HANOI, Nov. 11, 2007 (Thomson Financial delivered by Newstex) -- There's a real estate boom happening in communist Vietnam, where prices are soaring on properties yet to be built and investors are camping in the streets to get first chance to buy.
Western-style suburbs and apartment blocks are sprouting up, driven by more than 8 percent annual economic growth and a stock market that has given investors ready cash to spend.
Realtors say the pace is so hot that supply cannot match demand, which is sending prices zooming off the charts -- no mean feat in a country where per capita GDP is under 1,000 US dollars.
'Prices have doubled in 12 months, nearly tripled in some cases over the past 18 months,' said Brett Ashton, managing director of Savills Vietnam, a property services firm.
It will take two years in the country's commercial centre of Ho Chi Minh City and surrounding areas to match demand and cool down prices, Ashton said.
In another sign of the boom, hundreds of people in the city queued all night several weeks ago to try to buy flats on a site where the developer had not even broken ground yet.
'A lot of local Vietnamese people have made a lot of money in the stock market in the last two years or so,' said David Blackhall, a deputy managing director at VinaCapital Real Estate.
'Now they see real estate as another opportunity to invest and make very quick returns,' he said.
In just one year, some Ho Chi Minh City neighborhoods have seen apartment prices jump as much as 100 percent, he said -- adding that more than 80 percent of those investing in property are paying in cash.
'Today to spend 1,500 or 2,000 dollars a square meter is not unusual,' Blackhall said. He said he could see the price rising to 4,500 dollars.
Though 70 percent of the country's 84 million people still live in rural areas, more and more of them are heading to cities, armed with increased buying power.
The boom is also affecting the commercial property market, said Marc Townsend, managing director of realtor CB Richard Ellis (NYSE:CBG) Vietnam.
The amount of 'international quality' office space in Ho Chi Minh City, the former Saigon, should increase from 320,000 to 800,000 square meters in three to five years, he said.
The inflow of direct foreign investment and growing interest in the real estate market by overseas Vietnamese are also helping to push prices up.
'The present rise in real estate prices essentially results from across-the-board speculation and many weaknesses in fiscal policy,' said Hoang Xuan Bac, architect and deputy director of a Hanoi real estate project.
To cool the fever, a former environmental vice-minister, Dang Hung Vo, has proposed legislation to limit speculation. But his proposal has not been taken up for years.