Property fever heats up on economic rebound

VNRealestateMarket.com - 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. >>Full Story...

Health project is nursed

VNRealestateMarket.com - Investors in Vietnam’s first hi-tech healthcare park are working to revise public opinion about the project’s progress.

It follows complaints that the park site has seen no changes since breaking-ground over a year ago. The Hoa Lam-Shangri-La Healthcare Park in Ho Chi Minh City is a $400-million joint venture between Vietnam’s Hoa Lam Service Co. Ltd and Singapore’s Shangri-La Healthcare Investment Pte. Ltd.

The 37.5 hectare park was licenced in July, 2008 and marked its ground-breaking ceremony in October, 2008. The project’s site, however, has seen no sign of construction as of October, 2009. In response, the project’s investors stated that the lack of visible signs of progress was not an indicator of the project’s overall health.

Lai Voon Hon, general director of Hoa Lam-Shangri-La Healthcare, said at a press briefing last week in Ho Chi Minh City that “the project’s ground-breaking in late 2008 was not to start construction work but to just celebrate receiving the investment licence.”

He said: “We [the developer] obtained land use rights [LURs] for the entire project in April 2009, just six months ago, so we have only recently got the State Bank permission to put money into the project. We are also waiting for the construction licence from the Ministry of Construction before launching the project’s first phase.”
The first phase will consist of a 250-bed hospital, a medical training centre, a kindergarten, an international school and a staff residential area.

Hon said investors would usually only put in money after receiving LURs. However, with the support shown by the leaders of Ho Chi Minh City and the central government, “we had the confidence to begin putting in our money and begin designing the hospital first. That is why we’re able to submit the construction drawings only five months after we received the LURs and the land demarcation,” he stressed.

He said VND250 billion ($14 million) had been disbursed into project’s administrative and licencing approval. “We are working hard to get the project moving forward in line with our promises made to the Vietnamese government and the people of Ho Chi Minh City.” He stated that if all went well the first phase might be put into construction in early 2010, with an opening in 2011.

Nguyen Van Hiep, vice director of Ho Chi Minh City’s Department of Construction, said the project was of great government importance and flow of administrative procedures took a bit more time than usual. However, the investor’s cooperation to the project had made its progress go quickly compared with other projects, particularly in this difficult economic climate.

“The project’s delay is also attributed to it being long planned by the city’s government. When Hoa Lam-Shangri-la came in, it took time adjustments to be made to planning and market research,” Hiep added. The park’s development will span five phases over a period of nine years and will address the current shortage of world-class, comprehensive healthcare services and facilities in Ho Chi Minh City.

The project’s aim is to feature a world-class healthcare environment for medical professionals and patients, including private tertiary care and teaching hospitals, research centres, medical institutes, commercial and retail components, supporting service residences and other community facilities. >>Full Story...

Ha Noi’s real estate prices rise by 20 percent

VNRealestateMarket.com - Real estate in several areas of the capital city has seen 20-30 per cent increases in the last month.

Those affected include newly incorporated areas in expanded Ha Noi such as Ha Dong, Tu Liem and Thanh Tri.

Price of real estate in the areas was equal to or even higher than that in the inner city’s districts, said Dao Minh Thuy from the Ha Dong’s Long Thuy Property Brokerage Company.

Thuy said that a square metre of land along major streets in Ha Dong currently reached VND140-150 million (US$7,800-8,300) and roughly VND180 million ($10,000) in Tu Liem’s Le Duc Tho Street. A square metre of land in Bach Mai Street is currently about VND130-135 million.

Land located off small alleys had also sharply increased by roughly VND5 million per square metre over last month, said a property broker in the My Dinh area said.

A property investor, who bought a plot in Me Linh District at the price of VND9.2 million per square metre at a property trading floor two weeks ago, said that the floor currently appraised the land at the price of VND11 million per square metre.

Earlier this month, thousands of people crowded the sales office of the Nam Cuong Real Estate Co, expecting to be able to buy apartments at their original prices.

A deputy director of a construction company, who declined to be named, attributed the price rises in the past month to speculation.

Currently, people can only purchase apartments directly from investors if they have close relations.

The scramble for purchases is based on speculators expecting prices of the apartments to increase dramatically when they are later sold on the secondary market. The prices set for the Duong Noi flats, which will range in size from 50-200sq.m, are described as very ‘soft’, from $880 to $1,200 per square metre.

The deputy Minister of Construction, Nguyen Tran Nam, said that people often bought property based on rumours, warning investors to be careful with such information.

Nam said that some investors were overly influenced by rumours leading them to quickly invest but after little research. Whenever they heard that land prices in certain areas were "hot" they would immediately rush to buy.

Le Duc Hien, deputy head of sales at Viglacera Real Estate, said that the real estate market needed transparency.

Hien said that with transparency, clients would be able to purchase apartments at their original prices, while investors would gain prestige in the eyes of people. Real estate developers who could gain customers’ confidence would be the long-term winners in the market. >>Full Story...

Binh Duong investment property attracts domestic, foreign interest

VNRealestateMarket.com - The real estate market in the southern province of Binh Duong is predicted to boom in the near future as it is attracting the interest of investors from throughout the country and abroad including Singapore and Malaysia.

Real estate companies in Thu Dau Mot Town are announcing record interest in property. Since the beginning of this year, three projects have been announced, providing 1,000 units. Over 3,000 people have expressed their interest in the new properties that have recently gone on the market.

The first announcement which took place in March saw project investor Hoang Gia announcing the sale of 350 land lots which were immediately bought. The second project, five months later, saw the Huong Phuoc Project, invested in by CotecLand, selling 300 land lots in a day of their availability. November saw the Becamex-invested Green River Project receiving deposits from more than 1,000 investors.

High demand is being met by major new investment projects such as the building of Binh Duong City as well as economic and industrial zones My Phuoc, Viet Nam-Singapore, Tan Uyen and Bau Ban.

Moreover, infrastructure in Binh Duong Province has been strongly improved. Binh Duong Boulevard has been finished. Projects to upgrade and widen National Road No13 and the My Phuoc-Tan Van Highway are under construction.

Marc Townsend, Director of CB Richard Ellis Viet Nam, agrees that Binh Duong is an attractive real estate market. >>Full Story...

High gold prices slow house sales in downtown HCM City

VNRealestateMarket.com - The rapid increase in gold prices over the last several months has virtually halted house sales in downtown HCM City where property is typically valued in gold.

Landlords owning houses in the city’s downtown districts usually fix their property prices in the precious metal.

The volatile nature of the gold market over the last few months has meant that the value of a property could go up overnight by several hundred million dong. This has led to many potential house buyers suspending intended purchases in the downtown area.

A District 1 house put up for sale at 160 taels of gold three months ago carried a value of VND3.36 billion (US$182,000). However, with a VND4.8 million per tael increase in gold prices, the house now costs VND700 million more at VND4.1 billion ($217,000).

A deal for another District 1 house was fixed at 1,100 taels of gold, or VND22 billions ($1.2 million), when the price of gold was VND20 million per tael. This house now is dearer by VND6.3 billion ($300,000) because the precious metal has risen to more than VND25 million per tael.

In District 3, a landlady fixed her house price at 140 taels of SJC gold after consulting neighbours. A broker warned that she would not be able to sell the house if she quoted its price in gold.

The broker explained that the price was fixed in 2006 when a tael of gold was VND12 million. In three years, gold prices have soared to VND25 million per tael. Valued in gold, the house is now more than twice as expensive.

Real estate brokers report that many deals have been cancelled and the number of prospective buyers has dwindled to almost nothing. This also means that the number of brokers going out of business could rise sharply in the coming months, they add.

On the other hand, real estate developers who fix their house prices in dong, not in gold, are seeing a spurt in business. Potential house buyers, instead of trying to get houses in downtown districts, are coming to new urban areas because gold prices have not had a strong impact on property prices in these areas. >>Full Story...

Two firms co-build VND750 billion-apartment project

VNRealestateMarket.com - Construction Joint Stock Co No 5 (HOSE listed SC5) has signed a cooperation deal with Construction and Material Trading Joint Stock Co (coded CNT) to co-build the An Phuc apartment project.

Total cost for the project is estimated at 750 billion dong, in which each party contributes 50 percent.

An Phuc apartment building includes five 18-storey blocks and one basement, covering total 17,250 sqm in Ward 16, Dist 8 of HCM City.

SC5 targets to reach the profit of 50 billion dong in 2009 and 100 billion dong in 2010. >>Full Story...