Vietnam’s real estate market experienced rapid growth. Buildings could not go up fast enough as the middle class rode a wave of economic development out of the countryside and into apartments in the cities.
Accommodating all these new home buyers, however, took vast sums of capital. Real estate firms were borrowing from banks hand over fist and issuing hundreds of thousands of millions of dollars’ worth of bonds to satisfy the surging demand.
But then COVID-19 happened, and Vietnam’s home buyers changed from bulls to bears. This led to a downturn in home sales and several real estate companies, that were overleveraged to begin with, found themselves short of cash and unable to borrow more.
Facing a liquidity crisis, many of these firms turned to Vietnam’s bond market. This led to a huge jump in bond issuances. In 2020, Vietnam’s local currency corporate bonds were worth US$12 billion. By the end of 2021, however, that figure had more than doubled to US$26 billion, the bulk of which was connected to the real estate market.
Consumer and investor sentiment nosedived, and the Vietnam real estate sector found itself under increased scrutiny as regulators worked to isolate and rectify systemic issues.
This was, however, all kicking off as Vietnam was emerging from prolonged lockdowns brought on by the COVID-19 pandemic. For the most part, the worst of the pandemic had passed, and vaccination rates were high. On a macro level, discussion had shifted from prevention to control – reopening the borders had risen the agenda and soon a full economic recovery was expected to begin.