Foreclosed Properties: Banks Struggle to Find Buyers Despite Generous Discounts

Vietnamese banks are facing challenges in selling off houses, resorts, and factories that were pledged as collateral by borrowers who defaulted on their loans. Despite slashing prices by billions of dong (VND), banks are struggling to find buyers for these properties. Since the end of last year, banks have been aggressively auctioning off various types of properties, including prime land plots, houses, villas, large tourism properties, resorts, and factories, in an attempt to recover their debts.

For instance, Agribank is currently seeking buyers for two houses located in Hanoi’s old quarter. The starting prices for these properties have been reduced by VND50 billion and VND26.5 billion compared to the initial auction a year ago, now priced at VND60 billion ($2.5 million) and VND34 billion, respectively. Despite multiple auction announcements, these two houses remain unsold.

BIDV has faced similar challenges, having to attempt the auction of a cement factory in southern Binh Phuoc Province for the sixth time, as well as a 1,100-square-meter plot of land in Ho Chi Minh City for over a dozen times. In October, VietinBank announced a fresh auction of 20 land plots in southern Dong Nai Province, with a starting price VND60 billion lower than three months prior, at VND265 billion. These properties were used as collateral by a construction firm in HCMC to secure loans.

The prices of many properties within a $1-billion tourism project associated with developer Tan Hoang Minh have been significantly reduced from previous auction attempts. However, the current slump in the property market has made it challenging for borrowers to sell their properties themselves, as they hope for higher prices, while potential buyers are waiting for further price reductions. Additionally, the large properties being auctioned by banks face competition from new projects being developed by companies seeking to restructure and raise funds in a tight market.

Furthermore, some seized properties have legal issues, making it difficult to attract foreign buyers, despite their interest in Vietnamese tourism projects. According to the head of a firm in Hanoi with extensive experience in mergers and acquisitions, the bad debts ratio in the real estate sector has increased from 1.8% to 2.58% in the past year and is expected to rise further as the property market struggles to recover.

In summary, Vietnamese banks are finding it challenging to auction off defaulted properties, even after reducing prices significantly. The current property market slump, borrowers’ high price expectations, competition from new projects, and legal complications are all contributing factors to the difficulty in finding buyers for these properties.