Real Estate Bonds Mature: Peak in August
According to data and financial analysis provider FiinGroup, over VND 100,000 billion worth of corporate bonds in the real estate sector will mature in the second half of this year. This highlights the existing pressure on cash flow payments. Notably, in August, the maturity of bonds issued by real estate enterprises peaked at approximately VND 17,500 billion.
Statistics from VNDirect Securities Company reveal that in the third quarter of this year, the total value of maturing corporate bonds is estimated at VND 67,000 billion, the highest in the year. Notably, the real estate group accounts for more than 57%, equivalent to nearly VND 38,200 billion, of which the majority are bond lots that have been extended from 2023.
Despite the heavy bond repayment pressure, many real estate enterprises maintain a “price holding” strategy, refusing to accept discounts to recover cash flow.
Enterprises attribute their inability to lower prices to capital cost pressure and financial obligations to bondholders. Real estate bonds currently offer interest rates ranging from 10-12%/year, significantly higher than bank loan rates. If assets are sold urgently at a low price, the proceeds may not be sufficient to cover bond principal and interest payments, and it could also violate commitments made to bondholders. As a result, prices in various real estate segments have surged since the beginning of the year.
According to the Ministry of Construction’s report on the real estate market in the second quarter, urban apartment segments stood out, continuing to thrive and setting the highest price level in nearly a decade.
In Hanoi, the average selling price in the market during the second quarter reached VND 80 million/sqm, up 5.6% from the previous quarter and a significant 33% increase year-on-year. Surveys indicate that many apartment projects in Hanoi recorded price increases of about 5-6%. Notably, several luxury projects, such as Noble Crystal with prices ranging from VND 160-270 million/sqm and The Matrix One with prices ranging from VND 120-150 million/sqm, caught attention with their striking asking prices.
In August, the maturity of bonds issued by real estate enterprises peaked at approximately VND 17,500 billion. Illustration: VOV.
In Ho Chi Minh City, the average apartment price reached VND 89 million/sqm, showing no significant change from the previous quarter but representing a substantial 36% increase year-on-year. While generally stable, some luxury segments still witnessed localized increases and set new price levels, mainly due to superior infrastructure advantages such as the Metro line, ring roads, and the Cat Lai tunnel, as well as the expansion of major roads in Thu Thiem, Thao Dien, An Phu, and Thanh My Loi.
The segment of villas and townhouses within projects also noted a slight upward trend compared to the previous quarter, notably in Ho Chi Minh City and Khanh Hoa province.
Bond Default Unlikely
SSI Securities Corporation experts believe that the strategy of maintaining real estate prices to stay afloat can only work in the short term. If market confidence continues to decline, the “holding breath” state will turn into a widespread liquidity risk. Therefore, robust and synchronized solutions and policies are necessary to alleviate maturity pressure and restore market liquidity.
Experts suggest that, in the short term, the mechanism for issuing private placement bonds should be continuously improved towards mandatory information disclosure, periodic audits, and enhanced independent credit ratings. There is also a need to expand the legal framework for debt restructuring, such as converting bonds into equity or conditional extensions for projects with complete legal procedures and clear progress.
Maintaining real estate prices to stay afloat is only a short-term strategy. Illustration.
In the long term, credit for the real estate sector should be selectively regulated, prioritizing social housing and rental housing while curbing speculative projects. As the real estate market is gradually recovering, enterprises can sell their products, and bond maturity will no longer be a concerning issue.
Dr. Can Van Luc, Chief Economist at BIDV, asserts that bond pressure this year is not worrying. The likelihood of bond defaults is low as the real estate market has been showing positive signs. Many enterprises only need to offer a 10% discount on their products to sell them, unlike the previous period when discounts of 40-50% were common.
According to analysts, the real estate industry continues to thrive this year. The country has completed the rearrangement of administrative units, ensuring political stability. The real estate sector is benefiting from low-interest rates and institutional reforms. The trio of laws on real estate, the resolution on piloting the implementation of commercial housing projects through land use agreement negotiations, efforts to promote public investment, and administrative procedure cuts are all contributing factors.
The government’s recent efforts to address legal obstacles for real estate projects will enable enterprises to resume project implementation, improve cash flow, and facilitate enterprises to launch sales and develop financial plans to repay bondholders.
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