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Good morning, Vietnam
 Much has been made of
Vietnam's housing boom, which set the new property market on fire last year;
but, like all emerging markets that are growing rapidly, there is a danger of a
‘last in, first out' bust...
Reported to have the second biggest potential for capital
growth after China in both
the residential and commercial property market in Asia, the property market in Vietnam last
year was piping hot and the total capital injected into
the real estate market reached £3.37 billion.
Most of this cash came from foreign direct
investment (FDI) and overseas remittance. More than eighty-five per cent of the
FDI capital that entered Vietnam's largest city, Ho Chi Minh,
last year was pumped into real estate.
Thousands of local and foreign investors
rushed to snap up apartments and prices in certain districts in Ho Chi Minh
rose by more than 100 per cent, which was far more than industry experts had
predicted.
Brett Ashton, Managing Director of Savills Vietnam, said, "The real estate
price saw a two-fold increase over the last 12 months and three times over the
last 18 months."
As the market was on such an upward curve, experts
predicted that it would continue growing this year, by as much as 30 per cent. PricewaterhouseCoopers even went so far as to
list Ho Chi Minh City as one of the top ten most promising Asian markets.
In another positive move, the Vietnamese
National Assembly agreed to implement a five-year pilot scheme to allow
foreign enterprises and individuals to purchase and own residential properties
in Vietnam.
The current law only allows foreign enterprises and individuals to invest in
the construction or development of residential property for the purpose of sale
or lease. Ownership of residential property is for development and subsequent
sale or lease.
The new Resolution substantially changes this position. It gives foreign
enterprises and individuals the right to own and enjoy property rights similar
to those enjoyed by domestic property owners. The pilot scheme is expected to
start on January 1st next year.
Along came a
problem...
But then came the credit crunch and that
old saying of ‘last in, first out' started to apply to Vietnam's new
market. As it was relatively unchartered territory and had undergone such a
massive boom, prices had further to fall and foreign investors lost confidence
in an less established market.
But, don't
lose hope. Vietnam
does still have the potential for strong growth for years to come, but experts
are saying that the Government needs to intervene in order to save the market
from booming once more and then going down in flames in a spectacular bust. Booms
inevitably come hand in hand with increased inflation and new Government
policies are needed to ensure this doesn't stall the market for good.
One venture that is going
ahead is the commercial project on the shores of the South China Sea, 80
miles from Ho Chi Minh City.
MGM Mirage and Asian Coast Development Ltd
are joining up to build a £2.79 billion MGM Grand Ho Tram - a mixed use
development consisting of beaches, luxury hotels and holiday resorts.
On completion in 2011, it will be the largest resort complex in Vietnam.
Picture by Magalie L'Abbé
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