Real estate companies facing new challenges

VIETNAM, July 13 –

HÀ NỘI — Limited capital and scarce supply, along with new property tax regulations, are putting pressure on real estate businesses.

With recently revised regulations to make the market more transparent, many real estate transactions must declare a more reasonable taxable price under the direction of the tax authorities.

According to the Ministry of Finance, in the first five months of 2022, the amount of personal income tax collected on real estate transfer transactions reached VNĐ 16 trillion, an increase of 68%. While this figure was 21 trillion VNĐ for the whole year 2021 and 16 trillion VNĐ in 2020.

However, this could have a significant impact on the real estate market, as speculative activities will be monitored more closely, which will reduce the number of potential transactions.

Đỗ Thu Hằng, senior director of the consultancy and research department of Savills Hanoi, said that in addition to the scarcity of supply, limited capital was also a “bottleneck” of the real estate market.

However, controlling real estate credit, limiting the fragmentation of plots in certain localities or even strengthening the fight against the tax deficit is necessary to regulate the real estate market.

According to SSI Securities Joint Stock Company (SSI), the land law amendment is still under consideration, and with more regulations on the issuance of bonds for investors, the new supply of apartments and housing projects. ‘low-rise buildings will continue to be limited.

Lê Hoàng Châu, president of the HCM City Real Estate Association (HoREA), said that the credit capital for the economy and the real estate market were “reservoirs of oxygen”. If companies could not access capital, they would risk “choking”.

Now, the real estate market is experiencing a lack of liquidity because many projects cannot be deployed, which leads to a lack of products, while the demand from investors and buyers is enormous. Meanwhile, businesses are still struggling to access sources of credit.

According to the Department of Construction, the number of new approved commercial housing projects fell by 59% in the first quarter of 2022.

Due to the shortage of new supplies, primary selling prices in key urban areas such as Hà Nội and HCM City continued to rise.

Meanwhile, the number of transactions in the second quarter of 2022 was recorded at 20,325, down 20% from the same period last year.

SSI believes that to achieve sustainable development of the real estate market, the real estate market in some provinces must cool down.

In 2021-2022, due to the strong demand for investment in real estate products, real estate prices in many parts of the country have increased significantly.

For example, land prices in Lâm Đồng and Bình Phước have doubled or even tripled in a year or a year and a half, even in areas without developed infrastructure.

Therefore, the authorities of some localities have stopped allowing the division of agricultural and residential land into several small plots. This helps cool the market and prevent housing bubbles.

Meanwhile, the sale prices of many urban projects in the suburbs have risen rapidly due to news of infrastructure development.

At the beginning of 2022, the Ministry of Transport announced a capital of more than VNĐ 304 trillion for projects in the medium-term public investment plan for 2021-2025. The southern region will benefit the most from this investment plan with numerous highway and international airport projects.

These have increased the price of many urban projects in the suburbs by 15-20% compared to the same period last year.

However, according to SSI Securities Corporation, up to 70-80% of homebuyers are primarily investors, and most choose bank loans because the loans come with many attractive incentives, including subsidized interest rates. interest, a deferred payment for the first 1-2 years, income guarantee for certain products, loan value up to 80-90% of the loan and loan duration for the purchase of a home up to 35 years .

SSI also said that home sale prices continued to be anchored at a high level while liquidity in the secondary market has diminished recently.

Declining profits

Joint-stock company VNDIRECT said that in the first quarter of 2022, real estate companies recorded a decrease in net profit of 5.7% compared to the same period in 2021 due to lower sales of apartments and the rental segment.

Meanwhile, according to SSI research, most real estate investors are still forecasting double-digit earnings growth in 2022, with the exception of Vinhomes Joint Stock Company (Vinhomes) which expects to cut earnings in 2022 as the company made a high profit in 2021.

SSI said net income for real estate investors in 2023-24 could be affected because projects in 2021-22 had higher land, financing and construction costs. Specifically, the cost of inputs such as cement and steel increased by 7-15% compared to the end of 2021.

Regarding finance, listed companies are trying to keep the debt ratio at a reasonable level or plan to reduce it gradually. This is a key factor in helping to maintain the stability of listed real estate companies in the times to come.

However, the potential risks for unlisted companies are numerous. Many have poor finances and need to raise capital through bond issuance.

On the national stock market, the price of real estate is down 25% compared to the start of 2022, which is equivalent to the drop in the VN index in mid-June. —VNS

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