The New Vietnam-Growing Pains and Opportunity
I began to realize how much the world had changed over my lifetime when the New York Times ran an article recently about a new “Ho Chi Minh Trail” in Vietnam-this one having nothing to do with arming and supplying an insurgency.
The new Trail is a marketing tag for a string of golf courses. If your image of Vietnam is stuck in the twentieth century or is shaped by “Apocalypse Now”, you need to rethink it. Consider, for instance, the Gulf of Tonkin being spoken of not as an ill-fated Act of Congress, but rather as a “breath-taking tourist destination”. The new Vietnam has no Colonel Kurtz. Twenty-first century Vietnam has bicycle tours, diving, sailing, extreme sports, and of course, golf and a long list of other attractions for its visitors from around the world.
After a tragic Twentieth Century, Vietnam is on the rise. It remains a poor country with a low GDP but one in which economic progress is palpable. Vietnam is expected to grow 8 percent in 2008. It is communist country, but, in the model of China, one in which Marxism seems curiously not to impede the pursuit of wealth. What’s more, in a historic move Vietnam joined the WTO in 2007.
There have been some growing pains for this budding economic dynamo but Vietnam is beyond doubt a hot real estate market. The new HCM Trail is an interesting sidelight, but on a more bread-and-butter level the government has designated large tracts of land for the creation of “new towns” set aside for the type of development which exemplifies the lifestyle to which the long-suffering population of this Southeast Asian nation aspires.
Vietnam’s overheated real estate market
Unfortunately, the real estate market in Vietnam seems to have overheated. It is probably not too hard to understand why, since the international interest in this country has been pretty intense and property speculation is blamed for the incredible rise in prices of certain real estate areas. In some cases the prices of commercial real estate have even reached first world levels.
Stocks market and real estate competition
The Wall Streed Journal ran an article at the beginning of March discussing the interplay between Vietnam’s real estate market and its much-touted stock market. After Vietnam joined the WTO, the stock market surged. Now it is tanking. The stock market’s surge had created an oversupply of both currency and stock offerings. At the same time, the real estate market had a concomitant surge that drew investment dollars away from the market. By some estimates the jump in real estate prices has been 100%.
The Journal reports that the Vietnamese government has high hopes for its stock market as a way of raising capital for the economy and so the government is intervening to slow down the real estate sector. The Vietnamese Central Bank is asking banks to stop lending to property developers, and there is talk of a tax on large real estate holdings. There is reporting, however, that foreign banks have stepped in to fill the gap created by the local banks’ pull-back.
Is there opportunity despite it all?
So is there still opportunity in Vietnam? The short answer seems to be yes, but at the present time it is rather risky.
Experts are still forecasting continued growth this year but the market has the risks of a market fueled by speculation. There is still much being said, however, about the strength of the Vietnam real estate market. A recent survey of real estate investment trusts ranked China, India and Vietnam as the leading property growth markets in the Asia-Pacific Region.
The speculation that has driven prices up may have slowed a bit because of the tightening of credit, but price inflation is still a problem. As one might expect of a newly developing country with an 8% growth rate, there is talk of poor government planning and inadequate infrastructure being potential problems.
All in all, while there are clear pitfalls, this seems too attractive and ascending a market to overlook entirely.
Read more:
Golf Properties– Ho Chi Minh Trail
