Real estate businesses’ cash flow worst in five years: expert

Real estate developers are experiencing their worst cash flow in five years as the property market is facing several economic hurdles, said Dinh The Hien, head of the Institute of Information and Business Research.

“Investment cash flow is facing difficulties as some VND382 trillion ($32.85 billion) worth of bonds are mature this year,” Hien said at a forum entitled "Unleashing real estate supply in the southern region - Investment trends", organized by Business Forum magazine in Ho Chi Minh City earlier this week.

"Gold prices and the USD/VND foreign exchange rate have jumped. Notable, the VND has weakened over 5% against the greenback, limiting the government's monetary supply and hindering cash flow in Q1 and Q2,” he noted.

Real estate companies with bad business results will face difficulties in accessing bank loans, he said, adding consumption is weak as employment has not recovered and the middle class is trying to settle real estate debt.

The expert expressed his hope that cash flow will gradually improve from Q3 when exports recover further, creating more jobs, and consumer spending improves. Public investment and government spending will also create new cash flows. In addition, recovering consumer confidence will help services and trade increase, creating opportunities for speedier cash conversion cycle.

"Our economy will gradually improve from Q3 thanks to export growth and consumption recovery, but businesses will still face difficulties accessing capital,” he noted.

The expert suggested the government prioritize controlling commercial banks’ capital sources into the real estate market. Individual investors do not have confidence in the market's recovery, so they are hesitant to invest.

"Listed real estate companies continued to suffer losses in Q1, showing that the real estate business is still facing many difficulties. However, a recovery is looming as medium-term investment funds are starting to pour into property companies," he commented.

Newcomers fewer than quitters

According to Tran Dinh Thien, a member of the Prime Minister's Economic Advisory Group, the number of businesses leaving the market has always been higher than newly established ones, especially real estate investment and trading enterprises.

He analyzed that in the general context, the domestic business sector still faces numerous difficulties, while the foreign-invested sector is growing well. Low inflation and high interest rates make it difficult for Vietnamese businesses, while foreign investors suffer less from high interest rates.

“With weak domestic demand and falling workers' incomes, in the long term, the Vietnamese economy is still struggling,” he noted.

For the real estate market, after many years of a booming high-end segment, the gradual disappearance of affordable housing and decreasing employment and incomes have hit the market hard, he stated.

Thien held that high growth and low inflation are a problem. Therefore, the general view on macroeconomics and inflation needs to be reconsidered.

"Perhaps we lowered interest rates a bit late, and some businesses could not wait for that source of capital and had to leave the market," he said, emphasizing the need for smooth circulation of goods and cash flows, open policies and mechanisms, and smart enforcement.

In the past quarter, in addition to lower interest rates and accelerating public investment disbursement, bond market bottlenecks have been removed, but in reality, many problems remain in the stock and bond markets, so restructuring efforts are needed, according to the economist.

“At the same time, we need to implement new policies to remove difficulties for projects and unleash the flow of investment for businesses, as well as clearly define the roles of the state, banks, businesses, and people,” Thien stressed.