JarJar Nixon's Blues Kitchen

Vietnamese feel the pinch of red-hot home prices

By Roger Mitton

HANOI - PHYSICIAN Nguyen Thu Huong lives with her engineer husband and
young daughter in a small flat in the Vietnamese capital's drab and
distant north-west suburbs.

They pay US$60 (S$87) a month for their place in a run-down 35-year-old
building. That may sound cheap, but bear in mind it is half of Dr
Huong's monthly salary.

So she is not happy, especially as the rent used to be US$30 until their
landlord doubled it this year.

Excessive demand and inadequate supply, made worse by a growing flood of
rural folk moving to the booming cities, has caused Vietnam's urban
property market to go wild.

Skyrocketing prices have been sent even higher by an influx of affluent
foreign investors seeking a place to live and set up office.

Naturally, local landlords, unhindered by wishy-washy and rarely
enforced regulations, are making hay while the sun shines - often
doubling and tripling rents without notice.

Welcome to the cut-throat world of real estate gouging in the region's
most booming economy.

Said Ms Tran Minh Phuong, 23, an accountant at a toy-making company in
Ho Chi Minh City: 'High rents make life very tough. I earn 1.8 million
dong (S$163) a month and I have to pay a third of that in rent for the
little one-room flat I share with my student sister.'

The issue is a hot topic in the current session of the National
Assembly,the country's legislature, and measures such as hiking property
taxes have been mooted to discourage speculation.

But in reality, few expect the moves will turn the tide of the soaring
market.

Said Mr Truong Thai Son, deputy head of Hoang Quan Real Estate in Ho Chi
Minh City: 'High property prices badly affect ordinary people like civil
servants and young professionals. They now have little chance of buying
their own place.'

The Huongs have always dreamed of getting their own flat, but it now
looks like it will stay a dream.

Said Dr Huong: 'We checked one place and it was 14 million dong
(S$1,268)a square metre. Even if we could raise the deposit, it would
take us 50 years to buy the place, so we'll never do it.'

As Vietnam's economy has kicked up another gear, prices have shot up
across the board.

Inflation hit 9.34 per cent last month and is expected to be 9 per cent
for the year.

Ordinary people have had to face a double whammy of steep hikes in the
cost of staples like petrol, meat and cooking gas, as well as soaring
rents and property prices.

Mr Nguyen Ba Thanh, a national assemblyman from Danang, said: 'The
amount of money that bought half a kilo of meat earlier this year now
only buys a third of a kilo. A bowl of noodles that cost 10,000 dong now
costs 14,000. The hike in prices has been tremendous.'

Vietnam's 81,000 resident expatriates have also been hit hard. It is
estimated that the annual inflation rate for foreigners is now between
20 per cent and 30 per cent, largely fuelled by stiff rent increases.

Said Mr Le Viet Hai, chairman of Hoa Binh Construction & Real Estate:
'Urban property prices in Vietnam are too high, much higher than in
Bangkok and other places in the region.'

In fact, property prices have gone up a staggering 50 per cent
nationwide since the start of this year, and in Hanoi and Ho Chi Minh,
they have tripled.

Said Mr Hai: 'A large imbalance between supply and demand has led to
these steep price hikes. When more supply comes onstream, prices will
fall.'

Not everyone is so sure, especially in the major cities, where extensive
construction projects have recently been completed, but prices continue
to soar.

Apartments in more than 100 Hanoi property projects have mostly been
sold and even resold - often before construction had begun, at prices
ranging from US$700 to US$3,000 per square metre.

These prices are far beyond people like Dr Huong, Ms Phuong and most
other citizens who work as civil servants, factory employees, or in the
service industry.

Said Ms Phuong: 'Five years ago, I moved from the provinces to the city
to find work and I dreamed of buying a flat. But with my current income,
it's impossible.'

It is, however, possible for a select number of elite urban
professionals in Vietnam's private sector who are entrepreneurially
adventurous and who play the stock market.

They snap up the high-end properties, and vie with affluent expatriates
to rent the topnotch new condos.

Said Mr Son: 'Many people have made a ton of money from playing
Vietnam's stock market, and they invest some of their gains in property.
So that has helped drive prices up.'

They have soared highest in the booming commercial metropolis of Ho Chi
Minh City, where top-range flats can cost US$3,500 per square metre.

Considering that Vietnam's annual per capita income is only US$835, it
is understandable why the masses feel left out and angry.

Said assemblyman Tran Du Lich, the director of Ho Chi Minh's Economic
Institute: 'Ironically, housing prices in Vietnam are among the highest
in the world, while our per capita income is among the lowest.'

Indeed, as Vietnam's property prices start to rival those in Hong Kong
and Singapore, many fear that none of the government's proposed new
measures will bring much relief.

And that is why people like Ms Phuong and Dr Huong will continue being
squeezed out of the property market and forced to live in small
low-quality rented dwellings.