Real estate waiting for COVID-19 to pass

The reason is not just lack of new products on offer but these days’ customers are extremely reluctant to participate in crowded events and places like the trading floor because of fears of the COVID-19 threat to human life across the globe.

Change in approach to customers

One of the main points of the Prime Minister's Directive 06/CT-TTg on strengthening measures to prevent and combat complications caused by COVID-19 is to totally avoid crowded places, and always wear a mask and gloves in public places. These strict directives have led to several organizations postponing big events and huge sales promotions planned especially by real estate businesses, until such time that the epidemic passes. Hence, businesses dealings in real estate have begun to change tactics and ways to approach their customers.

In the past, the trading floor of the Novaland real estate Group used to be quite crowded, even if there were no new products on offer. Now, with fears of the current epidemic of COVID-19, the number of visitors and actual customers have reduced to a mere handful. At the corner of the trading floor on CMT8-Nguyen Thi Minh Khai Street in District 3, only ten customers were seen, even though it was during rush hours.

The real estate consultants said that only customers who desperately needed to buy houses or invest immediately were coming to the trading floor these days. One such customer on the floor called Mr. Van shared that he had just sold his house in the suburbs and was looking for a new house in District 2 or District 4 very urgently. He said that the buyer had deferred possession of the house for one more month, so it was urgent that he buy a house within that time. In any other circumstance he would never have come to such a crowded place. The scare of COVID-19 was too real for him.

At the Kim Oanh trading floor on Truong Chinh Street in Tan Binh District, the number of visitors enquiring about projects were scarce. One representative of Kim Oanh real estate Company said that every year in January soon after the full moon, businesses implemented large-scale promotions and sales activities, but this year they have to put all such activities on hold. In the immediate future, the company will only focus on selling existing ready and completed products of old projects as new projects cannot be implemented due to lack of attendance of adequate number of customers.

Similarly, Mr. Le Tien Vu, Deputy General Director of the Cat Tuong real estate Joint Stock Company, shared that before Tet every sales event of their enterprise had attracted thousands of customers but now after the Tet holidays, such events have been temporarily suspended. Specifically, the company had planned to organize some sales promotion for the next phase of the Cat Tuong Phu Hung project in Binh Phuoc, but this plan had to be temporarily suspended to ensure safety of the public.

Leaders of some companies such as the Thu Thiem New Urban real estate Company, Tran Anh real estate Company, and Dai Phuc Land Company, also confirmed postponing their sales events. Now, instead of focusing on sales, these enterprises are starting to organize small-scale events or even direct one-to-one service to an individual customer.

Mr. Duong Chinh, General Director of the Viet Event Joint Stock Company, said that because of the present environment created by fears of COVID-19, dozens of real estate enterprises in the South have cancelled their scheduled sales events and start of projects already under contract with the company. Mr. Chinh said that although their business was being seriously affected their concern for the general public was also of great importance. His company had canceled all business activities until March as they are hoping that life will be back to normal after then.

Real estate businesses need State support

According to Le Hoang Chau, Chairman of Ho Chi Minh City Real Estate Association (HoREA), the real estate market and many real estate businesses had already faced many serious difficulties and challenges in 2019. The size of the market, the supply of projects and the supply of housing products had plummeted, especially those products that were at lower and affordable prices such as social housing and commercial housing. Most businesses suffered a sharp decline in revenue and profits, while some businesses even came close to bankruptcy.

Referring to figures of the Business Management Registration Department in the Ministry of Planning and Investment, Mr. Chau said that in 2019, 598 real estate enterprises registered to suspend operations, up by 36.8%; while 686 real estate enterprises were dissolved, up by 39.4% compared to 2018. In Ho Chi Minh City, there were 126 commercial housing projects with mixed land fund that delayed construction and 158 real estate projects with State-owned land fund were reviewed for legal procedures, or investigated.

In 2019, only one commercial housing project with residential land use rights was approved by the People's Committee of the City, rejecting around twelve projects, down 92% compared to 2018; and four projects were approved for investment policies and recognized investors, reducing some 24 projects, down 85% compared to 2018.

In order to solve problems and bottlenecks that exist in the real estate market, HoREA recently sent a letter to the Prime Minister and the People's Committee of Ho Chi Minh City to summarize the Association's proposals to support the market in recovering and developing sustainably, to meet housing needs of the people. In particular, in the face of COVID-19 and a widespread fear in the public, HoREA proposed to consider the setting up of a mechanism to support businesses before the impact of the epidemic spreads even further. HoREA believes that the epidemic is affecting and increasing difficulties for the market, mainly resort real estate.

Mr. Ngo Duc Son, Deputy General Director of DRH Holdings, said that the epidemic is greatly affecting real estate businesses. For residential real estate, Chinese customers accounted for a large portion of foreigners buying houses in Vietnam, but this number has decreased sharply after the spread of COVID-19. Chinese investors had invested in Vietnam heavily earlier, but with the current epidemic situation they have changed their plans or postponed buying and investing.

Although recognizing that the real estate market is facing many difficulties and challenges, Mr. Ngo Quang Phuc, General Director of the Phu Dong Group, said that bottlenecks due to legal issues and procedures or even COVID-19 were just temporary setbacks for real estate businesses. According to Mr. Phuc, the biggest difficulty for businesses now was finding suitable land fund to develop their projects, especially social housing projects and affordable housing for the majority of low-income people in urban areas. In addition to scarcity of land, other challenges like rising land costs were somewhat surreal at double or triple prices. These problems have caused headaches for many investors.

Mr. Phuc believes that land costs have a great impact on the cost of output products. To ensure profits, investors are forced to cite for high-end projects and hike up product rates. The corollary of the virtual real estate then adversely affects the market and the psychology of people who have houses and do not want to buy more, as well as people who do not have a home. Salaries of workers and civil servants have not increased much per year, just by only 3-5%, while housing real estate has increased dramatically and unreasonably.