Real estate enterprises continue to face headwinds in 2023

A view of HCM City downtown area. Real estate enterprises will continue to face headwinds in 2023. Photo tienphong.vn

HCM CITY — Real estate enterprises will continue to face headwinds in 2023 due to challenges related to accessing loans, issuing corporate bonds and mobilising capital, experts warned.

They said this year the real estate market would move slowly due to the pressure of high interest rates and inflation.

A number of property firms are facing the risk of falling liquidity and have had to make painful decisions to survive.

Many property developers are scaling down their businesses as can be seen by investment or construction delays or cancellations, they added.

Some property developers also face higher lending interest rates, fluctuations in foreign exchange rates, and higher prices of gasoline, oil and construction materials.

They have stopped developing new projects, issuing new bonds or launching initial public offerings.

Experts expect the market to face more hurdles in the first half of 2023, with prices continuing to drop further in the first and second quarters.

Lê Hoàng Châu, chairman of HCM City Real Estate Association (HoREA), said the challenges in the real estate sector are expected to last until 2024 as capital shortage, low liquidity and an expected global economic recession cast a shadow over the sector.

Corporate bond-related issues, including ongoing investigations into wrongdoing during issuances, are also impacting capital flows, he said.

A huge amount of expiring corporate bonds this year and next year are putting great pressure on issuers, who are mostly property businesses, he added.

Big real estate firms will need to roll over debt, sell part of their projects, undertake M&A, and get new investors with strong financial capacity to join them, according to Châu.

In 2022, the number of real estate businesses declaring bankruptcy or dissolution increased by 38.7 per cent against 2021, according to the Ministry of Construction.

Since the third quarter of last year, the operations of real estate exchanges showed signs of difficulty with fewer transactions being conducted compared to the beginning of the year.

Prime Minister Phạm Minh Chính at the end of last year ordered the formation of a task force led by the Ministry of Construction and the State Bank of Việt Nam to remove the challenges faced by the real estate sector.

The real estate sector plays a major role in the country’s economy, contributing 11 per cent to the national GDP. It also has organic relationships with other fields and creates many jobs.