VIETNAM NEWS/ANN: Chu Anh Tuan, deputy general director of property developer Ha Do Group, said recently his company expects consolidated profit after tax to be 700 billion dong ($29.90 million) this year.
But its target for next year is only 800 billion dong, a 15 per cent year-on-year increase, he said.
The Development Investment Construction Joint Stock Corporation (DIG)’s leadership has also been very cautious in setting business targets for next year.
A company spokesperson said the growth target for next year would only be 10 per cent higher than for this year.
The targets are rather modest when seen against the real estate industry’s performance this year. In the first nine months the profits of many enterprises grew by more than 100 per cent year-on-year.
DIG for instance reported 178.6 billion dong in pre-tax profit, 167 per cent up.
Asked about his company’s modest profit target for next year, a Ha Do spokesman said it would be very difficult for not only the real estate sector but also others to sustain high growth rates year after year.
Besides, the sector’s growth peaked between this year and last year and so this success would not be easy to replicate in the coming years, especially next year.
Market observers said property companies’ caution was due to many reasons, including the instability in the sector.
There is a supply-demand imbalance, especially in the high-end, tourism and resort property segments, they warned.
The number of transactions in the first six months of this year fell sharply yet the number of developments and supply has continued to increase, causing an oversupply, particularly in the high-end segment, they said.
Between 2015 and this year, a significant number of high-end projects have been developed by well-known names creating the imbalance, they explained.
They cited the example of Ho Chi Minh City where 65 projects brought 23,756 houses into the market, including 22,684 apartments.
Luxury units accounted for 31.3 per cent, mid-priced ones for 49.4 per cent, and low-end ones for only 19.3 per cent.
Meanwhile, demand for cheap apartments was highest.
A representative of the Ho Chi Minh City Real Estate Association (HoREA) said the city is facing a serious shortage of low-priced commercial apartments, social housing and particularly low-rent apartments for workers and low income earners.
This would create instability in the market and society, he warned.
Another cause of instability is the “land fever” occurring at many places around the country, with HoREA experts saying this involved mainly agricultural lands being illegally divided into plots and used for unauthorised purposes.
This was distorting the real estate market, they warned.
Real estate companies’ caution in setting growth targets for next year has also been due to fears of a possible real estate bubble.
Analysts said a bubble occurred 10 years ago and the industry is afraid the next one is due based on 10-year cycles.
The real estate market began a recovery in 2014 after a bubble burst a few years earlier, and since then there has been an unprecedented supply of new projects and with a good net absorption rate.
Besides traditional products, many new ones too have been introduced, such as second-home villas, condotels and officetels. In 2015 the Government began to allow foreigners to buy and own properties in Vietnam, and they have duly obliged.
Nonetheless, analysts and investors are wary of the pace of growth, and point to underlying risks.
They include an oversupply of high-end housing projects, the return of speculators and declining market demand.
Their biggest concern is the formation of a bubble like the one that burst in 2007 and kept the market in limbo until 2013. The market is still paying the price.