Soaring property prices spark worries

HO CHI MINH CITY: Vietnam’s “sharp-ly rising” asset prices are a growing concern, the International Monetary Fund (IMF) said, citing a surge in property prices in the Southeast
Asian nation’s largest cities.

Rental prices at prime retail locations in Ho Chi Minh City exceed those of Taipei and Beijing, while occupancy rates in Hanoi shopping centres exceed 95 per cent, according to CB Richard Ellis Group Inc’s Vietnam unit. CapitaLand Ltd, Southeast Asia’s largest property developer,
said this week it may start a Vietnam property fund.

An economic growth rate that reached 8.2 per cent year-on-year through the first three quarters is driving growth in personal incomes, boosting demand for houses and retail shopping space, while surging foreign investment is driving the need for corporate office space.

“Inflation and sharply rising asset prices have become an increasing concer n,” IMF’s Shogo Ishii, assistant director in the Asia and Pacific department, said in remarks prepared today for the so-called Consultative Group meeting in Hanoi, a two-day gathering of countries and agencies, which provide Vietnam with grants and low-interest loans.

Vietnam’s consumer inflation rate reached 10 per cent year-on-year in November, the highest since October 2004.

While the IMF today repeated comments made in a report released last month that higher food and commodity prices reflecting “supply factors and global market conditions” are driving the acceleration in inflation, the agency added a new comment on higher asset prices.

The version of the so-called Article IV Consultation posted on the IMF website made no reference to asset prices or property.

“The underlying inflation trend is well above the average of emerging markets in the region,” the IMF said.

“On asset prices, the steps taken by the authorities appear to have reined in the emerging bubble in the stock market, but property prices are reported rising sharply.”

The Ho Chi Minh City Stock Exchange’s VN Index reached a record high in March. Since then, the measure has declined 17 per cent, leaving the index up 30 per cent for the year to date.

“A revival of property speculation in Ho Chi Minh City helped to divert the attention of retail investors away from the equity market,” the UK-listed fund Vietnam Holding Ltd said in its latest monthly report.

Vincom Joint-Stock Co, a Hanoibased property developer that listed its shares this year and is now the ninth-biggest company by market value on the Ho Chi Minh City exchange, has jumped 26 per cent since it began trading on the bourse in September, while Ba Ria-Vung Tau Housing Development Joint-Stock Co has climbed 38 per cent since listing in October.

“Before, you had a limited number of people speculating in the property market and now you have a large number of people speculating in the property market,” said Brett Ashton, Ho Chi Minh City-based managing director of the Vietnam unit of the UK’s Savills plc.

“But fundamentally, the current level of high prices is driven by lack of supply, ” Ashton said in a phone interview yesterday.

By Bloomberg