High inventory plagues property developers

In the second quarter Novaland recorded VND142 trillion (US$5.72 billion) in inventory, highest among the companies studied by VnExpress. This represents 59% of the company's total assets.

Most of the unsold units were recorded at urban project Aqua City in southern Dong Nai Province, and entertainment complexes NovaWorld Phan Thiet in central Binh Thuan Province and NovaWorld Ho Tram in southern Ba Ria-Vung Tau Province.

Khang Dien posted 76% of its asset as inventory and the ratio at Nam Long Group was 65%.

The trend among big companies went against Vietnam’s nationwide statistics. The number of property inventory nationwide fell 73% year-on-year to over 17,100 units in the second quarter, according to the Ministry of Construction.

The Vietnam Association of Realtors said that many projects have not been completed due to lack of required permits, and developers have to put them under inventory in their earnings reports.

Leader of a developer in HCMC said that since 2022 his company has been ordered to stop selling until all permits are acquired.

Many completed homes, therefore, cannot be sold, he said.

Le Hoang Chau, chairman of the Ho Chi Minh City Real Estate Association, said that legal obstacles have made many projects incomplete.

Although loan interest rates are declining, developers lack the strong income needed to secure loans from lenders.

Property units that have been completed but cannot be sold lay significant burdens on the developers, said Nguyen Van Dinh, deputy chairman of Vietnam Real Estate Association.

These inventories might eventually turn into debts, he added.

Since mid-2022, housing sales have been dropping and are now equivalent to only 15-30% of pre-pandemic level, said Vo Hong Thang, deputy CEO of property services firm DKRA Group.

In the first six months this year 40-50% of new supply were sold, he added.

Thang added that developers should have strategies to reduce their inventory, including offering discounts.

Chau said that to reduce inventory in the long run, developers should diversify their capital sources, including issuing bonds, investing in stocks and exchanging traded funds.

Focusing their products on people with real housing demand will also boost sales, he added.