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News ellipse 03/12/2020

Real estate market - The nightmare of the economy

On the afternoon of April 11, the National Supervision Committee had a dialogue with the HCMC Real Estate Association about the current situation and solutions for the market. The discussion took place tense when many enterprises "called for help" that they were dying day by day on their own assets.

According to Mr. Vu Anh Tam - Vice Chairman of HCMC Real Estate Association cum General Director of Tai Nguyen Company, in the past 4 years, the real estate market has been gradually receding. In 2009 real estate still had a little liquidity. By the end of 2010 and 2011, when banks had difficulty, real estate entered a period of absolute "dormant". By 2012, real estate enterprises were almost unable to contribute to the economy and could not create jobs. Almost all enterprises stop producing and terminate labor contracts with employees. Leaders of Tai Nguyen Company said that the State should have policies to support interest rates for home buyers to increase the liquidity of the market. “In the past 4 years, enterprises have eroded most of their assets because investment is not profitable. Banks do not lend while the market is capital hungry. Interest rates are as high as a noose killing investors, killing the economy, ”Mr. Tam said.

Meanwhile, the director of the company Le Thanh and Le Huu Nghia did not hesitate to share the difficulties of enterprises. He said, with the segment of small-area apartments priced at 11-14 million dong per square meter, previously sold 60 units per month, now a sharp decline, selling less than 20 units. “Low-cost houses are the only bright spot, but now it's hard to find the output. If this segment is off, other projects will certainly not sell. In the meantime, the most important thing is tax extension for real estate enterprises ”, said Mr. Nghia.

And General Director of Thanh Binh Real Estate Company, Dang Hoang Vu Tran Tinh, currently his company owes VND 28 billion despite a project worth millions of USD. He fears that with the real estate market having no output, a pile of assets will be buried in the mountains of debt. "90% of enterprises in the industry no longer produce for a year and a half because the market has no liquidity," he said.

Chairman of the HCMC Real Estate Association, Le Hoang Chau, said that now all real estate enterprises face different difficulties. Some companies have to pay billions of dong in interest every day. Some enterprises even have to pay more than that number. “Real estate is suffering many impacts of macro policies: high interest rates, overwhelming taxes, inappropriate land policies. Enterprises are enthusiastic about their job but they are "dying" on their assets ", Mr. Chau said.

Consequences

Real estate "died" dragged many other production and business industries to a halt. According to a report of the steel industry: In 2011, consumption of construction steel decreased continuously since the second quarter, making inventories reach a record number, over 800,000 tons. This is the largest inventory level ever. Steel consumption in the end of 2011 was at 326,000 tons, down 29% year-on-year. Steel production consumption for construction in 2011 was only 4.6 million tons, down 5.5% over the same period. According to many economists, in 2012, the steel industry will be even more "catastrophic" because the real estate market has not shown signs of recovery.

Sharing the same fate with the steel industry is the cement industry. According to statistics of the Ministry of Construction, by the end of 2011, consumption of the whole cement industry reached over 44 million tons, still quite far from the 55 million tons that the Ministry of Construction forecasted from the beginning of the year. It can be said that the cement industry has never faced so many difficulties like now and it is forecasted that 2012 will be even more difficult, because a series of customers are large construction enterprises operating in moderation. Consumption decreases, business efficiency is low, most cement projects are invested with loans, so enterprises have to put their efforts into repay debts, making the situation even more difficult. According to our research, there are enterprises producing cement so far, they have bad debts of thousands of billion dong. Enterprises with strong potential such as Vietnam Cement Industry Corporation (Vicem) in 2011 also had holes of over VND 230 billion. Vicem representative said that with the current profit margin, it is difficult for enterprises to convince banks to make loans for production investment.

Vietnam Building Ceramic Association (VIBCA) said that the inventory of ceramic tiles in domestic companies is currently estimated at over 30 million cubic meters, equivalent to more than VND 2,000 billion... furniture for construction is also shabby because it cannot sell products. Stagnant production leads to many construction enterprises, construction production enterprises have to "narrow down" the scale, causing many workers to lose their jobs. The life of the already difficult employee is now even more difficult.

The future of the real estate market

Many forecasts for the real estate market (real estate) to collapse with related consequences have been made since 2011. However, until the last month of the first quarter of 2012, the market has not yet broken, not seen. Many Real Estate enterprises announced their bankruptcy. Therefore, in the remaining months of 2012, the Real Estate market is still difficult to forecast.

That is the judgment of many Real Estate market experts given at the seminar "The total solution for the Real Estate market 2012" co-organized by InfoTV - Vietnam Television and Real Estate Vietnam Association on March 28.

According to experts, from now to the end of 2012, the Real Estate market and Enterprises related to this market will continue to face difficulties such as: Rare transactions, lack of capital, difficulty in accessing. credit, high interest rates ...

Dr. Tran Kim Chung, Central Institute for Economic Management predicts that there are 3 possible scenarios in the real estate market.

In the first scenario, the Real Estate market flourishes. The condition for this scenario is that the world economic situation is stable, the common currency countries in Europe have overcome the public debt crisis. The domestic macroeconomic has high growth, inflation continues to be curbed, interest rates return to 10%/year. Some real Estate financial instruments were born... At that time, the market will cross the bottom and flourish in August on the calendar. From April to September 2012, it will be a period of "fire test" and screening of Real Estate Enterprises.

The second scenario contrasts with the first. Real Estate Enterprises will face great difficulties, the market will decline dramatically, projects stall ... If this scenario happens then secondary investors will leave the market and the market will take a long time to recover.

The final scenario is arguably the most likely to happen, which is what the situation will be today. Policies continue to be researched, while Enterprises will operate in moderation, investors will continue to hope that some Enterprises will continue to narrow production.

However, Dr. Pham Sy Lien, Vice Chairman of Vietnam Construction Association, said that the Real Estate market will gradually warm up. In order to achieve this scenario, in addition to perfecting the mechanisms and policies on the Real Estate market proposed by ministries and agencies, a real dynamism is needed from enterprises.

According to Mr. Liem, the current demand for housing in the middle and low-price segments is huge. Therefore, Enterprises need to understand the demand for housing in any segment to adjust the supply. The reality shows that, due to not being able to grasp the real housing needs, over the past time, there has been a situation of "redundancy but lack".

The government's plan to "save" real estate - a long-term plan

The project "Restructuring the system of credit institutions in the 2011-2015 period" reveals important details of this expected plan.

One of the measures to deal with bad debts of credit institutions (CIs) that the Scheme on restructuring the credit institution system proposes is: “For some types of projects, real estate to mortgage for bank loans is about to Completed or completed but not yet sold, the Government will consider buying back the real estate for the purpose of social security and the operation of state agencies ”.

This measure to buy back outstanding real estate projects seems to be the last, direct and most powerful step to rescue real estate after a series of measures that have been taken before such as Directive 2196 in 2011. of the Prime Minister, February 13 Directive of the State Bank of Vietnam (SBV).

Clearly, a long-term and methodical real estate rescue plan has been put in place. The State Bank Governor - Nguyen Van Binh's affirmation "not letting the real estate market crash" in the early year online exchange is completely grounded. Also in the above scheme, on the State side, the unit assigned to buy bad debts with secured assets is the Enterprise Debt and Asset Trading Company (DATC) of the Ministry of Finance. Bad debts will be reevaluated with asset quality, recovery capacity and value, and then write off with a risk reserve source or collateral disposal to recover debt or convert debt into capital. contributions and shares of loan enterprises. In addition, bad debts can also be sold to enterprises other than credit institutions, private debt trading companies and debt trading companies of commercial banks.

Temporary solution?

Although it has been well planned, however, the government's acquisition of outstanding real estate, or bad debts from credit institutions always means "pumping" money into the capital market is risky. This is just a situational solution. The SBV and the Ministry of Construction - the two main agencies responsible for the management of credit institutions and the real estate market, will certainly have a lot of work to do to cover the gaps that may arise from this urgent solution. The Vietnamese real estate market is still a nascent market, especially for managers. Policymakers cannot deny the responsibility for letting the market grow distorted. Business circles and investors flock to the high-end segment with low demand, while ignoring the segment with high demand, which is low-priced housing, small area. Even the acquisition of real estate projects, if implemented, the agency responsible for review and classification will also face many problems, because of questions from the real market: How to deal with the sale since leveling and being in the hands of speculators? Real estate projects under "bad debt" are located in any segment, high-end or low-end?

On the banking side, the credit institutions' liquidity problem is not easy to solve overnight. At the press conference on 12/3, once again the liquidity problem was repeated by Governor Nguyen Van Binh: “After years of overheating growth, the ratio of capital use of credit institutions and banks has increased very high. 80% of the mobilized capital is short-term, while 40% of the loan balance is medium and long-term”. How to ensure that credit institutions will not re-violate the regulations on medium and long-term loans is not easy to have a positive answer. What happens when real estate recovers and banks break through regulation to create new bad debts?

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