Slightly off the world media radars, Vietnam continues its economic opening. Taking into account its population however, the interest to invest there is even higher than in China. The elite's ambitions of this nominally communist country is to modernize it by 2020 by reducing the weight of the agrarian population to about one third of the total population, to reduce absolute poverty to less than 10% of whole population, to turn the country into a middle-income nation and to take over some manually-intensive industries that are expected to be dropped by more advanced neighbors like Thailand and Malaysia. Among the 'hot' issues that still reduce the speed of economic progress is the slow and corrupt bureaucracy. Without reforming it Vietnam will remain unable to fulfill its ambitious modernization goals.
The major news on the real estate in Vietnam is the first significant correction after so many years of relentless appreciation of urban properties. The prices of the bottom segment have fallen by 20-30% from their last year record levels . So far the upper segments keep their positions and the agricultural land is increasing in value. In fact there are factors that determine the dynamics of each of these three separate real estate markets.
The least expensive urban market is determined by the demand coming from local professionals and it's this segment that seems oversupplied for a moment. The expectations were that the ever-growing urban middle class might absorb as many new apartments as were supplied to the market, but this turned not to be true. The lack of strong banking sector providing mortgage loans led to lack of buffer to absorb foreclosure properties. The market correction was brutal as was the strong performance during the last years. On the other hand, the growing foreign demand for luxurious properties seems unabated. The WTO membership is expected to happen later this year and it may only increase the value of Vietnam as an international trade partner for the West.
Interesting phenomenon is observed in the rural areas, where peasants for the first time in written history can really sell their small parcels for big money. By 'big' money people usually understand enough to send at least one of their children to study at university abroad. Statistics show that most of the Vietnamese students sent abroad are paid not by the government, but by their parents. The difference of incomes between manual rural and professional urban jobs can be 10 times and more, so this seemingly desperate act of family sacrifice for the children well-being isn't so foolish after all. It may be the best long-term investment most Vietnamese can afford to make.
Vietnam peasants are deserting the land and moving to the cities in large numbers for the first time in this ancient nation history. Keeping this process at its current speed may reduce the peasant population to one third of the total well in advance of the government's 2020 deadline. What may slow the speed of modernization is the corrupt and badly organized bureaucracy at any level. To give just one example relevant to the rural real estate market, a new owner of land has to apply to several different authorities and wait in average for up to one year in order to get the property properly registered. The same task in Thailand takes 2-3 business days. If Vietnam wants by 2020 to look like Thailand today, it has to make some efforts to reduce this gap. Otherwise the dreams of bright future will remain just sweet dreams.