Real estate firms facing new challenges

July 13, 2022 - 08:42
Limited capital and scarce supply, along with new regulations on property tax, are putting pressure on real estate businesses.


In the first five months of 2022, the personal income tax collected from real estate transfer transactions increased by 68 cents. — VNA/VNS Photo

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

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

According to the Ministry of Finance, in the first five months of 2022, the amount of personal income tax collected from real estate transfer transactions reached VNĐ16 trillion, an increase of 68 per cent. While this figure was VNĐ21 trillion for the whole year of 2021 and VNĐ16 trillion in 2020.

However, this could significantly impact the real estate market because speculative activities will be more closely monitored, reducing the number of potential transactions.

Đỗ Thu Hằng, Senior Director, Consulting and Research Department, Savills Hanoi, said that along with scarce supply, limited capital was also a "bottleneck" of the real estate market.

However, controlling real estate credit, limiting the separation of land plots in some localities or strengthening the fight against tax loss is necessary to regulate the real estate market.

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

Lê Hoàng Châu, chairman of HCM City Real Estate Association (HoREA), said credit capital for the economy and in the real estate market were "oxygen tanks." If the enterprises could not access the capital, they would risk "suffocation".

Now, the real estate market is experiencing a lack of liquidity because many projects cannot be deployed, leading to a lack of products, while the demand of investors and home buyers is huge. Meanwhile, businesses still face difficulty in accessing credit sources.

According to the Ministry of Construction, the number of licensed new commercial housing projects decreased by 59 per cent in the first quarter of 2022.

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

Meanwhile, the number of transactions in the second quarter of 2022 was recorded at 20,325, down 20 per cent compared to the same period last year.

SSI believes that to gain sustainable development for the property market, the real estate market in some provinces needs to cool.

In 2021-2022, due to the high demand for investment in real estate products, real estate prices in many areas nationwide increased significantly.

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

Therefore, authorities in some localities have stopped licensing agricultural and residential land to be divided into many small land slots. That helps to cool the market and prevent housing bubbles. 

Meanwhile, selling prices at many urban projects in the suburbs have increased rapidly due to information relating to infrastructure development.

At the beginning of 2022, the Ministry of Transport announced capital of more than VNĐ304 trillion for projects in the medium-term public investment plan for 2021-2025. The southern region will benefit most from this investment plan with many highways and international airport projects.

Those have increased the price of many urban projects in the suburbs by 15-20 per cent over the same period last year. 

However, according to SSI Securities Corporation, up to 70-80 per cent of home buyers are mainly investors, and most of them choose bank loans because the loans have many attractive incentives, including interest rate support, deferred payment for the first 1-2 years, guarantee in income for some products, loans value up to 80-90 per cent of the loan, and loan term for buying housing up to 35 years.

SSI also said that house selling prices continued to be anchored at a high level while liquidity in the secondary market decreased recently.

Profits down

VNDIRECT Joint Stock Company said that in the first quarter of 2022, real estate businesses had a decrease in net profit of 5.7 per cent compared to the same period in 2021 due to the decline in sales of apartments and the rental segment.

Meanwhile, according to SSI's research, most real estate investors still set double-digit profit growth in 2022, excluding Vinhomes Joint Stock Company (Vinhomes) which plans to reduce profits in 2022 because the company had a high profit in 2021.

SSI said the net profit of real estate investors in 2023-24 may be affected because the projects in 2021-22 have had higher costs in land, finance and construction. Specifically, the cost of input materials such as cement and steel has increased by 7-15 per cent compared to the end of 2021.

Regarding finance, listed companies try to keep the debt ratio at a reasonable level or plan to reduce this ratio gradually. This is a key factor to help maintain the stability of the listed real estate companies in the coming time.

However, there are many potential risks for unlisted companies. Many have poor finances and must raise capital from the issuance of bonds.

On the domestic stock market, the real estate stock price has decreased by 25 per cent compared to the beginning of 2022, equivalent to the decrease of the VN-Index as of mid-June. — VNS