VIETNAM'S anti-corruption campaign has led to the unintended consequence of surging property prices in Ho Chi Minch City in particular, but measures to alleviate this should eventually help to stabilise the market, according to an article in the latest issue of ISEAS Perspective.
In an article titled The Impact of Vietnam’s Anti-corruption Campaign on the Real Estate Sector, researcher Le Hong Hiep noted that since 2017, inspections and investigations have been launched into hundreds of property development projects, especially in Ho Chi Minh City, Da Nang and Hanoi. The key targets of this drive against land management corruption are projects that sourced land from state-owned enterprises or public entities.
These investigations have uncovered several major corruption scandals. But they have also caused delays in the licensing process for property projects, leading to a fall in new supply and surging property prices.
According to Savills Vietnam, the supply of new apartments in Ho Chi Minh City in the first quarter of 2019 was 12,000 units, down 57 per cent year on year. A shortage of supply was one of the main reasons for a 15 per cent surge in the price of luxury and high-end condos in the city in 2018, with mid-range apartments also seeing a 13 per cent price rise.
The licensing delays and reduced new launches have also caused a decline in government revenue from land fees, for instance by 22.5 per cent in Ho Chi Minh City in 2018. "The trend, if sustained, will put the city’s fiscal position under pressure given that land fees normally account for around 10 per cent of its annual revenue," said Dr Le.
While the anti-corruption drive is expected to continue, Vietnamese authorities would not want it to hurt the economy either. Dr Le expects them to take measures to alleviate the unwanted impact on the property market.
For instance, there are signs that licensing procedures have gradually eased since early 2019, with most projects in suburban and non-central business district (CBD) areas in Ho Chi Minh City being allowed to proceed. In May 2019, the Ho Chi Minh City Real Estate Association announced that the city would allow 124 out of 150 projects that were suspended for investigation to resume.
"The resumption of these projects will help moderate the rise of property prices in Ho Chi Minh City by increasing the new supply, but such an effect may not be visible until next year," concluded Dr Le.