New real estate developments in District 1 in HCM City. — VNS Photo Bồ Xuân Hiệp

HCM CITY — Việt Nam is grappling with significant real estate inventory that could comprise nearly 80 per cent of some developers’ assets, raising concerns of potential bad debt and macroeconomic stability, experts warned.

In the first half of the year, 110 publicly listed real estate companies reported accumulated inventories amounting to VNĐ490.4 trillion (nearly US$20 billion), according to a Ministry of Construction report.

Over 17,100 apartments and land plots remain unsold in H1, according to the report.

Major real estate firm Novaland has reported an inventory of VNĐ142 trillion, accounting for 59 per cent of its total assets. 

This is followed by Khang Điền, with an inventory of VNĐ21.5 trillion (76 per cent of its assets), and Nam Long Group at VNĐ19.2 trillion (65 per cent of its assets).

The issue of unsold properties has adversely affected the financial stability of numerous real estate firms, according to the report.

Nguyễn Văn Đính, chairman of the Vietnam Association of Realtors (VARS), said real estate sales have dropped significantly since mid-2022.

The limited transactions have been attributed to high prices, unfavourable project locations, and legal issues, among other factors.

Experts have observed a growing preference among buyers for developments with clear legal standing and competitive pricing, placing those with legal complications at a disadvantage.

Đính recommended real estate businesses prioritise the development of affordable housing to address market demand and alleviate inventory levels. 

Lê Hoàng Châu, chairman of the HCM City Real Estate Association (HOREA), advised businesses to diversify their capital sources, avoiding excessive reliance on bank loans, while focusing on affordable housing projects that meet residential needs.

Recent legislative measures, including the new Law on Real Estate Business and the Housing Law, are expected to facilitate the advancement of stalled projects, experts said.

Meanwhile, commercial banks are facing challenges in liquidating collateral from defaulting borrowers, mostly in the real estate sector, in order to recover debt amid the sluggish market.

With over 70 per cent of their collateral composed of real estate, the banking sector is currently confronting non-performing loans totaling VNĐ224 trillion as of the end of March.

Compounding the challenges associated with selling mortgaged real estate is the arrest in late 2022 of Trương Mỹ Lan, the chairwoman of Vạn Thịnh Phát, who faces the death penalty for financial fraud and other offenses.

The Asian Development Bank has also warned of risks to the banking system arising from irregularities in the corporate bond and real estate markets.

Experts have called for collaboration among stakeholders to address the issues related to real estate inventory, which is critical for restoring market confidence. — VNS