Stop cutting real estate losses waiting for prices to increase

In early October, Ms. Ngoc (branch director of a joint stock bank) advertised for sale her 38.4 m2 private house in Phu Nhuan district, Ho Chi Minh City. Now she has decided to stop and wait for the market to improve.

She said that this apartment was initially listed at 5.3 billion VND, and that after negotiating with the buyer, it could be reduced to around 5 billion VND. This price has decreased by 20% compared to the peak (2020 - 2021), but many customers who came to see it offered 3.5-4 billion VND, so it could not be sold.

"Because I no longer use this house, I plan to sell it to get the money back, not because I have to cut my losses at all costs due to debt. Therefore, I decided not to sell it anymore, waiting for the price to stabilize before deciding to continue," said Ms. Ngoc.

Mr. Phuc (Thu Duc City) also stopped selling a plot of land in Thu Dau Mot City at a loss after being forced down by customers many times. He said that the plot of land he bought in 2021 for 3.6 billion VND, now selling for 3.2 billion VND, is still considered too high. "Compared to the price when I bought it, I have lost 400 million VND, but customers still want to reduce it further. I decided to keep it and wait for the market to recover before selling it," said Mr. Phuc.

The motivation for Mr. Phuc to keep the property is because interest rates have cooled down somewhat, he has borrowed money from the bank, and currently does not need to sell the house anymore, so he wants to wait a little longer for the market to improve.

The situation of suspending transactions and breaking contracts in real estate transactions has become more common recently, especially after the sharp decrease in bank interest rates and the adoption of new legal policies. Most of the products temporarily suspended from transactions are small plots of land with certificates in residential areas and individual houses in the inner city.

In the private house segment, the main reason for the overturning is that the homeowner adjusts the price previously negotiated with the broker, not wanting to reduce it further. As for the land segment, the upcoming information about tightening subdivision and land division has made many people expect that the land plots that have been divided and have completed the legal procedures will be "more valuable". If they are not financially strapped, homeowners all want to keep them instead of selling them at a low price at this time.

The director of a real estate brokerage in Nha Be also confirmed that recently, many homeowners have "turned around" and not continued selling their properties. Some transactions that were about to go to the notary stage were "backtracked". According to him, most of the time, the homeowners saw that the market was having buyers again and wanted to take advantage of the opportunity to adjust the price, and partly because they hoped that the real estate market would be better in a few months, so they continued to "hold on to their goods" and wait.

A report from DKRA Group shows that in November, the wave of selling land and individual houses at a loss has cooled down somewhat, and the situation of deep price reductions of 30-35% is no longer common. The primary price of land and townhouses in Ho Chi Minh City and neighboring provinces recorded an average decrease of 3-10% compared to the same period in 2022, and only decreased in high-value products with incomplete infrastructure and legal documents. In the secondary market, prices and transactions maintained a horizontal trend.

According to data from the Dat Xanh Services Institute for Economic - Financial - Real Estate Research, in November, the secondary market recorded moderate transactions, with no changes in selling prices. The apartment and townhouse segment also no longer recorded price decreases in secondary transactions, but mainly remained stable, even increasing slightly by 2-3% in some primary projects with good locations.

Commenting on the recent real estate transaction, Dr. Pham Anh Khoi, Director of Dat Xanh Services Research Institute, analyzed that the real estate market has now reached the final stage of the recession and almost hit rock bottom. The State's macroeconomic policies, including very favorable interest rates, have created conditions for people to access better capital sources. In fact, when the market shows signs of recovery, investors also listen closely to developments. Therefore, many homeowners "turn around" and no longer sell at a loss, but consider offering a better selling price when they have managed to manage their cash flow.

However, according to Mr. Khoi, the new growth cycle of real estate will develop slowly, following a U-shaped chart. At the earliest, it will be the second half of 2024 before it can improve somewhat. Therefore, we should not expect too much of a sudden growth next year.

According to Mr. Le Hoang Chau, Chairman of the Ho Chi Minh City Real Estate Association, although real estate has passed the most difficult period, it is not yet out of the woods. Compared to the beginning of the year, the market has only partially overcome difficulties, meaning there are still many difficulties that need to be resolved in order to fully recover.

Accordingly, Mr. Ngo Quang Phuc, General Director of Phu Dong Group, recommends that if investors accept to hold land, they need to be mentally prepared to wait 6-12 months before liquidity can return. If the financial foundation cannot hold out until then, they should accept to sell part of it.