Land plot prices in HCM City and neighbouring provinces such as Binh Duong, Dong Nai and Long An decreased by 10-25 per cent compared to early this year due to the central bank’s tight monetary policy for real estate lending.

Many investors borrowed money to invest in property in previous years, hoping to make profits, but instead suffered losses as tightened credit drove up interest rates and hit liquidity.

In 2021, Tran Van Nam from HCM City bought a land plot for VND5 billion (US$208,000) in the southern province of Dong Nai, hoping to resell it within a year for a profit of hundreds of millions of dong.

But in late 2022, when bank interest rates went up, he had to sell it for a loss of over VND800 million.

At that time, many brokers told him that land plot prices had kept increasing from 2016 to 2021 and it will keep increasing in coming years, and so he bought the land plot hoping for a profit. But he was shocked that he was forced to sell it at a loss, Nam said.

Like Nam, Nguyen Thi Hue, an investor in Binh Duong Province, said that in 2021, she decided to use her savings and borrowed money from bank to buy a 2,000 square metre land plot in Long An Province for VND10 billion ($416,000).

Some months later, many brokers contacted her and asked if she wanted to sell the land plot at VND12 billion.

But Hue did not do so because she believed that land price would increase further in the future.

However, this year, contrary to her prediction, land prices have fallen sharply, while interest rates have increased from 9 per cent to over 15 per cent. Hue is nervous as she cannot sell the land to pay debts.

Now, she is calling to sell her land for only VND8 billion, but she still cannot find buyers.

Many investors in land have suffered similar losses.

Loan interest rates increased sharply, raising the costs of many investors who borrow money to buy land. They are then willing to accept a 10-20 per cent loss to sell as soon as possible. This leads to lower land prices, experts said.

Land in Long An, Binh Duong and Dong Nai provinces could see prices fall by 10-15 per cent in the next 12 months, and in farther localities such as Tay Ninh and Dak Nong, the decline could be more than 20 per cent, experts added.

The real estate market has cooled down for the last eight months, especially in the third and fourth quarters of 2022. Investors using financial leverage are most vulnerable to low liquidity, rising interest rates and credit control, especially when these appear at the same time.

Luong Dinh Thuy Van, CEO of investment consultancy Mogin Holdings, said most short-term investors, who hope of getting a huge profit in six to 12 months, racked up losses in 2022.

She sounded a warning: "The property market will not be favourable to cash-strapped investors in 2023 either." — VNS