More closures, layoffs as Vietnam real estate gloom persists

The number of dissolved real estate businesses in Jan-Oct increased, many other firms have suspended operations, salaries are paid late and employees are being laid off in large numbers.

However, there are some signs of hope amidst the pervading real estate gloom, market observers say.

Recently, Housing Development and Trading Joint Stock Company (HDTC) in Ho Chi Minh City issued a notice that it had stopped operations and let all employees leave without pay because it was in an extremely difficult financial situation with no revenue.

HDTC used to be a famous brand in the southern real estate market with many large projects and was a company many people dreamed of working for.

During the "golden age" of the property market, the company maintained average revenues of VND900-1,000 billion ($41.21 million) and after-tax profits of about VND140 billion ($5.77 million) per year. But, from 2022 onwards, when the market plunged, it has revealed many weaknesses including legal problems encountered by many projects.

Many other developers have also undergone drastic restructuring over the past year to survive.

For example, Dat Xanh Group has cut a large number of employees. As of September 30, it had more than 2,480 employees, down nearly 1,300 from the beginning of the year.

This group is also restructuring eight subsidiaries: Eastern Real Estate Investment and Service JSC; Dong Nam Bo (Southeast) Real Estate Business Investment Corporation; Dat Xanh Finance Co. Ltd; Binh Phuoc Real Estate Development Investment JSC; Diamond Tower Investment JSC; Ruby Tower Investment JSC; Sapphire Investment JSC; and Emerald Tower Investment JSC.

As of end-September, Phat Dat Real Estate Development Corporation had 254 employees, down more than 100 compared to end-2022, while Khang Dien Group laid off 36 employees in the first nine months of the year.

Sales director of a large company in the Mekong Delta province of Long An, said that 2023 has been a very sad year for his company with its staff strength shrinking from 500 to just 150 now.

This week, the company will cut another 40% of its staff, he said, adding that accessing bank credit remained very difficult because of strict conditions and unattractive interest rates.

"Amid the volatile market, from now until the end of 2023 and the first half of 2024, the company will pursue a cautious business strategy, focusing on completing legal formalities of projects launched in 2020,” the exec said, declining to be named.

It will also continue to improve internal amenities of previously implemented projects, giving customers a better experience, he added.

Chairman of the Vietnam Association of Realtors (VARS) Nguyen Van Dinh said that in the first five months of 2023, the market saw 554 real estate businesses dissolved, up 30.4% year-on-year. The number of newly established firms in the sector plunged 61.4% at just 1,744.

In the third quarter, the situation of real estate businesses showed signs of improvement, with 1,721 companies resuming operations, an increase of 102% year-on-year, he said.

The number of newly established firms in the period was 3.5 times higher than the dissolved (3,394), but still down 52.4% compared to the same period in 2022. Moreover, an average of 107 real estate businesses left the market each month.

Meanwhile, at real estate trading floors, 20% continue to face the risk of dissolution or bankruptcy while 40% are struggling to maintain operations with a few core staff members in the hope that the market will recover by the end of 2023, Dinh said.

Data from the General Statistics Office shows that 1,067 real estate businesses were dissolved in Q3, up 9.5% over the same period in 2022. However, the number of newly established firms was 3,850, six times higher than those leaving the market.