The paradox of Ho Chi Minh City real estate 'having no inventory'

The market is closed…

Specifically, the report on the real estate market in the fourth quarter of 2023 and the whole year of 2023 recently announced by the Ho Chi Minh City Department of Construction shows that real estate business activities are still facing many difficulties but have gradually recovered, with negative growth in the following quarter lower than the previous quarter. In particular, the first 6 months of the year saw negative growth of 11.58%, the first 9 months saw negative growth of 8.71% and the whole year was only negative 6.38%.

Regarding supply, in the fourth quarter of 2023 alone, Ho Chi Minh City has 4 commercial housing projects with more than 3,700 units eligible to be brought to the market, 100% of the supply is in the luxury apartment segment. The supply in 2023 increased by 20.6% compared to the same period in 2022 and all of these houses have been sold, there is no inventory.

The Kenton Node project alone has about 1,600 apartments in stock.

According to the Ministry of Construction , inventory is calculated from the time after one year from the date the real estate is eligible to be put into business but is not sold or has not been sold. This may be the reason why in the report, the Department of Construction of Ho Chi Minh City gave a rather "nice" number as mentioned above, there is no inventory even though transactions are still very slow and the market is still growing negatively. However, Mr. Vo Hong Thang, Deputy Director of Research and Development of DKRA Group, said that this regulation is not close to reality because many new projects have licenses, have not been granted notice of eligibility for sale, but businesses have sold "green rice". By the time the project is eligible for sale, it is sold out.

On the contrary, many projects that have been sold for decades still have unsold inventory. Therefore, more precisely, inventory must be calculated at the time when the project is eligible for sale and the investor opens the product to the market. The amount of inventory calculated this way will change at each statistical time. Therefore, the current calculation method of the Ministry of Construction may miss the reality on the market. Inventory should start from the time of sale and accumulate over the years until the project is 100% consumed.

From the above arguments, Mr. Vo Hong Thang commented that the report of the Department of Construction of Ho Chi Minh City is not accurate because in reality, the amount of old and new inventory in the city is very large. The clearest evidence is that from the beginning of the year until now, there have been very few transactions, unsold goods, and many projects in inventory.

A real estate expert also affirmed: It is unreasonable for Ho Chi Minh City to have no real estate inventory because purchasing power is low throughout 2023. Only one or two projects that meet customer needs, targeting real customers, are selling well, while the remaining high-end real estate projects are selling very slowly, or even not selling at all. If it is reasonable to say that there is no inventory in a project that is suitable for the market, it is reasonable, but it is impossible for the whole market to have no inventory. "Many projects sold through floors or relatives can announce that they are 100% sold out, but in reality, the floors "hold the goods" to sell again," this expert cited.

…but businesses still have unsold goods

Statistics by the end of September 2023, the financial reports of 10 real estate enterprises recorded a total inventory value of more than 300,000 billion VND, an increase of 5% over the same period. No Va Real Estate Investment Group Joint Stock Company ( Novaland ), the inventory value at the end of the third quarter of 2023 was more than 137,755 billion VND. Khang Dien Company recorded inventory of 17,152 billion VND. Nam Long Group had inventory of 16,800 billion VND. Dat Xanh Group had inventory of 14,788 billion VND. Quoc Cuong Gia Lai also had inventory of 7,100 billion VND... According to statistics of DKRA Group, up to now in Ho Chi Minh City, the apartment segment alone has 7,890 units in inventory, an increase of 13.2% compared to 2022; and for the townhouse and villa segment, the inventory up to now is 2,904 units.

Recently, in a preliminary analysis of the financial statements of 1,579 enterprises (in 10 industries) listed on the stock exchange, the Private Economic Development Research Board (Board IV) said that from mid-2022 to the end of the second quarter of 2023, revenue of all industries decreased. The most serious are the real estate and construction groups. These are the two groups with the biggest cash flow problems when the number of inventory days and the number of receivable days (the average time to collect debt after sale) increased many times. The analysis results showed that the average number of real estate inventory days in the first quarter of 2023 was up to 5,662 days, with some enterprises having up to 54,334 days. That is, it took enterprises up to 149 years to sell out their entire basket of products.

Ho Chi Minh City real estate market still sluggish

To resolve difficulties for businesses, Committee IV recommends policies that focus on supporting cash flow for businesses through access to capital, extending and reducing costs. This helps businesses create short-term cash flow at least in the second half of 2023 or until the first half of next year. Committee IV also believes that there should be additional counter-cyclical fiscal policies to boost aggregate demand in addition to monetary policies. For example, promoting public investment, focusing on large infrastructure, developing social housing. On the one hand, supporting businesses in the construction, building materials, and real estate industries; on the other hand, meeting the real needs of workers. In addition, it is necessary to reduce and extend taxes and other costs, because this is the time to relax people's strength.

In the long term, Committee IV recommends paying attention to developing a modern capital market to avoid growth being too dependent on credit. Continue to conduct analysis to design corporate income tax policies appropriate to each revenue scale group and industry to ensure the goal of increasing budget revenue to help businesses develop.

Real estate expert Phan Minh Chanh commented that the reality shows that real estate inventory is very large. For example, just one Kenton Node project in Nha Be District has 1,600 unsold apartments. Or a project in Thu Duc City has thousands of products launched but sales are also slow. In fact, inventory is increasing due to declining transactions and poor liquidity. The real estate segment is mainly high-end products serving investors. Not only that, legal difficulties, difficulty in mobilizing bond capital, limited access to credit capital, cash flow difficulties... have also caused real estate inventory to increase.

To "save" businesses and support the market to recover soon, this expert recommends that the biggest solution now is to step up efforts to resolve inventory, resolve legal issues, and "untie" unfinished real estate projects. The solutions must be practical, not just empty slogans.

Real estate inventory nationwide decreased

According to the reported data of 53/63 localities, the real estate inventory in projects in the fourth quarter of 2023 is about 16,315 units (including apartments, individual houses, and land). Of which, there are 2,826 apartments, 5,173 individual houses, and 8,316 land lots. The inventory is mainly in the individual housing and land lots real estate segments of the projects. The inventory in the apartment segment in the fourth quarter of 2023 is about 88.42% compared to the third quarter of 2023. The inventory in the land lot segment is about 115.66% compared to the third quarter and the inventory in the individual housing segment is about 78.93% compared to the third quarter.

Thus, it can be seen that in 2023, the real estate inventory in projects for apartment housing, individual housing and land segments tends to decrease.

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