Real estate businesses still hold large amounts of inventory

According to a report from the Ministry of Construction, in the second quarter, the country had 17,105 real estate products in inventory, down 73% compared to the previous quarter. However, according to financial reports from many large investors, the amount of inventory increased. At many businesses, the value of inventory has reached an all-time high, accounting for a high proportion of the asset structure.

Data from Vietstock Finance also shows that by the end of the second quarter, the inventory of 110 listed real estate companies reached VND490,400 billion. Most of this inventory value comes from unfinished production costs in old projects, as well as unsold finished products.

Novaland is currently the enterprise with the highest value of inventory, reaching over 142,000 billion VND, accounting for 59% of total assets; Khang Dien has 21,458 billion VND in inventory, accounting for 76% of total assets; Nam Long Group has 19,165 billion VND, this figure increased by 19% compared to the same period in 2023, mainly in unfinished projects.

The trend of increasing inventory is also recorded at a series of other real estate businesses such as Phat Dat and Becamex IDC.

Inventory of some businesses as of June 30

If unlisted enterprises are included, the inventory is much larger. According to the Vietnam Association of Realtors (VARS), in the structure of real estate inventory, products from unfinished projects account for the majority, mostly due to legal problems related to transaction conditions.

The leader of a real estate company in Ho Chi Minh City said that since the end of 2022, the project under implementation has had to temporarily suspend sales due to incomplete legal requirements. While waiting for the procedures to be resolved, his company has had to accept the situation of having houses but not being able to sell them, the entire project has fallen into "inventory" even though the pre-order volume has reached nearly 70% of the basket.

Mr. Le Hong Khang, Director of Analysis and Credit Rating at FiinRatings, said that the business situation of real estate enterprises in the first half of 2024 is still worse than the average of the past 5 years. Except for a few large-scale enterprises with clean land funds and clear legal status that can record positive business results, most profits are only average.

Chairman of the Ho Chi Minh City Real Estate Association Le Hoang Chau said that businesses are facing many obstacles, including legal problems that make it difficult for them to continue implementing unfinished projects. Many banks have lowered interest rates, but businesses cannot borrow because projects cannot be implemented, leading to no revenue. In addition, complicated procedures are also a major obstacle in bringing projects to market.

Real estate inventory comes in two forms: products in progress and completed products. Of these, the completed type, which is put on the market but not traded, is worrisome and needs to be prioritized, according to Mr. Nguyen Van Dinh, Vice President of the Vietnam Real Estate Association. This type of inventory causes a loss of liquidity, becomes a debt for businesses, and is mainly concentrated in the type of townhouses and resorts in the suburban market. The unwelcome products, according to him, are mostly due to high selling prices, unclear legal projects, or bad locations.

Mr. Vo Hong Thang, Deputy General Director of DKRA Group, said that low liquidity is the reason why many completed projects cannot be sold. Since mid-2022, real estate purchasing power has decreased sharply, especially for investment purposes. Consumption is only 15-30% compared to the period before 2019. In the first 6 months of this year alone, only about 40-50% of new supply was consumed. Buyers only choose projects with clear legal status, fast construction progress, and suitable selling prices. Therefore, many projects with "legal problems" or high prices will not be welcomed.

According to Mr. Thang, to reduce inventory in projects eligible for sale, in addition to restoring confidence in the market, it also requires the cooperation of all parties. Investors need people with strategies to release, most likely by adjusting prices. Banks must also support interest rates and more open policies for accessing home loans.

As for the unfinished project inventory, the solution lies in the hands of competent authorities. Only when these authorities speed up the removal of obstacles for projects and free up resources will the work of clearing inventory progress. Currently, state management agencies have made great efforts to issue many decrees and circulars to guide the solution of the problem of "supply bottlenecks" due to legal issues. This move is expected to clear the way for projects.

Mr. Le Hoang Chau said that in the long term, to avoid the problem of real estate inventory, businesses need to continue to proactively diversify capital sources such as issuing bonds, stocks, investment funds, and financial leasing; seek opportunities to cooperate with foreign investors to attract capital and new technology. Finally, businesses must have solutions to balance products, restructure the product basket, and focus on developing housing projects to meet people's housing needs to increase liquidity.