Real estate companies in Vietnam have struggled in the first five months of the year, with 554 firms closing and brokerage activities dropping to just 30-40% of the levels seen at the end of 2022.
The figures were released in a real estate market report published by the Vietnam Association of Realtors (VARS) on Tuesday.
According to the report, the market is thirsty for supply, especially affordable housing, while there is also a lack of buyers.
The association explained that buyers were being put off by low-quality products, mostly old projects, and instead were banking their money to take advantage of relatively high deposit interest rates. Confidence in the real estate market is also falling, and it has become increasingly difficult to access mortgages.
VARS assessed that the lack of suitable supply, combined with weak cash flow and reduced confidence, caused transaction numbers in 2022 and Q1/2023 to fall.
The overall absorption rate across the market in Q1 was only about 11%, equivalent to around 2,700 transactions, down more than 50% compared to the same period last year.
In Q1, real estate businesses reported combined revenue was down 6.46% and combined after-tax profit fell 38.6%.
According to VARS, real estate investment and development businesses had simultaneously fallen into a state of "suffocation" and may find themselves "drowning". Despite trying to gradually eliminate the factors that are dragging them down, not enough is being done to prevent them from sinking.
"The resistance of the companies is limited. If they do not surface in time, they will end up choking," VARS wrote.
VARS said that the declining number of real estate brokers has become a sweeping wave across the market that shows no signs of slowing down.
Notably, besides brokers who have quit their jobs because they were not earning enough to live on, many brokers have been fired, and some businesses have closed or gone bankrupt. Meanwhile, brokers who have stayed in their roles have been forced to diversify in new fields and find additional income.
Around 95% of brokers have seen their incomes cut, sometimes by over 70%.
However, over 95% of active brokers said they will stick with their jobs despite market difficulties.
VARS forecast that if the situation prolongs, up to 23% of businesses will only last until the end of the third quarter of 2023, and only about 43% of firms will survive until the end of this year.