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VNRE - This year’s credit crunch started to result in impacts to property firms with weak base, which were forced to sell their projects or acquired by bigger ones.

“Many builders have rushed to carry out more construction projects on luxury apartment block since they took big profits from previous ones earlier,” said a real estate broker in Ho Chi Minh City.

“Businesses in other sectors have also pumped money into property project since they were attracted by their significantly high profit margin.

“However, most of them paid deadly for their property investments as the market turned sour due to this year’s credit squeeze.”

On March 1, the State Bank of Vietnam ordered all lenders to limit credit to non-production businesses, including real estate projects, at 22 percent of total loans by June 30, and at 16 percent by the end of the year.

The government in February approved a plan to cut annual credit growth to below 20 percent from the initial target of 23 percent as part of a series of measures to curb inflation.

HCMC-based property firm Phat Dat carried out the luxury apartment block Everich II with more than 1,000 apartments in District 7 in HCMC soon after it gained positive sales of the Everich I in District 10.

However, at this year’s annual general meeting, the firm announced that only 166 apartments of the Everich II were sold due to the stagnant market.

Le Phuoc Vu, chairman of building material supplier Hoa Sen Group, told Dau Tu Tai Chinh Newspaper earlier that his company would focus on real estate sector, but then changed his mind after suffering heavy losses.

Hoa Sen Group announced at a extraordinary general meeting that it would sell series of property projects including Hoa Sen Phuoc Long and Hoa Sen Riverside apartment blocks in District 9 and transfer land use of a property at No. 123 Tran Nao Street in District 2.

“Property prices have risen well beyond their true value on speculation. Therefore many property firms suffered plunging sales as the market was getting gloomy,” said Le Hoang Quan, chairman of the HCMC People’s Committee.

Many businesses, who rushed to invest in property projects, are now struggling to find buyers, Quan noticed.

Three scenarios for property market this year

Dr. Tran Kim Chung of the Central Institute for Economic Management expects there will be three main scenarios for the real estate market this year.

In the first scenario, he assumed that as the government keeps the tight monetary policy unchanged and the global economy treads water, local property market will grapple to rally due to a capital shortage and high lending rates.

Chung expects in the second scenario that property firms will likely to be acquired or go bankrupt if the government still tightens credit growth and the inflation continues to soar.

The last scenario supposes that the market will roar back as if the monetary policy is loosened.

The Ministry of Construction has asked the central bank to consider on allowing lenders to loan some specific kinds of property projects.

Source: VNN | SGGP

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