Property Crisis Pressures Vietnam to Act Before It’s Too Late
(Bloomberg) — Time is running short for Vietnam to prevent a worsening property-sector credit crunch from derailing one of the world’s fastest economic expansions.
With about $4.6 billion of property developer notes tracked by Vietnam’s bond association coming due next year, firms will struggle to meet obligations without government support, according to local real estate executives and analysts. Funding has all but dried up after an anti-graft campaign spooked investors and authorities froze new bond issuances across the industry.
The looming maturity wall risks triggering a wave of defaults that could turn the property woes into a wider crisis for the banking sector and the economy. While the absolute scale of Vietnam’s property debt is tiny compared to that of China, the industry still makes up about 11% of economic activity. Mounting worries of a China-style hit to growth are prompting calls for Vietnam’s government to act before it’s too late.
“The real estate sector is undergoing a major crisis,” said Tran Xuan Ngoc, chief executive at property developer Nam Long Group. “We don’t know when the crisis may pass as it depends on the government’s actions.”
At stake is an economic expansion projected by the International Monetary Fund to