Vietnam - Poor apartment sales affect construction firms

The low liquidity of the apartment market not only leaves a negative impact on project owners but on construction firms as well.

Le Viet Hai, board chairman of Hoa Binh Construction and Real Estate Corporation (HBC), said that business operations of property firms were encountering difficulties and some have lost solvency.

Besides, several office and commercial center projects have also seen low sales, resulting in financial problems to property firms and late payments to contractors.

Therefore, contractors execute slowly or even stop work while some property firms decide to delay their projects due to lack of capital.

In fact, in addition to loans from banks, property owners cannot pay building expenses if their apartments are not sold.

The tough property market has been expected but perhaps no one can expect that the market will be this sluggish, according to Nguyen Ba Duong, general director of Cotec Construction Joint Stock Company (Coteccons)

Spreading investments in too many property projects is one of the reasons for capital shortage, and even many large firms have also run into difficulties, said Duong.

However, the number of new projects this year is fewer than that of last year due to the tough market and tightened property loans.

Like HBC, Coteccons, one of the big contractors, is working on projects it signed last year and this year worth a total of around VND5 trillion, and thus the firm’s operation is not affected much. However, small contractors will have to face many challenges next year, Duong said.

He said the property market would remain in difficulties over the next six months. As a result, there will be many contractors having no projects or earning modest profits.

According to the Ministry of Construction, Vietnam has around 36,000 construction firms. Besides, the construction industry contributed 7% to the gross domestic product (GDP) last year and attracted around three million workers.

Dinh Dung - The Saigon Times Daily

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