VNRE - A series of defaults in Hanoi in the past few months has been found to have the same cause: The gloom, even slump of real estate market in a long period of time. It is compared to a gunshot that signals the panic, even massive flight of property investors.
As the hopes for a bright year in 2011 were shattered, investors expect a new outlook in early 2012. However, according to experts, given the current context, the market will be unlikely to revive before the second quarter of 2012. This is also seen as the ultimate limit that [property] investors can bear, especially indebted investors.
The collapse of black credit with loss reported to reach trillions of Vietnamese dong (billions of US dollars) in Hanoi - the capital of Vietnam - is likened to the ongoing “Occupy Wall Street” revolution in the United States. This seems to be a negative association but it has basis for it as all happenings are against investors.
Many used to hope that the successful effort of the State Bank of Vietnam (SBV) to bring ceiling deposit rates to 14 percent per annum in couple with the Prime Minister-approved Hanoi Development Master Plan would revive the lacklustre property market but the spectre of black credits appeared and dashed the hopes of investors. The high-end segment is almost inactive because investors have shrugged off it because it is unmarketable. The current focus, though very weak, is on popular housing options, with each deal value hovering at VND2 - 3 billion. Homebuyers are end-users, not profit seekers.
In previous years, the property market usually surged at the end of the year because people spent their savings on houses and many stock investors purchased houses as a way to lock in profit. However, the stock market is a nightmare for many investors as banks curbed lending for equity market - the same way they treat the property market.
The unfavourable market seems to change investors’ traditional behaviours. Many investors decided to withdraw from the property market to invest in the stock market because the last hopes for the property market in 2011 have wrecked. A movement seems to be reluctant but logical. The stock market has nosedived and valuations have become attractive and worth investing.
Waiting for better future in Q2, 2012
According to many property experts, the real estate market is unlikely to revive before the second quarter of 2012 because the first quarter is traditionally not the best time for investors to take big deals. They usually go to pagodas to wish for a good new year.
It is obvious that the abnormal changes towards the end of 2011 are spotting signs of possible shocks in the future. According to veteran property investors in Hanoi, the collapse of black credits is just a gunshot that herald new bad happenings are coming. One is the maturity of many loans on December 31, 2011.
Experienced property investors in Hanoi may not surprise at the current situation but it is a big surprise for authorities because the figure that Hanoi’s outstanding property loans account for 16 percent of the country’s total outstanding property loans is very unreliable.
In April 2011, the Hanoi real estate market reached its pinnacle when banks increased funds for this market. It is already seven months to date - a time that is enough for the maturity lag of black credits and nearly enough for the maturity lag of bank loans. Basing on credit limits from people to companies and banks, the flight of real estate investors will wash away investors on the market, from the small to the big.
If there is any "compromise" from banks for investors when the next maturity approaches, the second quarter of 2012 will be the last straw for this “compromise.” At that time, banks will consolidate their existence by taking away the existence of others. Consequently, investors will be forced to sell off to settle debts and interests. This will possibly be the worst time of the real estate market.
If this is the case, investors with abundant financial sources and little dependence on bank credits will start “fishing frenzy” strategy. The division between the rich and the poor in the real estate world will be thus widened. A wave of M&As will continue to an exit.
Reported by Luong Tuan | VCCI News