Property developers tighten their belts amid frozen market

By Vu Le   January 31, 2023 | 03:47 pm PT
Property developers tighten their belts amid frozen market
Office buildings, villas and apartment blocks in south HCMC. Photo by VnExpress/Quynh Tran
Property developers plan to cut costs, slow investment, and target lower-income housing markets in 2023 amid frozen real estate market.

A VnExpress survey of 10 property developers in Ho Chi Minh City and other southern localities showed that more than 70% of businesses were taking a more cautious approach to their business plans this year.

The deputy general director of a real estate company developing high-end homes in HCMC’s Thu Duc City revealed that this year his firm would reduce investment capital by 30-50%, and slow down project construction progress to avoid cash flow pressure and save resources for the next 12 months.

"In 2023, just overcoming difficulties is reaching the target," he said. "Growth and breakthrough will be tasks for the 2024-2025 period."

Similarly, the chairman of a property firm in Ho Chi Minh City’s District 3 said that over the next 12 months his company would lower spending, downsize personnel, restructure products, and increase its risk fund.

Instead of developing properties with an average price of some VND3 billion ($127,000) per unit as the enterprise has been doing for the last five years, the firm will this year develop properties with price tags of around VND1.5 billion in east HCMC, the chairman noted.

Nguyen Thanh Quyen, general director of Thang Loi Group, said that last year’s low real estate market liquidity would likely continue this year, so his firm will develop housing in more affordable segments priced at around VND1 billion per unit, and located in provinces bordering HCMC.

Demand for affordable housing has been high for years, but supply has remained limited, he added.

The chairman of a District 10-based property developer listed on the Ho Chi Minh Stock Exchange said global economic turmoil and difficulties on the domestic property market this year were prompting his firm to review and sell off a number of unsuitable projects to stabilize cash flow.

"Our company has not set a high growth target this year," he said. "Instead we’re prioritizing the stabilization of our system and improving financial indicators to a safer level."

While providing consultancy to the five biggest property developers in the south, Huynh Phuoc Nghia, GIBC senior consultant, realized that 80% of the firms revealed they had adopted the cautious business approach of cutting down spending in 2023. Nghia said this is a realistic move.

The common difficulties facing real estate businesses in 2022 included loss of liquidity, lack of capital, legal bottlenecks, large debts, and high interest rates. The effects of all these problems will remain in 2023, he said.

Nghia concluded that the austerity strategies adopted by property developers this year were positive indicators for stopping rampant investment and beginning a more prudent business cycle towards more sustainable development.

Prime Minister Pham Minh Chinh recently urged the central bank to take measures to make credit more accessible for real estate businesses and buyers.

The prime minister also requested relevant agencies to promote the development of real estate projects, restructure the real estate market, rectify bad debts and corporate bond issues facing property developers, and further develop social housing and apartments for workers.

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