Property investors run into trouble in Vietnam

Nguyen Ngoc Binh, chairman of Viet Nam Mechanisation, Electrification and Construction Joint Stock Company, estimates that his company was forced to pay as much as 70 billion dong per year in interest.

This became a burden when the company’s properties remained unsold or could not be completed, he said.

A project run by the Malaysian Berjaya group to build a Vietnam finance centre was granted an investment licence in February 2008 with total capital of US$930. However, due to the declining market and the high supply of offices for lease in HCM City, the design for the building changed significantly and the project was downsized, with investment reduced to $460 million, Dau tu Tai chinh (Financial Investment) reported.

According to Nguyen Hoai Nam, director of Berjaya Vietnam, the drop in investment was unavoidable due to the declining market and few buyers. 

Many other real estate companies face the same problemwith high inventories, especially at a time when the real estate sector is saddled with bad debt.

Construction Ministry statistics for last year show more than 17,000 of 55,870 enterprises operating in the construction and real estate industry reported losses. The ratio of enterprises incurring losses soared from 19 per cent in 2010 to 30 per cent last year.

Statistics released by real estate company CB Richard Ellis Vietnam showed that 95 per cent of units launched in the first quarter this year were priced below $1,000 per square metre. The rate over the same period last year was 26 per cent, suggesting that developers are adapting to new market demand.

Le Thanh Than, director of Lai Chau Construction Co No 1, said they recently sold space in a major project for below $700psm and attracted many buyers. Than said high costs for unnecessary procedures were pushing firms into difficulty and suggested many companies were also burdened by high interest rates from loans.