An epidemic Vietnam has no cure for: real estate fevers

I intended to buy a land plot and build a house 10 years ago. Thanks to an acquaintance, I was able to acquire a 55-square-meter plot in the HCMC's outskirt district of Nha Be. The transaction took place during a land fever outbreak and therefore, I rushed to close the deal via an intermediary.

The cost for the plot was VND7-8 million ($305-350 as per current exchange ratio) per square meter and I made a deal with the broker on a handwritten paper without getting it notarized.

"Let's just cut the deal and we will have all the paperwork legalized later," the broker assured me, showing me a list of customers that had bought land with exactly the same process I had gone through. "See? Now they are building their houses like mushrooms."

Convinced at last, I agreed to make a deposit and transferred the money.

At that moment, as a salaried employee, I had to gather almost every asset I had and sell away all pieces of jewelry, apart from borrowing from others to have enough money to obtain that one land plot.

Yet once I got the plot, I could not get anything built on it because that land was situated in the path of a high voltage transmission line.

I was stuck with the plot for five years. Then I had to try many different ways and spend several tens of millions of dong asking for help from intermediaries so that I could sell it at half the price I spent on it.

That land fever of 2010 in Ho Chi Minh City lasted several months, before cooling down in mid-2011.

After that failure, I only paid attention to real estate projects that were fully legal.

But real estate fevers keep recurring every few years in HCMC; and whatever I saved up only allows me to get land plots outside the city, in neighboring Dong Nai, Binh Duong and Long An provinces. But those are places I do not know well, and it would be difficult to travel back and forth as I work in HCMC. If I were to buy a property there, I would not be able to keep a close eye on it.

My friends then advised me to invest in condo apartments.

Five to seven years ago, such an apartment in the city’s outlying areas, about 10-15 km from the downtown area, cost around VND2 billion ($86,700). And if I wanted to buy one, with my financial ability back then, I would have to get a bank loan worth 70 percent of the house’s total cost, not to mention borrow more from friends and relatives.

Thinking about a future in which I have to endure chronic debt and yet like many others, still face the risk of unemployment, illnesses, and all other possible vagaries of time, I just wanted to shrink away.

The story of settling down, having a career, and building a family sounded so simple at the time of my parents, but these have become very stressful for me and my generation.

The path to realizing the dream of owning land and houses is just as tough for youth in other countries as it is for Vietnamese youth. Houses in South Korea are so prohibitively expensive that many married couples, despite six-digit incomes, have had to give up the dream of having a house in a city. In Hong Kong, many people can only afford several dozen square meters, and have to live their lives in so-called "coffin homes."

Other factors, too

Yet, I cannot blame everything on the "real estate fevers" that arise out of greed and speculation.

There are other factors that have a say in deciding whether or not one can own a house in a city in Vietnam.

Many friends of mine have devoted all their time and effort to making money; earning as much as they can has become the biggest goal in their lives. More than a few of them have managed to own houses in the city, eventually, but, to achieve this goal, they’ve have had to trade away their youth, health, relationships and other things. Some did not even dare to get married.

Some have been lucky enough to acquire property in real estate projects when the market was down and prices were not pushed up too high, compared to the actual value of the properties.

In the 2008-2010 period, we witnessed a sideways movement in the real estate market and saw it "plunge" by nearly 50 percent between 2011 and 2013. Then in the 2014-2019 period, prices surged sharply by 50-300 percent in big cities. House prices in the center of HCMC jumped 21 times after just 16 years.

So after more than ten years of hard work, I still could not buy any real estate for myself.

One reason of course is that the sum I have saved up has never been able to match the continuously rising land and housing prices. The other reason is that every time I want to make some investment, brokers would show up and I would always fall into a matrix of information and tricks.

Many people accept the notion that one can never suffer losses by investing in real estate. This explains why 90 percent of land buyers in the suburbs of HCMC are speculators, according to surveys by the HCMC Real Estate Association and independent organizations. In the middle and high-end apartment segment in the inner city area, a majority of buyers are investors who buy houses to resell or lease out.

Investing in real estate is not a bad thing, especially when the bank interest rate is just 4-5 percent per year. However, when the fever rises quickly due to asymmetrical information generated by a network of intermediaries, the market is distorted.

Most recently, information on planning and building large-scale projects like bridges and airports in HCMC’s neighboring and nearby localities, like Dong Nai, Ba Ria – Vung Tau, Phan Thiet and Binh Phuoc, has triggered yet another real estate fever, fanned as ever by eager intermediaries.

A real estate project in Phu My Hung Urban Area in HCMC's District 7 in 2020. Photo by VnExpress/Quynh Tran.

Around me, people keep bragging about how they have just acquired another piece of land, cut a deal to sell properties at good prices, or how they are going to earn big money, now that some large-scale projects are about to go up nearby their properties, or that the districts their properties lie in have become localities with a higher level of administration, and therefore higher value properties.

I know some of them have mortgaged their houses and cars and borrowed from banks to invest in places where the land fevers are raging. Most of them are very excited about the huge profits that will arrive soon, and only a few think about how much they would suffer if they make losses.

An acquaintance of mine had borrowed money from different sources to buy a land plot in Binh Duong during a land fever 10 years ago. The land is still there and if it is sold now, the acquaintance must accept 70-80 percent of the original cost, and this is not accounting for inflation.

What does a land fever do, apart from the obvious gains for developers and investors/speculators? It distorts the market and business environment and causes inequity in the enjoyment of land use values, contributing to increasing "conflicts of interest" in our society.

Once a land fever sweeps through a locality, there is little chance it can return to a peaceful normal. In 2018, when the prime minister agreed in principle that the central province of Khanh Hoa can adjust the general construction plan for the northern part of the Van Phong Bay, hundreds of brokers flocked to Ninh Hoa Town and Van Ninh District nearby, as also inside the bay, to buy and sell land.

In just one night, the price of one square meter of land there went up 50-70 times. From the national highway to the alleyways in those two localities, signs of real estate sale and brokerage advertisements went up like mushrooms after rains. Many fishermen in Ninh Hoa put aside their boats and fishing tools and began working as brokers.

Then last year, when information was released about suspending the plan to develop the Bac Van Phong special economic zone, thousands were hit hard and left with no option but to sell the properties they had raced to invest in and suffer heavy losses.

When a land fever happens, the sudden increase in land prices means an increase in compensation costs, factory construction costs and rents for businesses.

It also makes it difficult for the government, which would have to pay more to clear sites for public projects.

In developed countries, any real estate transaction must go through a third party, which are brokerage companies and banks, lawyers and appraisers, and the process is supervised. Healthy economies accept healthy increases in real estate prices over time, and transactions are transparent.

In case real estate prices suddenly surge, by 10-20 percent for example, in a short period of time, authorities will jump in and investigate it. Individuals or organizations that have spread rumors or other misinformation to push up land prices will face criminal charges for manipulating the market, causing property differences and committing fraud.

Strict supervision of the real estate transaction process and equally strict law enforcement have helped many countries manage the risk of market manipulation.

It is not difficult for Vietnam to do the same. Apart from ensuring openness, transparency and strict supervision by local authorities, all the existing loopholes in the Land Law, which have been pointed by more than a few people many times, have to be fixed.

Will this happen and will people like me be allowed to dream again of having a home? Or, will land fevers continue and speculators rule the roost?

*Ngoc Thuy is a journalist. The opinions expressed here are her own.