Surging Demand (Vietnam)

Vietnam faces surging demand for property but also legal shortcomings

The fast-growing economy of Vietnam has opened tremendous opportunities for real estate investment but there are some challenging factors that overseas investors need to consider before jumping on the bandwagon.


Vietnam's high gross domestic product (GDP) growth rate has been fuelled mainly by its two largest cities -- Ho Chi Minh City and Hanoi -- where GDP growth rates last year were 12.2 percent and 11.5 percent respectively, according to Nguyen Quang, habitat programme manager for the UN-Habitat office in Vietnam.

He said opportunities had arisen due to Vietnam's membership in the Asia Pacific Economic Co-operation (Apec) group, the booming stock market and the entry into the World Trade Organisation. More retailers, distributors and investors have entered the market while more local and foreign companies have set up businesses. As a result, demand for office space has surged.

At the same time, housing demand has risen in line with increased job opportunities, higher incomes and consumer-oriented demand from young workers who make up 60 percent of Vietnam's population.

Mr Quang also pointed to the phenomenon of "repatriates" -- workers who have discovered that they no longer need to be in the big cities to make a good living.

"More repatriates have come back to live in their hometowns as the government has opened more opportunities for them to come back, do business and own a residential unit," he said during a seminar entitled "Asia's Real Estate Cycles: the Vietnam Situation".

As a result, demand is growing while supply in all sectors is very limited. Office and retail vacancies are was low and the upward trend will continue due to growing demand and delays in new supply. Demand for good-quality residential projects is also growing.

Sopon Pornchokchai, president of the Thai Appraisal Foundation, told seminar participants that the Ho Chi Minh City real estate market had a lot of potential to grow as the country's GDP was still relatively low -- about half Thailand's figure -- despite a population of 85 million.

"In Vietnam, the land area is about two-thirds of Thailand's. Land prices in Ho Chi Minh City are very high. Of a unit price in Ho Chi Minh City, the land price is four times the housing price while in Bangkok, the land price is only two times the housing price," said Mr Sopon.

Mr Quang said that amid the property boom, some challenges awaited including legal matters, land title problems, speculation, planning and investment procedures.

He said the legal framework had some limitations such as the legacy of the Communist central-planning system, spontaneous and ad-hoc state intervention, dual ownership of land and housing units, and overlapping responsibilities for land use title supervision and planning.

"Access to land-use rights is complicated, such as long-term use and leases on land," he said.

In Vietnam, people cannot own a land plot but the government can grant them land-use rights. Five types of rights are available: right to transfer, mortgage, inherit, rent and transform land.

Mr Quang said the land-title situation was especially chaotic in urban areas because of unclear administrative responsibilities. People also had limitations in terms of access to formal land and housing.

As well, land information and records are not adequate while land registration and formalisation procedures are complicated. The government's planning system is also rigid and the cost of land transfers is quite high.

Another challenge involves differences in pricing that distort the property market. Land value is determined by administrative measures rather than based on the market while land allocation through bidding is limited.

"We lack a market-based and independent valuation organisation," he said. "The booming real estate market has built a lot of real estate brokers but few of them are professional."

Mr Quang said the planning system was inefficient and ineffective as there was a lack of priority-setting. Little co-ordination exists among mechanisms related to socioeconomic planning, spatial planning, land use and sector planning.

"The government should allow public consultation and participation in plan preparation and implementation," he said.

Constraints exist as well on investment procedures and land allocation. They are unclear and complicated while some regulations overlap.

Project and programme assessment and monitoring also need more appropriate mechanisms.

Other challenges include weakness of business capacity and professionalism, limited capital investment, a lack of market research and strategies, constraints on mortgages and access to financial markets, limited savings mobilisation for the formal real estate market, widespread speculation, inefficient land use and corruption and mismanagement.

Copyright (c) 2007, Bangkok Post, Thailand
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Land prices surge (Bangkok)

Silom remains the priciest at B650,000

Bang Kho Laem, Sathon and Yannawa districts in Bangkok posted the highest increases in the Treasury Department's new land valuations effective from January until 2011.

Property values in Bangkok rose 5.76% overall under the new assessment from the last survey. Silom Road, in the heart of the Bangkok business district, maintains its position as the most expensive property in the country at up to 650,000 baht per square wah.

The least expensive property in Bangkok was in Nong Chok district, at 260 baht per square wah.

Besides Silom Road, the next most expensive properties were located on Yaowarat Road in Chinatown, at 550,000 baht per square wah, followed by Sampheng at 500,000 baht, Siam Square at 350,000 baht, Asok at 260,000 baht, and Ekamai at 170,000 baht.

Klaew Tongsom, the director of the department's Property Valuation Bureau, said the higher valuations for Bang Kho Laem, Sathon and Yannawa reflected municipal plans to position the three districts as the financial centre for Bangkok.

Land values in Bang Kho Laem under the new 2008-11 framework rose 56.86% from the last valuation, while Sathon values increased 52.38% and Yannawa 50.94%.

The official valuations are used to assess property taxes and also serve as a benchmark for property transactions by the private sector.

Mr Klaew said that valuations for another five Bangkok districts - Don Mueang, Bung Kum, Bang Kapi, Huai Khwang and Lat Phrao - would be adjusted further in 2008 for use in 2009 to reflect changes of more than 20% in prices.

Bang Sue district also recorded a 33% increase in land values, mostly due to speculation of the area's increasing importance as a transport hub for the new Red and Purple mass-transit lines.

Puntip Surathin, the director-general of the Treasury Department, said the new valuations included assessments for more than 30 million plots nationwide.

Of the total, 5.12 million plots were assessed on an individual basis, including 1.8 million in Bangkok and the rest in 23 provinces. The other 24.9 million plots were assessed on a block basis.

Upcountry land values rose on average by 26.97% in the new assessment.

The most expensive property values were recorded in Hat Yai in Songkhla province, at 400,000 baht per square wah. Southern property values increased by 85.79% on average from the last assessment, the highest increase of all regions.

The cheapest property values were recorded for Ban Rai, Uthai Thani and Doi Lo in Chiang Mai.

In the eastern and central provinces, prices rose by an average of 11.71%, with Muang district in Samut Prakan the highest at 140,000 baht per square wah. Values in the North rose 15.43% overall, with Muang district in Chiang Mai quoted at 250,000 baht per square wah.

For northeastern provinces, values rose by an average of 22.97%, with Muang district in Khon Kaen quoted at an average of 200,000 baht per square wah.

Surat Thani in the South had property values adjusted to 11,000 baht per square wah from 1,500 baht earlier. Officials said the sharp increase reflected higher land demand for agriculture.

Udon Thani also recorded a sharp increase of 55% in the new valuation, reflecting the province's strategic location along the North-South Corridor running from southern China to the Laem Chabang Port as well as the East-West Corridor ending in Danang, Vietnam.

WICHIT CHANTANUSORNSIRI
Copyright (c) 2007, Bangkok Post, Thailand
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go to http://www.bangkokpost.com.