When the country’s property prices were at an all time high in late 2007 and early 2008, there was talk everywhere in Vietnam that ‘such and such a person’ had earned billions of Vietnamese dong from property trading. Suddenly everybody wanted a slice of the action.

Nowhere was this more evident than outside the site of the Vista in District 2, Ho Chi Minh City late last year when thousands of people turned up from as early as 4am hoping to register to purchase an apartment in the luxury apartment complex. There were stories that people had even hired others for large sums to reserve a spot in the queue.

Among the disorderly lines outside were white collar businessmen with luxury cars as well as less well off individuals couldn’t afford to buy such a luxury apartment. So why were they there? They hoped by successfully registering to buy an apartment, they could then immediately flip the ‘buying rights’ to an actual buyer and earn thousands of dollars.

In January 2008, Hoang Anh Gia Lai Group’s affiliate, Hoang Anh Housing Development and Construction Company, arranged meetings for potential buyers to register or book in advance apartments at River View in Ho Chi Minh City. Once again, thousands of people materialised to register themselves.

“Customers seemed unconcerned by the price. The main concern was how to successfully register or buy the apartments,” says Le Hung, director of Hoang Anh Housing Development and Construction Company.
“I would receive strange calls on my mobile phone, with people insisting that I should sell them an apartment as they were a close relative of mine. Or after office hours, a person with a large bag of money would arrive and insist on paying a deposit.”

With the property market heading towards fever pitch, there was no surprise when thousands of would-be customers arrived to register for an apartment at Dragon City project in District 7. But some people did not just want one single apartment, they wanted to buy tens of apartments or villas.

Best of times, worst of times…

However, the real estate market began to fall in the middle of the year when the tightened credit policies were introduced to combat runaway inflation. Buyers who had queued up to purchase apartments earlier have fled the market.

Hung said that when the River View’s registration period ended, there were 7,200 people officially registered to buy apartments. In May 2008, when the property market was on the slide, the project investor required registered buyers to start making additional deposits and sign purchase contracts. Only around 100 customers turned up. The rest had disappeared, accepting that their previous deposits would not be refunded.

In late 2007, a director of a well-known property brokerage and consulting company in Ho Chi Minh City was too busy to meet for an interview. Time was money. Later, we managed to meet up and when I asked about the country’s property market prospects for 2008, he replied without hesitation: “Demand for housing by Vietnamese people is increasing.

Supply has failed to satisfy increasing demand. Moreover, construction costs are also soaring and the government has allowed overseas Vietnamese to buy houses in Vietnam so the prices of property in 2008 will rise by at least 30 per cent against 2007.”

He added that his company had expanded its businesses and was now operating as a project investor, not just a property brokerage. In late September this year, we crossed paths again at a seminar on property. The once youthful looking director’s hair had turned grey. When I asked about the property market, he shook his head, and all he said was: “So surprising!”

A reliable source filled in the blanks. In late 2007, the said director’s company bought a land in District 7 from another investor at a relatively high price, aiming to develop it into a luxury apartment building. To finance the project, his company had to mobilise capital from its employees.

The company was planning to kick off the project construction when tightening credit policies bite. The property market was suddenly in free fall and the company’s plans were destroyed. Expenses had been accrued - renting office space, paying staff’s salaries and interest rates - so the company’s board of directors decided to sell the project on.

The company was ready to accepted losses with a bid of $2,000 per square metre of land but a foreign investor only wanted to pay $1,000 per square metre, so the company continued to look for other potential partners.

An experienced construction engineer, who would like to remain anonymous, said in mid-2007 that he decided to engage in property trading and investing after witnessing how a number of property companies had been successful.

He had some good contacts and cooperated with a “big-time” property trader on a deal to buy a piece of land worth hundreds of billions of Vietnamese dong in the South Saigon area. After winning approval from the local authorities, the investors expected construction to start in April 2008, but the project was postponed due to the credit crunch.

“Property investors sometimes win and sometimes lose. But it was a big shock for me when I was first joined the game,” says the engineer, adding that his company is still looking for partners to develop the project. “The longer the project was stalled the more difficulties and challenges it would face.”

An acquaintance of mine¸ who shall also remain anonymous, found himself in the deep end after investing in property. He had been an employee at a foreign company, earning around $2,000 a month, a huge sum for a Vietnamese man in his late twenties.

In 2007 he also earned a substantial sum from the stock market, prompting him to start dabbling in property investment. His first purchase was a luxury apartment in Phu My Hung in early 2008 and talking to friends, he bragged that he would be retired by the age of 40.

Less than a year later he has lost the apartment and friends claim he is rarely seen in public because of huge losses he incurred from property investment in a free falling market.

Source: VIR