Real Estate Industry Struggles: Temporary Closures 

In late April, a property brokerage company in Hanoi announced its temporary closure due to persistent losses and depleted cash flows. Minh, the company's director, informed VnExpress that his firm had only sold three properties on the quiet market in the past year.

Property market's challenges in Hanoi 

He stated that the company had incurred losses for consecutive quarters while real estate developers still owed the firm commissions. As a result, the company had to downsize its workforce from nearly 100 employees last year to 25 at the beginning of this year. They further reduced the salary budget in March and retained only 15 employees.

By mid-April, the company had only ten employees on its payroll, and, faced with the market's challenges and risks, they decided to close temporarily. Minh explained that this decision was a last resort, as their resources were exhausted, and they could no longer sustain the losses.

Similarly, a real estate trading floor in Hanoi, with fewer than 30 employees, had to shut down earlier this year due to four consecutive quarters without any revenue. Although the trading floor had sold some realty products at the beginning of last year, the developers delayed commission payments or compensated in the form of properties instead of cash. Due to weak demand, they were unable to sell these properties.

Hieu, the owner of the trading floor, explained that their temporary closure was necessary due to their inability to settle debts and manage continuous losses. This situation was prevalent among real estate trading floors in District 2 and Thu Duc City.

Even cash-strapped real estate developers had to close branches to reduce costs. Ngoc, the marketing director of a real estate company involved in projects in Hanoi City, Binh Duong, and Dong Nai provinces, mentioned that while the company's headquarters were still operational, its branches had been closed.

Over the past 11 months, the company has experienced no revenue in the stagnant market. Ngoc added that the workforce had decreased by 80% as many resigned due to salary cuts and postponed payments. He described the difficulties as the most severe in the past two decades.

According to the Ministry of Construction, the number of property developers and brokers that dissolved or temporarily halted operations increased by 30% and 61% in the first three months of 2023. Additionally, the establishment of new firms decreased by 63%. Approximately 30% to 50% of property trading floors had to close or suspend operations, and 60-70% of brokers either stopped working or switched professions.

Having observed the real estate market for the past two decades, Nguyen Mac Hoai Nam, the CEO of consulting service provider Nam Phat, remarked that some real estate developers and brokers have been forced to remain idle or temporarily close due to "stuck cash flows."

Nam identified four challenges currently faced by the real estate market:

• Tightened credit
• High-interest rates
• Restricted capital mobilization channels
• A significant decrease in liquidity

Real estate companies primarily hold their resources in land banks or ongoing projects, which are often difficult to convert into cash during plummeting market liquidity.

He stated, "The situation in the property sector is more severe than the real estate crisis that occurred 15 years ago, so more realty companies will face scrutiny and elimination in the future."

Read more: Villas for rent in Hai Ba Trung