In 2010, the real estate price in Hanoi increased by 30 percent. In some areas the land prices increased by 100 percent or more. Experts say there are latent risks in Hanoi’s real estate market.
Money pouring in again
Despite simply owning a garage in Lai Chau town, Nguyen Van Tuyen e has four apartments in Hanoi. Doctor Nguyen Manh Ha from Bac Giang is not a millionaire, but he owns two land plots in Ha Dong district and an apartment at Hatuco apartment building in Thanh Xuan district. He is looking to purchase more land plots, because he believes that only land investments can bring high profit.
According to Van Khanh from Hanoi Home, a real estate trading floor, there are many real estate investors in Hanoi who have the huge capital of tens to hundreds of billion dong. These big investors always “buy wholesale”, i.e. they buy 6-8 apartments or 8-12 blocs of land at a time.
“I cannot understand how they can arrange so much capital. If I have “good products”, I just need to call them. If they really want to buy the products, they will pay enough money just several hours later,” she said.
At the beginning of 2010, many experts predicted that Vietnam’s real estate market would be quiet, while the land price would decrease slightly because of the economic difficulties, low demand and high interest rates.
However, in reality, the price decreases only occurred in HCM City, where the supply exceeded the demand. Meanwhile, in Hanoi, the prices continuously increased in 2010.
The sharpest price increases occurred in the western area of the city, including the Van Phu, Van Khe, Nam Cuong, Gelexemco, Nam An Khanh and Bac Anh Khanh new urban areas. At the beginning of 2010, the land price at Van Khe new urban area was 52-57 million dong per square meter, and jumped to 80-90 million.
The land prices in the eastern area also increased sharply. The land price on the Vinh Tuy bridge area jumped from 40-60 million dong per square meter at the beginning of the year to 120-160 million.
Explaining the sharp price increases in Hanoi, Tong Van Nga, Chair of the Vietnam Real Estate Association, says a lot of big investors or those people who have idle money, have been flocking to Hanoi to purchase land.
Agreeing with Nga, Vu Thanh Tung, Director of the Vietnam Construction Designing and Consultancy, said that every year, every province purchases about 50 apartments in Hanoi. Tung says that customers from provinces prove to be very rich and tpurchase houses for their children for when they come to the city to study.
Real estate bubble?
Chair of a real estate group in Hanoi who asked to be anonymous, said that the real estate price in Hanoi is sky high because real estate developers have to pay high additional expenses.
Under the current regulations, the official expenses to turn one square meter of agricultural land into urban land in Hanoi are 14-16 million dong. With such expenses, real estate developers need to sell land at only 20 million dong per square meter to make profit. However, in fact, they have to charge 35-40 million dong.
“If the real estate developers do not have to pay “underground” fees, the land price in Hanoi would be 30-50 percent cheaper,” he said.
Deputy Minister of Construction Nguyen Tran Nam also said that the real estate price in Hanoi is unreasonably high. Vietnam is the country whose income ranks 120th in the world, while its real estate price ranks 20th.
The real estate prices in Hanoi are much higher than in the south. The prices of apartments in inner city of HCM City are between 12 and 16 million dong per square meter, while the price is 40 million dong in Hanoi. The land price in new urban areas in HCM City is 30 million dong, while in western urban areas in Hanoi the prices are 80-300 million dong.
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