The Vietnamese real estate market is facing big difficulties with "risks of falling into a recession," Ho Chi Minh City Real Estate Association (HoREA) said in a document sent to the Prime Minister on Monday.
"Real estate companies have seen profits plunge or made losses, with big liquidity risks. Some of them are deploying "painful" measures for survival," the document reads.
Several firms must reduce personnel, and a number of developers have had to pause investment or postponed new projects, it notes.
The HoREA said it agreed with Minister of Construction Nguyen Thanh Nghi's presentation at the National Assembly's session last Thursday regarding the market woes.
Nghi had said the real estate market would continue to face difficulties due to limited supply and tightened credit.
"Supply is limited while demand for low-end housing is enormous. Housing prices are much higher than what people can afford. The control of cash inflows into the real estate sector is not tight, leading to many risks. Long and medium-term supply is not available.
"Speculation remains pervasive, while there remains a lack of transparency because the relevant information system is yet to be updated," he said.
In the middle of the year, the State Bank of Vietnam (SBV) started to tighten lending conditions for the property market. In a bid to raise transparency, the government has also tightened control over the corporate bond market, a channel that property developers often used to mobilize cash via private placements.
The government on September 16 issued Decree 65 on private placements of bonds to amend and supplement Decree 153, requiring transparency for bond issuance purposes.
HoREA chairman Le Hoang Chau told local media Tuesday that Vietnamese property developers, facing the current tough time, may seek asset sales, and potential buyers are foreign firms.
He suggested the SBV consider raising the credit expansion ceiling for this year by about 1-2 percentage points to 15-16% to support the economy with an additional VND100,000 - 200,000 billion ($8.04 billion) in the year-end peak period.
In July, Chau had told a forum chaired by Prime Minister Pham Minh Chinh that visible “slowdown, stagnation and shrinking liquidity” were worrisome signs of uncertainty in the domestic real estate market.
There are concerns among developers and traders that banking credit to real estate has been narrowed down, while the corporate bond market tightened up following the cancellation of Tan Hoang Minh's nine bond issuances in early April due to its provision of "untrue information".
On October 8, Truong My Lan, chairwoman of HCMC-based property developer Van Thinh Phat Group, was arrested for alleged fraud in the issuance and trading of corporate bonds during the 2018-2019 period.
Hanoi’s Department of Planning and Investment last week froze assets of 762 legal entities related to the alleged fraud that occurred at Van Thinh Phat. The move aims at preventing any transfers, donating or using as collateral of the assets at these companies, it said.