Winter blues for Danang real estate as several segments ‘freeze’

The real estate market in Danang typically bustles during the year-end period, but this year has been quiet, almost eerily so, with several segments “frozen,” observers say.

Property experts say the Danang market is facing many challenges including limited supply, rising energy and raw material prices, high interest rates and difficult access to capital.

Vu Quy Hoi, a sales manager with the Minh Minh Group, said Danang's realty market was very gloomy now, with price drops of 5-10% in the Hoa Xuan and Nam Hoa Xuan wards.

"Currently, few customers and investors are interested in Danang real estate as they cannot access capital due to limited credit room, while property prices remain high," she said, hoping that the market will become dynamic again early next year when banks get new credit quotas.

Bui Thi Phuc, a property investor in the city’s Thanh Khe district, said investing in real estate carried a lot of risk, especially with high lending interest rates.

"If you spend a few billion dong (VND1 billion = $40,200) to buy a land plot at this time, it is not certain that the price will increase and you can sell it. So it is better to deposit your money in a bank to earn interest," she said.

The representative of a local real estate company, who preferred to remain unnamed, said the tightening of credit and corporate bond issuance has negatively impacted the realty market, causing "double" difficulties for many developers in sourcing capital.

"The recent interest rate hikes have made it impossible to implement many projects, thus limiting supply. In addition to the tight credit policy, investors are now hesitant to bank their money in properties, severely curtailing transactions in the market,” he said.

According to a report by real estate services provider DKRA Vietnam, the property market in Danang and surrounding areas was quiet in the third quarter of 2022, with steep falls recorded in many segments.

In the apartment segment, new supply dropped sharply to about 36% of the previous quarter’s figure. The overall market demand improved the same period last year, when anti-pandemic social distancing was in place, but it remained low. Most projects sold only 30-40% of their offerings.

In the townhouse and villa segment, new supplies in Danang and neighboring provinces recorded a sharp decline of 25.8% year-on-year and 36.8% quarter-on-quarter. Market demand plunged by 62.7% compared to the second quarter as a result of fluctuations in the macroeconomic situation, credit control and limited supply.

Difficulties pile up

According real estate expert Nguyen Hoang, since the beginning of the year, especially from the second quarter onwards, the property market in the whole country in general and Danang in particular has been gloomy and sluggish with few transactions.

He attributed the situation to high prices, low supply, rising inflation and difficult access to capital.

"The secondary market is almost "frozen", greatly affecting the general real estate market. It can be said that the secondary is the driving force for the primary to develop, making the general market vibrant and attractive to investors," Hoang said.

"Home buyers and investors have become more careful in making decisions following the recent arrests of major property developers’ leaders,” Hoang said, adding that they were also waiting for new regulations in the amended Land Law to be adopted by the legislature.

Echoing Hoang, Vo Hong Thang, R&D deputy director of DKRA Vietnam, said that recent political and economic uncertainties in the world have had negative impacts on the domestic economy, causing the stock market to plunge and USD/VND exchange rates and interest rates to rise continuously. These developments have made investors more cautious at this time.

In particular, tightened control of credit and corporate bond issuance and increasing interest rates have made it difficult for both buyers and developers to access capital sources, Thang said.

"The market sentiment has been affected by the recent move to step up inspection of major investors while the legal bottlenecks in the licensing of new projects are yet to be removed," he added.

According to Thang, speculative cash flows to Danang from other localities during 2016-2019 have been “net withdrawn” from the market. The prices of products in the primary market remain high due to high input costs while those in the secondary market have continuously been cut for improved liquidity.

"The unexpectedly weak tourism recovery with a sharp drop in arrivals in 2022 is also a reason behind the recent fall of the city’s real estate market, especially resort properties,” he added.