Vietnam’s listed property developers, grappling with mounting debts, face challenges as profits decline and cash reserves hit a five-year low. Moody’s co-owned rating agency reported a deterioration in debt ratios and a credit crunch in the real estate sector. No Va Land, amid missed payments, is discussing debt restructuring. Despite some improvement due to increased bank credit, the Asian Development Bank (ADB) warns of potential spillover into the banking sector. The agency anticipates subdued sales in H1 2024 due to a low property supply and slow recovery in homebuyers’ sentiment but expects a gradual recovery in developers’ performance from H2 2024.
Vietnamese property developers listed on the stock exchange are confronting heightened challenges in settling substantial debts, with dwindling profits and cash reserves hitting a five-year low, according to a report from a rating agency co-owned by Moody’s. The real estate sector in Vietnam has witnessed developers failing to meet interest payments on debts, mirroring the more severe issues seen in China, driven by a credit crunch and an excess of high-end properties. The ability of most listed developers to service their debt has further declined, according to a report from the Vietnam Investors Service and Credit Rating Agency (VIS Rating) released on Wednesday. The report, which didn’t disclose any credit rating changes, highlighted that several listed developers, including those with significant market capitalization on the Ho Chi Minh City stock exchange, are confronted with annual bond payments totaling approximately 114 trillion dong ($4.70 billion) for this year and the next. This amount represents over 1% of the country’s gross domestic product. Included in this group is struggling No Va Land, engaged in prolonged discussions with bondholders regarding potential debt restructuring after defaulting on payments for several months. VIS Rating noted that the debt ratios of listed developers worsened in the initial nine months of the year due to diminished revenues, and their cash reserves reached the lowest point in the past five years. The extension of fresh credit from banks has helped the sector to some extent, as highlighted by the agency. However, in September, the Asian Development Bank (ADB) cautioned about the possibility of repercussions in the banking sector stemming from the real estate crisis. According to the agency, the limited influx of new property supply and a sluggish improvement in homebuyers’ sentiment will persist, causing a decline in developer sales in the initial half of 2024. Nonetheless, it pointed out that developers’ performance is anticipated to gradually rebound from the second half of the coming year.
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