2 million buy 6 houses, Chinese buyers get lost in Vietnam
In recent years, in order to develop the company's real estate leasing business, Guo Xiao has frequently traveled to Vietnam, a Southeast Asian country adjacent to China.
He found that even Ho Chi Minh City, the most developed city in Vietnam, only some places can use credit cards, and mobile payment is almost non-existent. As for express delivery, e-commerce, and mobile Internet that Chinese take for granted, they are even rarer. What surprised Guo Xiao was the level of traffic in Vietnam.
"On some roads, there are not even traffic lights. The traffic jam is serious, and motorcycles and cars are on the same road. Even so, Guo Xiao always comforted himself, "After all, this is equivalent to China decades ago." However, to his unbearable moments, Vietnamese banks are closed on weekends and are only open from 9 a.m. to 4:30 p.m. on weekdays.
"If you want to use money on the weekend, there is nowhere to withdraw it, online payment is not very convenient, and most people are using paper money." Vietnam is scarce, and there are office buildings. In Hanoi, Vietnam's capital, for example, "there are few really high-end office buildings, and you can count them on your fingers." Guo Xiao told "City Boundary".
In stark contrast to Vietnam's high housing prices. Since 2015, Vietnam's housing prices have soared, reaching a record high in June 2022, with the average price of commercial housing in Ho Chi Minh City reaching 22,000 yuan. For the past three years, house prices in Ho Chi Minh City have maintained an annual growth rate of 25%, which is very rare in the world.
▲ (Photo/Visual China In Hanoi, Vietnam, narrow buildings are called "tube buildings". This bustling capital is home to 9 million people, and the streets are littered with these tall, thin, brightly colored "tubes." ）
In the Vietnamese property market, countless capital flocked to the cooking oil. Just when Chinese buyers believe that "Vietnam will copy the 'Chinese miracle', and now buying a house can enjoy asset appreciation similar to the Chinese property market in the past decade", today in 2023, there is news of a "crash" in Vietnam's real estate market.
In early June, Bloomberg reported that due to financing difficulties, Vietnamese real estate developers have suspended 1,200 real estate projects worth more than 800 trillion Vietnamese dong (about 241.3 billion yuan). Vietnam's Youth Daily revealed that about 400 projects in the capital Hanoi have been put on hold, while the number of stalled projects in Ho Chi Minh City has exceeded 300.
Why did Vietnamese real estate suddenly press the pause button?
"Residential transactions are shrinking, and industrial land is hard to find"
"Vietnamese house sales are really not good." As the founder of Shouwang Real Estate Vietnam Co., Ltd., Xue Chao has felt the chill of Vietnamese real estate since the end of last year.
In 2023, the trend of real estate folding in Vietnam is increasing. In the first quarter, the supply of residential markets reached about 25,000 units, mainly inventory of pre-sale projects, of which the transaction rate was only about 11%, and about 2,700 transactions, down 50% year-on-year. This has left many Vietnamese real estate workers facing unemployment.
The Fed's interest rate hike has become the main culprit in Vietnam's shrinking property market. "The (Fed's) interest rate hike has led to a decline in demand for export orders in Vietnam, which in turn has affected the income of residents. When residents' incomes fall, they dare not buy real estate, a large consumer good. As a result, property sales shrank and house prices stagnated. Xue Chao explained the logic of this to the "City Boundary".
Specifically, in Vietnam, some real estate projects have restrictions on the proportion of foreigners buying houses, generally not exceeding 30%. This means that the main group buying Vietnamese houses is still locals. However, for Vietnamese people with an average monthly salary of less than 2,000 yuan, to buy a house of 1 million yuan in full, even if they do not eat or drink, they have to save for decades. What's more, under the influence of the Fed's interest rate hike, many Vietnamese people have fallen into the embarrassing situation of having no work to do.
In the southeast of Vietnam, such as Binh Duong province, there are many textile companies, "who have shrunk their orders by two-thirds this year." So there are no need for so many workers, and many people are on leave without pay. Dego, who went to Vietnam in 2014, told City Boundary. This also makes locals who could not afford to buy a house even less able to buy a house. The rich people in Vietnam who can buy houses, as well as overseas investors, "many are waiting and seeing, and everyone is generally not confident." Xue Chao told the "city boundary".
One of the reasons for the lack of confidence of these two groups of people comes from the shock of housing prices. "City Boundary" learned from a number of people engaged in real estate work in Vietnam that from the perspective of Ho Chi Minh City and Hanoi, compared with the 25% increase in the past few years, their housing prices are currently flat or slightly rising, and some cities' real estate, such as Ha Long Bay, Nha Trang, Phu Quoc and other areas of tourism real estate, some have hit 7% off.
However, in their view, the divergence of housing prices does not equal the collapse of Vietnam's property market. The so-called real estate market crash does not simply refer to the sharp decline in house prices, but a series of systemic risks caused by the crash, including the complete collapse of market confidence, the rupture of the capital chain, the sharp decline of assets, and the emergence of a large number of bad debts in the financial system. At least for now, there are no signs of this from the Vietnamese locals who bought houses.
Vietnamese locals buy a house almost in full, even if they take out a loan, they only borrow for up to 2 years, just because the interest rate of a mortgage in Vietnam is as high as 12%. "A large part of the local people buy houses, and they live in their own homes." Xue Chao told the "city boundary", "Even if they are not self-occupied, they are relatively rational and will not sell their houses together when the market is down." ”
Vietnam's real estate developers are a little unbearable under this property market turmoil. In the past year, many local real estate enterprises have dissolved or ceased to operate. In early June, Bloomberg reported that Vietnamese real estate developers had suspended 1,200 real estate projects worth more than 800 trillion dong (about 241.3 billion yuan). Vietnam's Youth Daily revealed that about 400 projects in the capital Hanoi have been shelved, and the number of stalled projects in Ho Chi Minh has exceeded 300.
Behind this, in addition to a series of butterfly effects brought about by the Fed's interest rate hike, such as some unfinished building projects left by capital withdrawal, there is also a series of rectification actions by the Vietnamese government, which have brought a fatal blow to Vietnamese developers. In 2022, a number of Vietnamese real estate tycoons, including Zhang Meilan, chairman of Wansheng Huat Group, were imprisoned on suspicion of illegally issuing bonds. This scared away a large number of investors. The Vietnamese government has also stepped up supervision of real estate developers' issuance of new bonds, which has created a growing funding gap in Vietnam's real estate sector.
According to the data, the total amount of new bonds issued by Vietnamese real estate enterprises in 2022 was only VND 269 trillion, a significant decrease of about 64% compared with the same period in 2021. This makes Vietnam's already sluggish real estate market even more difficult: properties that used to sell out in just 2 months can now take 6-8 months to sell. Financing difficulties coupled with weak sales have made Vietnam's real estate liquidity problems increasingly serious.
Currently, Vietnam's real estate sector has US$4.6 billion of bonds maturing in 2023, while Vietnam's real estate companies have no way to "repay on time". According to Bloomberg data, the short-term debt ratio of Vietnamese real estate companies has risen rapidly to 21%, the highest level in Southeast Asia. In stark contrast, industrial real estate is still hard to find.
Due to the continuous influx of foreign investment, the rent of industrial land in South Vietnam has continued to rise since the beginning of 2022. Especially in the southern economic center of gravity represented by Ho Chi Minh City, the annual rent quotation of the local industrial park has risen to 300 US dollars / square meter. This is almost the highest level of industrial land rent ever recorded in Vietnam, and its utilization rate has also reached a high level. "Industrial land is crazy." Dego sighed to the "city boundary". This booming scene has also appeared in the Vietnamese residential market.
In those years, many Chinese buyers bought "crazy" in the hot land of Vietnam.
"The craziest time, selling 100 units in three months"
Xue Chao entered the Vietnamese real estate market in 2018. That year, he looked through a report and found that Vietnam's economy was remarkable. "In 2018, Vietnam's GDP grew by 7.1% year-on-year, the highest since 2011." So, he decided to enter the Vietnamese market to find out.
At that time, a large number of foreign capital poured into the Vietnamese market, and the demand for just-demand housing and investment housing continued to grow, and Vietnamese real estate achieved a record high transaction volume in the fourth quarter of that year. Positively correlated with this, the average sales price of high-rise residential buildings in Vietnam increased by 10%, and land prices increased by 47% compared to 2017.
At that time, this property market carnival had not yet entered its climax. In the years that followed, Hanoi and Ho Chi Minh City became the two cities in Vietnam with the sharpest price increases. In 2022, the average price of commercial housing in Ho Chi Minh City will reach 3,300 US dollars per square meter, a year-on-year increase of 27%; Residential prices in Hanoi rose by about 23% year-on-year; In many areas west of Hanoi, including areas such as Paper Bridge County, Thanh Thanh County, the increase was as high as 35%-74%. This scene is very similar to China more than a decade ago.
Chinese buyers flocked to the market. For example, in the first nine months of 2018, 31% of high-end condominium buyers in Ho Chi Minh City were Chinese. This is up from 4% in 2017 and 2% in 2016. This year, CBRE reported that Chinese buyers jumped from sixth place to the top of the list, becoming the largest buyers of properties in Ho Chi Minh City.
Chinese buyers come from different parts of China, mainly in Shanghai, Hong Kong and other places. Xue Chao's main customer group is also many Chinese with foreign passports. In the eyes of these buyers, Hanoi is equivalent to Beijing, Ho Chi Minh is equivalent to Shanghai, "miss the rise in domestic housing prices, don't miss investing in emerging countries", is the fundamental motivation for them to buy houses in Vietnam.
▲ (Photo/Visual China March 22, 2019, Shanghai, Shanghai Overseas Real Estate Immigration Investment Exhibition, investment in Vietnam's real estate market. ）
"They just have path dependencies." Xue Chao told the "city boundary". Take one of Xue Chao's biggest sources of customers, Taiwanese, for example, who actually have their own factories in cities like Kunshan and Dongguan. They are the ones who have enjoyed the dividends of China's reform and opening up, and "they hope to replicate their domestic experience in Vietnam." "The biggest list Xue Chao ever made was a Taiwanese man who bought thirty or forty houses with a total price of more than 30 million yuan." They are all betting on rising house prices. ”
In this gamble in the Vietnamese property market, Xue Chao had two highlight moments. Once in early 2019, not long after he entered Vietnamese real estate, "first he sold his house in Ho Chi Minh and then he went to Hanoi." Houses in these two cities sold well, so we pushed with our clients and sold 18 units in a month. Xue Chao told the "city boundary".
Once in the second half of 2019, Xue Chao and his team, a total of six people, sold 100 units between September and December. For three months, Xue Chao took customers to see the house every day, starting at eight or nine in the morning, and if he took a group of 1-2 hours, he had to bring at least five or six groups a day. "These buyers have visited delegations from China, as well as domestic third-party financial institutions such as Noah and CreditEase, who recommend Vietnamese real estate as a wealth management product."
The commission rate for the sale of a single house by local real estate agents in Vietnam is 3%-5%. Xue Chao and his team do underwriting, which generally has a higher commission rate than retail.
Chinese not only works as an agent to help Vietnamese developers sell houses, but also buys houses himself. Gang Ge, who settled in Vietnam in 2018, has bought 6 houses one after another since he set foot in Hanoi. "I felt that the house was very cheap, the rent return rate was not bad, and I had more than 2 million yuan in my hand, so I bought these houses in full." At that time, I thought that if I gamble, I should be able to do it. Brother Gang told the "city boundary".
However, in 2020, after the epidemic black swan caused inconvenience to travel, the Chinese to buy a house in Vietnam became less and less. At this time, although Vietnamese real estate is not as active as before, Xue Chao still has some income. But from 2021, "we basically have no income." It was not until the end of 2021 and the beginning of 2022 that Vietnam's door to the outside world opened, coupled with the news of Li Ka-shing's investment in Vietnam, "that many Chinese buyers came to ask about Vietnamese houses." ”
At that moment, not only Chinese buyers, but almost everyone's eyes were on this hot land. Housing prices in Vietnam reached a decade-long high in June 2022. In Hanoi, for example, six years ago, the average price was $790 per square meter, but now it has risen to a maximum of $2,200 per square meter, an increase of nearly three times.
However, what the outside world did not expect was that since entering the second half of 2022, an unprecedented crisis has hit Vietnamese real estate. As mentioned earlier, due to the flight of funds caused by the Fed's interest rate hike, as well as the chain reaction caused by the stock market crash, coupled with the comprehensive suppression and siege of Vietnamese real estate developers by Vietnamese regulators, the Vietnamese real estate market has entered a major reshuffle.
The Chinese buyers who were involved, some cried, others laughed.
In the Vietnamese housing market, some people cry and others laugh
Over the years, the six houses purchased by Gang Ge have risen with the Vietnamese property market.
"One set bought in 2018, 8,000 yuan per square meter, and two sets bought in 2019, about 9,000 yuan per square meter. All three homes have doubled by 2022. Brother Gang told the "city boundary" that the other three small houses of 30 square meters have risen to 15,000 yuan per square meter.
Today, even if the Vietnamese housing market presses the pause button, the impact on Gangge does not seem to be great. "The price of houses has not fallen, nor has it skyrocketed, it is now slightly up. Second-hand houses are cheaper than new houses and do not have a basis for a big rise. It can still be sold now. Brother Gang told City Boundary that as the capital of Vietnam, Hanoi's housing prices are still strong.
However, Brother Gang does not plan to sell the house. Because, in his opinion, rental returns in Vietnam are not bad, at least in Ho Chi Minh City and Hanoi. "Take a house of 2 million yuan as an example, rent 8,000 yuan a month, and you can return the capital in 15 years." In addition to leaving a 64-square-meter house for self-living, Brother Gang rented out all five other houses, "I can collect nearly 15,000 yuan in rent a month, and the house is relatively easy to rent." ”
The biggest reason for the good rent of houses in big cities in Vietnam is the strong demand. Guo Xiao specializes in the Vietnamese rental market, and his main customer group, in addition to the local Vietnamese who are flocking to the city, also the employees of foreign-funded enterprises in Vietnam (Siemens, Adidas, Decathlon, etc.) and the employees sent to Vietnam by Chinese companies. Guo Xiao told City Boundary that the average rental return of properties in Vietnam is about 6%-8%.
Also unaffected was Dego. Since arriving in Vietnam in 2014, Deco purchased a lot of industrial land in 2019 when it saw that the rent of industrial land continued to rise, especially when the influx of foreign capital caused it to be difficult to find a place. Although Dego did not disclose to City Boundary how much land he bought and how much land price increased, City Boundary learned from CBRE (Vietnam) that Vietnam's industrial real estate market has maintained an active trend throughout the country. Over the past five years, the average land price in the primary market in the southern cities has increased by about 9% per year, and in the northern market by about 7% per year.
However, not everyone can buy land in Vietnam. According to Vietnam's 2014 Land Law, foreigners who invest and work in Vietnam, as well as foreigners with the right of abode in Vietnam, can buy land in Vietnam. Even if foreigners meet the above conditions, they need to comply with some specific regulations, such as foreigners can only buy land in Vietnam for their own residential or business purposes.
Dego's friends couldn't be happy. In 2017, 2018, everyone bought a few homes, and some even bought four or five, spending a total of four or five million dollars, "even if these houses have risen by 30% in these years, but the houses have no housing capital." ”
Dege told the city that holding a new Chinese passport can only sign 50-year long-term lease contracts with some real estate companies, and there is no real estate certificate.
"The property rights are in the hands of others, and if the developer secretly takes it as collateral, the buyer has no protection." De Ge said that this also led to the house being difficult to sell, coupled with everyone's lack of confidence in Vietnamese real estate, "This house is equivalent to having no market." ”
▲ (Photo/Visual China, Halong Bay)
Sadly, there are also Chinese buyers who have bought Vietnamese tourism real estate. Tourism real estate projects are mainly concentrated in Vietnam's tourist cities, such as Halong Bay, Nha Trang, Phu Quoc and so on. Taking a three- or four-story shop house built on a 100-square-meter piece of land on Phu Quoc Island as an example, "If someone spends three to four million yuan to buy this project at the beginning of 2022, they can't sell it now at a seven-fold discount." Xue Chao told the "city boundary".
The city learned that many of the 1,200 real estate projects suspended by Vietnamese real estate developers are tourism properties. "Some irresponsible intermediaries tell investors that these houses are very easy to rent after they are built, and the rent is also very high, but after the investors buy the land, they may not even be able to pay the house." Xue Chao lamented that buying a house in Vietnam also has many pits.
Even so, quite a few people still come to Vietnam. Of course, it's not just Chinese buyers. Over the years, what Xue Chao has seen is Haidilao, which consumes 200 yuan per capita, and it has always been a full scene. He also saw an increase in the number of foreigners coming in and out of luxury restaurants in Ho Chi Minh and Hanoi. "Whether you admit it or not, Vietnam's heat is real."
However, the suspended 1,200 real estate projects cast a shadow over this hot scene.
(In the text, Song Feng, Guo Xiao, Gang Ge, and De Ge are pseudonyms.) ）
Author | Tao Ting
Edit | Sun Chunfang
Operations | Jia Tianyu