The freezing property market and decreasing tolerance for loss-making property companies will give rise to asset trading in 2012, particularly debt trading, acquisition and partnership, according to industry experts.
The evolution of the real estate market in early 2012 was in the prognosis of many investors. But, with previous big investments along with exorbitant loans, they seem to be not as tolerant as in 2009 and 2010. The market started eliminating capital-short investors, secondary investors and retail investors from the second half of 2011.
Meanwhile, existing investors are struggling with mounting capital pressure. Many projects have been forced to a halt as a result of capital shortage and lack of buyers. According to calculations by the Ministry of Construction, the inflation rate in the construction industry in 2011 was about 30 percent, which reportedly added more pressure on investors, particularly in the context of economic slowdown.
In addition, the interest rate rise from 14 percent to 22-26 percent applied more intense cash flow pressures on investors taking out overpriced loans from banks. Unfortunately, property sales plunged last year. According to statistics by a foreign consulting firm, only 45 percent or so of apartments in Hanoi, the capital of Vietnam, were sold last year, a sharp fall from previous years with 80-90 percent. The number of unmarketable apartments in the city was estimated at 16,000 units.
Asset restructuring and project sale are the last resort for investors at this time. Even in 2011 when the freeze started, many well-known investors were forced to give up their projects, like FPT Corporation handing its office building project to VP Bank, or CapitaLand purchasing a property project in District 2, Ho Chi Minh City from Khang Dien Saigon JSC at US$49 million, and a project in Binh Chanh District from Quoc Cuong Saigon at US$7.3 million.
With the tightened credit policy capping credits for the property market at 16 percent in 2012, liquidity will be lower. According to property experts, M&As on the property market will thrive in 2012 because more loans will reach maturity.
Mr Phan Xuan Can, President of Soho Vietnam Real Estate Consulting Joint Stock Company, said: Difficulties in 2012 will not be less than 2011, because primary investors want to reschedule their loans. But, without good sales, they will not have enough money to repay their lenders.
Back when the real estate market was a gold mine for any participant, many invested much more than they could afford in hopes of earning more. They mobilised capital from future buyers and borrowed from banks. Now, though, when sales are slow and capital is insufficient, they have to swap debts. The situation is worse for them as banks tighten loans. They have to deliberately slow down or reschedule their projects on hopes of market recovery.
According to many property experts, pressures on banks will be intense in the first and second quarters of 2012 because of maturity. Banks may reschedule loans or acquire assets to become project partners. Therefore, the debt trading market will thrive in 2012. To be more specific; asset trading is carried out through debt trading, share acquisition and partnership.
Luong Tuan
Vietnamese
