can reap some benefits, but still cannot give up trying or sit back and wait for opportunities for the pandemic to end.
Looking at the first six months of the year, we can easily summarize and visualize market movements as bullish, cautious, and pending. This means that we must continue to wait for opportunities in the last six months of the year. The opportunities that will present themselves over the next six months of the year depend entirely on the pandemic situation, not the market.
The reality of the Covid-19 pandemic is that it has been around longer than expected, and difficult to predict when it will end. Vietnam, as well as the world, will be forced to coexist with it. We may have to sacrifice the third trimester to track pandemic cases in the community and roll out more vaccination programs for the population. However, we can expect two possible scenarios over the next six months of the year.
A positive scenario is that the market could partially recover in the middle of the third quarter and prosper again in the fourth quarter, assuming at least 50% of the population have been vaccinated. It will also be vital that at least 100% of employees in real estate companies be vaccinated. The market in the last six months of the year is expected to grow by at least 25-30% from the first six months. This growth rate should only be achieved if real estate activity accelerates as much as possible to compensate for the losses of the first six months.
The worst-case scenario could arise if this situation continues for another quarter and the vaccine supply is not sufficient for the entire population but only reaches less than 30% of the population. In such a case, real estate companies can vaccinate only 50% of their employees. The market is not expected to grow over the next six months as companies gradually run out of capacity. Keeping the device running has already been a huge burden on businesses and most production and business plans are now disrupted with drastic drop in revenues. The overall market has barely surpassed 20% from the first six months of the year, and even the timely support has yet to arrive.
However, in both scenarios there are many external factors affecting the market as well. There is the issue of state policy, business support programs, consumer demand stimulus programs, disbursement of public investment programs, and the process of removing legal bottlenecks. All of this support will directly or indirectly affect businesses, investors and general market sentiment in the direction of overly optimism or caution.
Real estate attractiveness remains in turmoil
Vietnam has more real estate investment opportunities than other more mature Asia-Pacific markets, although some challenges persist.