Bad Times In Vietnam’s Real Estate

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Vietnam’s real estate sector has been going through a rough year, with developers missing out on interest payments on debts due to a credit crunch triggered by ill-timed government measures. This has led to a significant drop in the sector’s performance, which was the worst-performing one last month on the falling Ho Chi Minh City stock exchange.

As per Vietnam investor Dragon Capital, the sector saw a drop of nearly 16% in the month. This has been the culmination of two years of turmoil in developers’ shares that spread last year to corporate bonds, affecting project development and leaving ghost blocks of high-end property. 

The largest listed developer to face problems is No Va Land (NVL.HM), whose shares have fallen more than 80% in a year after missing interest payment deadlines on domestic and foreign bonds, triggering a standoff with some international creditors. Even the shares of the largest listed developer, Vinhomes, part of the country’s biggest conglomerate, Vingroup, have fallen 13% this year. 

Recently, other non-listed companies who defaulted include Hung Thinh Corp, a major developer in southern Vietnam, and Van Thinh Phat, whose chairwoman was arrested in a graft crackdown last year, according to VISRating, which is partly owned by Moody’s. The pressure is mounting with real-estate bonds of about $6 billion set to mature each this year and the next, nearly three times more than in 2022. 

Experts attribute the worst troubles to a long-running graft campaign that authorities stepped up at the end of last year. The arrest of Truong My Lan, chairwoman of Van Thinh Phat Holdings Group in October 2022 over financial fraud, is seen as a turning point by analysts after which confidence took a hit. The arrest followed tougher rules on transparency and private placement of corporate bonds adopted in September, coinciding with an economic slowdown, and authorities were forced to suspend them a few months later as the market froze. Bond issuance drew to a halt and bank loans fell, prompting the government to repeatedly urge lenders to boost credit.

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