Vietnam property: Gold bullion payments in real estate deals decline

Real estate brokers say the habit of paying for houses in gold bullion has been broken this year, mainly by the government's efforts to tighten control over gold trading.

News website VnExpress reported on Sunday that many real estate exchanges in Ho Chi Minh City, including ACBR, Sacomreal and Vinaland, have not brokered any deal with gold payment over the past three months.

In 2009, 40 percent of real properties listed at ACBR, a subsidiary of Asia Commercial Bank, were still priced according to their value in gold.

Pham Van Hai, general director of ACBR, said many of his clients switched to dong payments after learning that the government was considering measures to curb gold trading. Only a few sellers of really expensive land lots refused to change, he added.

Gold bars have been used widely in Vietnam as a form of savings and a means of payments in real estate transactions.

Bui Tien Thang, deputy general director of Sacomreal, said the trend of using gold buillion for property payments is declining.

Gold is no longer favored by many because rising gold prices often lead to unsucessful deals. Besides, a tightened control over gold trading can also make people think twice about keeping a lot of gold, he said.

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Prime Minister Nguyen Tan Dung last week reaffirmed that the government will seek to eliminate the unofficial trade in gold bullion and tighten controls over foreign currency transactions in the black market.

Nguyen Quang Huy, head of the Foreign Exchange Department, noted that that the government plans to gradually abolish black market gold trading. Gold holdings by the public will continue to be protected under the law, he said.

No upturn in sight for real estate market

Vietnamese real estate market is characterized by cash purchases

The Vietnamese real estate market, which is still characterized by cash purchases, will be affected by high interest rates and a significant pickup in demand is unlikely in the short term, says consulting firm CB Richard Ellis.

High interest rates make mortgages unattractive for end users while limitations on lending will likely stifle some of the new supply, the firm said in quarterly reports issued this week for markets in Hanoi and Ho Chi Minh City.

The government has tightened lending to non-production sector, including real estate and stock markets. Interest rates for the sector are between 18 and 22 percent a year, according to a weekly report published by the State Bank of Vietnam.

The CBRE reports note that both Hanoi and Ho Chi Minh City saw strong economic growth in the first three months, despite national economic worries. The capital city witnessed a 9.2 percent growth in GDP while the economy of the southern metro expanded 10.3 percent.

Hanoi’s residential segment improved from last year, with new high-end projects attaining good sales rates. Meanwhile, prices in the secondary market remained stable overall and this price trend is expected to continue in the second quarter, CBRE said.

The situation was less positive for the residential market in HCMC. Primary market prices in the high-end sector dropped notably due to a drop in buyer confidence and increasing supply. Even the affordable sector saw softening of prices, the company said.

CBRE said there was also a “softening in demand” from Vietnamese retailers for retail space. However, the company said it sees continued interest from international retailers keen to profit from Vietnam’s strong demographics.