The real estate sector, already struggling with debt, is facing additional strain due to the ongoing credit crunch and government restrictions on corporate bond sales.
According to a survey by Savills Vietnam, homebuyers are required to apply for mortgages worth between 50% to 80% of the total value of a mid-end apartment, but the current credit crunch, inflationary pressures, and high interest rates are deterring potential buyers, exacerbating the housing market’s liquidity problem.
Despite steep discounts offered by property firms, home sales remain sluggish. “Although property firms offered steep discounts, they still failed to attract buyers,” said Vo Thi Khanh Trang, deputy head of Savills Vietnam’s research department. Trang added that as buying a house requires a considerable amount of money, most people cannot afford it without taking out mortgages.
Credit rating agencies are expressing concern about the mounting debts and increasing capital risk in the housing sector, as 71.6% of real estate bond issuers are unlisted companies. Their debt-to-equity ratio stands at 8.1, significantly higher than the ratio of listed companies, which is only 2.5.
According to data from the Vietnam Bond Market Association, the real estate sector issued nearly VND52 trillion, which accounted for 20.4% of the total bonds issued in 2022.
As of late 2022, outstanding loans in the housing sector had nearly doubled compared to late 2016, reaching almost VND800 trillion, as reported by the State Bank of Vietnam. Coupled with VND419 trillion in real estate bonds, the sector’s total debt has risen to VND1,200 trillion.
Over the next two years, real estate bonds worth over VND230.8 trillion will become due, representing 35.2% of the total bond market value, according to local media/