Gold hunt in the real estate market

There's no other real estate market in the world like Vietnam's. One can not only find gold; one is required to have it, because real estate purchases in Vietnam are done only in pure gold.

Gold in Vietnam is measured in taels. One tael is equivalent to 1.25 ounces of gold. In June 2006, the price of one tael was VND11.45 million (US$687). Gold bars became the preferred medium after run-away inflation in the 1980s. It is not difficult to buy gold anyway, as the country is full of gold shops.

No freehold

In theory, freehold land does not exist in Vietnam. Land can only be leased, even by Vietnamese; though in reality many leases are for indefinite terms. Buying land is technically a transfer of leasing rights.

Permanent resident foreigners may also "buy" land but only from state enterprises; however they may not "sublease" it.

While land can only be leased, foreigners residing or investing in Vietnam for a long periods are allowed to buy dwelling houses.

A foreign investor may invest in Vietnamese real property by forming a joint venture company with a local partner, or a wholly foreign-owned company, or by forming a Build, Operate and Transfer (BOT) company or one of its variants.

The rapid growth of Vietnam's economy and the liberalization of the market has led to a housing boom. In 1995, there are less than 200 residential units catering to the luxury and expatriate market. By 2005, there were almost 150,000 such residential units.

High gold prices

Since 2004 Vietnam's property market has been considered "fragile." Following ten years of economic and property boom, overbuilding pushed the real estate market so high, that there was a pause. The sudden increase in gold prices gave the market a final kick. The market continued subdued in 2005.

Since 2000, the international price of gold has risen strongly. In 2006 gold rose to its highest level since prices began to be tracked, going above US$600 per ounce (US$675 as of May 2006). The price was half that only five years ago, at $250 an ounce. Rising gold prices are undermining an already expensive property market.

Decree 181

The situation was worsened with the implementation of Decree 181 in November 16, 2004. The decree prohibited the sale of small land plots without concrete structures. This in effect raised the cost of selling property.

To revive the real estate sector, in early 2006 the government passed a decree abolishing many cumbersome regulations, including Decree 181.

However, banks are still hesitant to lend money to property developers.