Real estate businesses struggle to meet 2024 profit targets

DNVN - Credit rating company VIS Rating commented that although real estate project sales have recovered since the first quarter of 2024, new policies will promote project development activities in 2025 and beyond, most companies will find it difficult to complete their 2024 profit targets.

According to the residential real estate industry report based on the top 30 residential real estate companies in terms of revenue recently announced by VIS Rating, real estate sales in Hanoi and Ho Chi Minh City in the third quarter of 2024 increased by 48% compared to the previous quarter, the highest level in the past 4 quarters. Many new regulations on real estate issued recently will promote project development and sales in 2025 and beyond.

VIS Rating expects that when cash flow improves, the debt repayment ability of real estate investors will begin to improve from the weak level of 2023-2024.

The rating agency believes that although project sales have recovered since Q1/2024, most developers will find it difficult to meet their 2024 profit targets. Housing demand remains strong, as evidenced by high absorption rates and strong growth in home loans of 7% year-on-year (2023: 1%). Expectations of rising home prices, combined with lower down payments, will continue to drive strong demand from homebuyers. Many developers (VHM, NLG, KDH, AGG and HDC) have recorded increased sales, mainly in the high-end segments.

VIS Rating expects that the debt repayment capacity of real estate investors will begin to improve from the weak level of 2023-2024.

However, the revenue and profit in the first 9 months of 2024 of the investors that VIS Rating monitors decreased by 20% and 43% respectively compared to the same period last year due to the decrease in handover volume from weak sales in 2023. Therefore, VIS Rating expects that more than 60% of investors will not complete the profit plan for the whole year of 2024.

According to VIS Rating experts, many circulars and guiding decrees issued or taking effect in the third quarter of 2024 will accelerate project development and sales in 2025. More than 20 decrees and circulars were issued in the third quarter of 2024 to support the implementation of the revised Land Law, Housing Law and Real Estate Business Law.

Developers will have clearer guidance to conduct procedures and promote the development of new projects. The Government 's efforts to accelerate legal approvals for prominent real estate projects from early 2024 have led to an increase in newly licensed and eligible projects for sale in the third quarter of 2024.

VIS Rating expects investors to sharply increase the number of new projects, helping to improve their sales and cash flow next year.

Regarding debt repayment capacity, although VIS Rating believes that the industry's debt repayment capacity will remain weak in Q3/2024, it expects that leverage will be controlled thanks to new regulations, and that investor cash flow will improve thanks to increased sales. As of Q3/2024, more than half of the investors that the company monitors have weak leverage and debt repayment profiles.

Accordingly, debt growth is likely to continue to slow down from a high of 15% per year in 2022-2023. With a positive outlook for new project sales and cash flow, VIS Rating expects debt coverage ratios of investors to gradually improve.

Minh Thu

Source: https://doanhnghiepvn.vn/kinh-te/bat-dong-san/doanh-nghiep-bat-dong-san-chat-vat-hoan-thanh-muc-tieu-loi-nhuan-nam-2024/20241202085128719