EM – The negative impacts from the construction and real estate market recently have recently caused pushed many elevator businesses to undergo into a “staggering” situation, but the current time is not really yet a “falling point” for growth of the elevator industry – but the its most difficult time.
EM – The negative impacts from the construction and real estate market have recently pushed many elevator businesses into a “staggering” situation, but the current time is not yet a “falling point” for growth of the elevator industry – but its most difficult time.
Looking at the general status quo of the economy as of late, specifically the first quarter of 2023, perhaps without the need for detailed statistics on all activities of all fields, each of us can already sense a ” heavy cloud” engulfing the economy.
Industrial production stagnates, unemployment increases, consumption weakens and especially the construction and real estate market have been caught up in a “big storm”.
The overall picture of the real estate market and construction industry in the first few months of 2023 is dull.Grand investment and rapid expansion of the project scale used to be regarded asthe development path of many real estate firms over the years.
But now, the main goal of most real estate investors is just to “surve”, “bealive” to overcome the “tragedy”.
The implementation of real estate projects has been met with numerous obstacles, chiefly legal issues, which account for 70% of the difficulties that real estate enterprises face. Besides, the sale transactions have declined, the liquidity of products fell into dismal situation, which stifles the cash flow of most businesses in this industry.
The season of shareholders meeting in early 2023 between many real estate construction enterprises is no longer recorded with financial revenues compared to previous years. Many businesses reported losses, declining performance, and growth plans for this year are no longer “paintedpink”.
Notably, compared to the same period, Novaland Group witnessed a 69% decline in their quarterly revenue, just landing at over VND 604 billion; or Phat Dat Real Estate Investment JSC, where profit after tax was just over VND 22 billion, plunging by 92% over the same period.
Similarly, Dat Xanh Group JSC also recorded a 79% decrease in their quarterly revenue compared to the same period last year, reaching VND 378 billion.
The “big storm” of the real estate market not only affects project development enterprises, but also have a strong effect on closely related businesses such as construction contractors, and companies, which manufacture and sell building material.
According to the data of the Ministry of Construction, several main contractors and subcontractors have taken a “hit”. By the end of the first quarter of 2023, the construction industry has reached a growth rate of -3%, primarily due to the lack of new orders and increasing prices of raw material.
Typically, in the first quarter of 2023, Hoa Binh Construction Group JSC witnessed the second consecutive quarter of loss, after a record loss of more than VND 1,200 billion in the fourth quarter of 2022. Specifically, in the first quarter of the year, Hoa Binh Construction Group JSC reported a loss after tax of nearly VND 445 billion while consolidated turnover was VND 1,194 billion, down 60% over the same period.
The first quarter of 2023 was also the second consecutive loss of Hung Thinh Incons Joint Stock Company since being listed on the stock market. Accordingly, the company’s first quarter net revenue slumped by 71% over the same period to VND 429 billion and profit after-tax was VND -17.6 billion , while the turnover in the same time last year was 43.2 billion dong.
According to a recent study by the Vietnam Real Estate Association, this industry contributes about 13.6% of GDP. In addition, this field also have influence on more than 40 other important economic sectors, a constitutive element to the synchronous development of the economy.
When the end-use demand of real estate accretes by VND 1,000 billion, it will stimulate the production value of the remaining fields by VND 772 billion and spread to added value of VND 191 billion.
Hence, in the opposite direction, when the real estate market comes to a “stands still”, it is comparable to the “tow head” of many other auxiliary industries being halted. If the locomotive stops, the entire train will be compressed together due to inertia and the elevator industry is one of those wagons.
Along with the freezing of the real estate market, difficulties in carrying out construction and weakening consumption demand, building finishing contractors such as the elevator industry also fell into ” a gridlock”. Since the need for installing new elevators has declined, the revenue and profit targets of many businesses in this industry have also been considerably affected.
Not only suffering from a decrease in turnover, but the scarcity of new elevator installation orders also makes the competition among elevator businesses more intense.
According to forecasts of many economic experts, when the Government’s fiscal and monetary policies penetrate quickly and strongly impacts objects in the market, the recovery of the economy will take place faster, specifically, as per recent forecasts, the earliest recovery period is the end of 2023.
At the announcement of the Real Estate Market Report for the first quarter of 2023, which tookplace on the morning of April 11, Mr. Nguyen Quoc Anh, Deputy General Director of Batdongsan.com.vn shared that the real estate market would improve in the second quarter of 2023 but there will not possibly be any strong movements yet.
“Policy has a huge effect on the real estate market and normally there is only a time lag of about 6 months. It is forecasted that with the Government’s policies in place, the reversal signal of the real estate market will appear in the fourth quarter of 2023 or later, in the middle of 2024. At that time, the amount of inventory on the market will drop sharply,” said Mr. Quoc Anh.
Thus, the most difficult time for the real estate market is gradually passing. However, haverelated industries, such as the elevator industry, really been through their hardest stage yet?
Along with the “freezing” of the construction – real estate industry, the elevator enterprises have also fallen into a dire situation. Numerous influential corporations in the Vietnamese elevator field believe that this status quo is much more severe than the previous crisis period of 2008-2014.
It is undeniable that the elevator industry has suffered from accumulating challenges over the years . However, in accord with many experts’ assessment, the current “falling point” cannot be considered the actual “falling point” of this industry.
Real estate is a vital core of a large-scale ecosystem. This core consists of many different cycles, surrounded by many layers, and has a widespread impact.
When confronted by an earthquake, this core will be the first to vibrate, such vibration will spread out to other surrounding layers. The spillover effects of this vibration has a certain time lag , particularly, when affecting the elevator industry.
It can be clearly seen that, in the past time, even though the construction – real estate industry has reached their “rock bottom”, besides the stabile revenue originating from maintenance and reparation of old lifts , the elevator businesses can still “survive” thanks to the installation of elevators at recently completed construction sites.
Therefore, the actual “falling point” of the elevator field is still lying ahead. Based on the analysis of elevator specialists, the impact of the stagnating construction – real estate industry on the elevator industry usually lasts about 1-2 years.
In particular, a medium-sized construction project usually lasts about 2-4 years. Meanwhile, elevators areone of the items belonging to the finishing process of the building.
Consequently, when construction and real estate projects untie their knots, it does not mean that the elevator industry will be salvaged immediately. And vice versa, the “falling point” of the elevator sector will not coincide with the trough of the construction – real estate industry.
According to the assessment of many economic experts as well as anecdotes of business owners in recent times, the present is the most difficult time for the construction – real estate industry. It is forecasted that the earliest time to receive the reversal signal is at the end of 2023 – early 2024.
Based on the above analysis, the actual “falling point” of the elevator industry will be in the second quarter of 2024.
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