Volatile real estate market puts pressure on business results

A volatile real estate market caused revenues and profits of realty businesses to decrease sharply in the fourth quarter of 2022.

Phat Dat Real Estate Development Joint Stock Company (PDR) reported net revenue of VND14.6 billion (US$622,600) in the last three months of 2022, a sharp decrease compared to the VND1.29 trillion recorded in the fourth quarter of 2021.

The company suffered an after-tax loss of VND229.4 billion in Q4 of 2022, while in the same period in 2021, it reported a net profit of VND751.4 billion. This was considered Phat Dat’s “failure” quarter as the company reported a loss for the first time since it announced business results.

Dat Xanh Group Joint Stock Company (DXG) reported a loss of VND460 billion in the last quarter of 2022. During the period, the company’s net revenue reached VND984.3 billion, down 56.6 per cent year-on-year. In which, sales of apartments and land plots reached VND400.2 billion; real estate brokerage services reached VND394.8 billion, down 68.8 per cent and 55.9 per cent respectively over 2021.

In the fourth quarter of 2022, LDG Investment Joint Stock Company (LDG) reported a loss after tax of VND38.88 billion and its revenue decreased by 83.7 per cent year-on-year due to high costs.

Although no loss was reported, No Va Land Investment Group Corporation (NVL) announced its business results in the fourth quarter of 2022 with net revenue of only VND3.24 trillion, down 29 per cent over the same period of 2021. Accordingly, profit after tax in the period only reached VND239.4 billion, down 73.5 per cent year-on-year.

For the whole year, this real estate group recorded nearly VND11.15 trillion of consolidated revenue, down 25 per cent year-on-year. Profit before tax decreased by 19 per cent to VND4.11 trillion and profit after tax decreased by 34 per cent to more than VND2.29 trillion. Notably, Novaland’s inventory amounted to nearly VND135 trillion.

Nam Long Investment Joint Stock Company (NLG) announced business results with a net profit in the fourth quarter of 2022, down 23.3 per cent over the same period, at VND589.7 billion. Compared to other businesses in the industry, this figure shows the company was least affected in the fourth quarter of 2022.

Specifically, net revenue reached VND1.63 trillion, down 63.1 per cent over 2021. Meanwhile, financial revenue increased 5.4 times, reaching VND306.9 billion. However, selling and administrative expenses of the enterprise reached VND186.2 billion and VND199.1 billion, both down 51 per cent and 10.3 per cent respectively over the same period last year.

The forecast is still poor

The decline of real estate stocks is attributed to the lack of corporate cash flow, caused by the tightening of the bond market and bank credit room.

In the latest report, VNDirect Securities is not optimistic about the recovery of residential real estate in the short term because the real estate industry is facing three big challenges. That is, investors face difficulties in debt restructuring due to tightening bank loans to real estate and strict supervision in the issuance of corporate bonds. In addition, rising interest rates weaken demand for houses.

“Investors should focus on businesses with healthy financial structures and solid cash flow from previous sales,” VNDirect’s report said.

KB Securities (KBSV) recently forecast that the real estate market in 2023 will still face many difficulties in the context that home loan interest rates are expected to continue to increase and deposit rates will increase, affecting homebuyers’ borrowing needs.

Legal issues often take a long time and there are many risks that can slow down the process of approving and granting project construction permits. Realty investors also face more difficulties in accessing capital due to restricted bank loans to the real estate sector and the unstable bond market.

"Real estate stocks have plummeted, reflecting the negative situation about the real estate market. The short-term outlook for these stocks is still unclear," KBSV noted.

Similarly, in the recently released 2023 strategy report, Viet Dragon Securities (VDSC) said that the country’s real estate industry in 2023 will generally still face many challenges in the context of interest rates rising at a high level.

However, from a positive perspective, Ngo Minh Duc, CEO of LCTV Investment said that when interest rates go down in the second half of 2023, the real estate market will warm up along with benefiting from infrastructure as the 3,000-km North-South expressway is open to traffic within the next 2-3 years. — VNS