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Property fever heats up on economic rebound
Investors shrug off capital gains tax, calling real estate a better avenue than stocks and banks as inflation looms.
Retired garment worker Cu Ai Lan recently made over US$20,000 profit by selling two apartments in just over a week.
In a country where annual per capita income is around $1,000, Lan, who owns two Western-style villas and several newly-built apartments, can easily earn tens of thousands of dollars from each piece of property she sells.
“Demand (for apartments) is high, so it is easy to find customers. I often buy apartments with base prices at real estate trading floors and then resell them,” she said. “Sometimes, I have to buy flats from other investors.”
Like Lan, many traders are enjoying newfound wealth thanks to soaring urban property prices in many areas since the beginning of the year. Many are even willing to buy apartments or villas that have yet to be built.
Last week, thousands of people in Hanoi’s Ha Dong District formed a line beginning at midnight to try to buy apartments at a Nam Cuong Group real estate project that has not even broken ground yet.
Quick and easy
At real estate trading floors, supply cannot match demand. Apartments priced at over $1,000 per square meter attract the most customers.
Nguyen Dinh Tuan, a 32-year-old accountant with a paper firm in Hanoi, said real estate investment is the “quickest and easiest way to earn money.”
Tuan recently sold a house for over VND4.5 billion ($250,000), “more than triple what I paid for it two years ago,” he said
Tuan and other property investors at a trading floor in Hanoi said deposits at banks and in stocks were now not as effective as real estate investment because they feared inflation, the pace of which has picked up again recently.
Khuat Huu Vu Trung, a market expert from Colliers International, said the real estate market in the capital city had been warming up for several months.
“Property prices in Hanoi, especially in the city’s western area, have risen 10-20 percent this year,” he said, adding that property speculation was becoming more and more common.
Economist Ngo Tri Long warned that property prices were surging and exceeding the properties real value due to speculation.
The World Bank warned in a report last week that Vietnam could face risky asset bubbles as stock and property prices rebound.
Though some property transactions have been slowed or canceled due to a new capital gains tax, many buyers have avoided it by declaring prices much lower than the actual money they trade.
Additionally, many of the recent buys have been at new projects sold directly by investors, so buyers have yet to worry about the capital gains.
Buying has also been fueled by first-time home buyers who want to live in their properties.
Rebound and crunch
Deputy Chairman of the Vietnam Construction Federation Pham Sy Liem said the real estate market rebound reflected the economy’s recovery.
Vietnam has navigated the global economic slump well and is expected to achieve a growth rate of 5.2 percent this year thanks to government stimulus measures, including the partial subsidization of interest rates.
The boom is also due to psychological factors as many people worry the price may continue to rise and want to buy houses quickly, said Liem. “The mentality may contribute to property bubbles.”
He also said that real housing demand in Vietnam was very high amid rapid urbanization and the growth of the wealthy class.
Nguyen Manh Ha, director of the Construction Ministry’s Housing and Real Estate Market Management Department, said the total housing area in the country was currently just over 1 billion sq.m, which translates to an average 12.2 sq.m of housing per citizen. The average figure is 30 sq.m of housing per head in developed urban areas throughout the world.
Real estate prices are expected to continue their rise in the coming time. According to a surveyed by Vietnam Report of 500 consumers and individual investors, including 35 property firms in Hanoi and Ho Chi Minh City, over 43 percent of surveyed property firms said they expected real estate surges.
Vietnam Report is a research firm that provides surveys and rankings in the property and telecommunications markets.
Over 61 percent of the surveyed consumers said they planned to buy properties to live in while 11.5 percent said they would do so for short-term investment purposes and 27 percent for long-term investments.
A dream too far
The real estate fever has benefited some investors like Tuan, but it has also made it more difficult for the poor to improve their situations.
“Housing prices are too high, so owning a new apartment is only a dream. All we can do is make changes to our old flat,” said retired blacksmith Nguyen Van Tuan. His six-member family is now living in a 30-square meter flat and has to use their balcony as a kitchen and laundry area.
To improve housing conditions, the government has approved amendments to construction laws to simplify procedures.
Liem from the Vietnam Construction Federation said housing policies for low-income earners have partly met urgent housing demand in urban areas, which has helped stabilize prices.
In 2010, an estimated 29.2 million urban citizens will need some 438 million square meters of houses, while the respective figures in rural areas will be 62.2 million and 870.8 million square meters.
The government aims to fulfill the ambitious target of increasing the average living area to 15 square meters by 2010, according to the Construction Ministry.
“I hope that the state can offer more support to help poor people like us buy a house. For example they could help us by increasing our access to preferential bank loans,” Tuan said, scrubbing his flat’s variegated wall.
Thai Thanh Van
thanhnien
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