HO CHI MINH CITY, Vietnam - A half a world away from Silicon Valley's anemic real estate market, agent Cindy Nguyen has little time for sleep while she sniffs out deals in one of the world's hottest property markets.
Last year, the president of San Jose's Lakami Professional Realty returned to Vietnam for the first time in 23 years. She was stunned by what she saw: instant wealth being created by land prices that have tripled, even quadrupled, in recent years.
"I saw the opportunity," said Nguyen, who now commutes regularly between the valley and Vietnam. "I saw the cha-ching, cha-ching. Your return on investment is at least 200 percent in one year."
The boom is fueled by intense optimism about Vietnam's future as multinational corporations like Intel funnel billions of dollars of investment into its economy. International developers are building everything from resorts to cities. Speculators are betting on undeveloped land on the outskirts of the big cities. And members of the new middle class are pushing up prices as they strive for their own Vietnam Dream: Buying a home. And another. And another.
"Because there is no supply, the prices are going up," said Matthew Koziora, associate director of commercial real estate services company CB Richard Ellis in Ho Chi Minh City.
The country's youthful population - 65 percent are under the age of 35 - adds to the buying frenzy. Many are cashing in on smart purchases made a year or two ago. "But hey pour 98 percent of it back into property," Koziora said. "They are not frivolous. They want to reinvest straight-away." Some home buyers sign papers for new $150,000 villas in Ho Chi Minh City's upscale Saigon South and then immediately sell them for $300,000 to willing buyers waiting outside, said Paul Hoang, managing partner of Milpitas-based Donnelley LT Group, which sells Saigon South units to overseas Vietnamese. "It's unbelievable," he added. Meanwhile, office rental rates in Ho Chi Minh City, Vietnam's commercial hub, spiked more than 90 percent from 2006 to 2007, according to CB Richard Ellis. Office rents in Ho Chi Minh City - which were $85.84 per square foot a year during the first quarter of 2008 - are nearly double the cost in San Jose. In an effort to slow Vietnam's rampant inflation, the government recently increased reserve requirements for commercial banks and raised interest rates. This has caused the real estate market to slow in recent weeks, though experts expect it to heat up again after the summer. "Demand is still high," Koziora said. Bubble in the making? Some economists worry about a bubble, but Koziora and others do not see significant slowdowns for at least three to five years. Property near the city's center will hold its value, he added. Outlying areas may not be so fortunate. The axiom "location, location, location" hasn't taken hold among many Vietnamese. Some will suffer if a downturn hammers the value of projects "in the outlying areas built by average Vietnamese developers," Koziora said. Hoang believes a bubble is in the making in certain areas. "The majority of the population is very poor," he said. "Assembly-line workers probably make $70 a month; the white-collar people, probably $150 a month; and some people working for foreign companies make $500 to $700 a month. So not too many people have money to buy land." Vietnam's property market is mystifying in other ways. Valley real estate agent Nguyen said she had to develop new skills to cut deals in Ho Chi Minh City. "If you don't have connections, you can't work here," she said. "It's the relationships you have with people that makes things happen." Overseas investors Ho Chi Minh City real estate tycoon Duong Thi Bach Diep has seen overseas Vietnamese struggle to succeed in the market. Government regulations virtually exclude individual overseas Vietnamese, whom locals refer to as Viet Kieu, from owning property if they are not part of a larger investment group. So some Viet Kieu give money to family to acquire property. There have been lawsuits between them and Vietnamese family members who cut out their overseas relatives as property values soar. "Viet Kieu need to be careful," Duong said. "They don't understand the system in Vietnam." Nonetheless, overseas Vietnamese continue to invest in real estate. It's impossible to know how much money they are sinking into land, but it's a good bet a healthy chunk of the $6 billion to $10 billion in annual remittances to Vietnam is funneled into real estate. Nguyen represents a number of Vietnamese-Americans from the Bay Area. They insist on anonymity for fear of angering the San Jose Vietnamese community, some of whom remain strongly opposed to the communist government in Hanoi and those they perceive as helping it. But Nguyen said the government is changing, at least when it comes to business. "They are making it safer and easier for the investor," she said one recent Sunday while touring upscale Phu My Hung. The 8,000-acre project, where homes range from $180,000 apartments to $2.5 million villas, is a section of Saigon South. "Silicon Valley is dead right now," she added. "I need to survive." Property developers like Duong are surviving in style. She likes to tool around town in a custom-made $1.3 million Rolls-Royce purchased earlier this year. The demand for real estate is real, Duong said as she showed off one of her properties, a multilevel suite equipped with an elevator, lavish kitchen and numerous bedrooms. "Vietnam is considered a poor country," she said. "But people are rich. They have cash in hand. So the trend is the market has to go up. Nothing can stop it."
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