Property prices in the cities of Hanoi and Ho Chi Minh pushed forward in the fourth quarter of last year on the strength of monetary policy from the central bank which positively fuelled the property market. Compounding their policy efforts, the central bank then decided to implement tougher restrictions regarding securities trading. This caused a substantial number of investors to move their money from stocks into the growing property market. By the end of the 2007 calendar year, the VN-index had fallen from 1,170 points to 927 points.
Aware of the effects of the restrictions placed on the securities market, the central bank then moved to counteract an increasing inflation rate and a possible property market bubble. Tightening monetary policy yet again, they also increased the reserve requirement rate by another percentage point last week.
All of this economic positioning for market stability has not deterred developers who are forecasting yet another busy year for land and property in Hanoi. New high rise buildings are being constructed all across the city and with rents increasing to approximately $200 per square meter each month, the northern portion of the city is fast becoming yet another suburb. Where there were once rice fields there are now shopping malls and suburban planned communities. As with all progress, this is viewed as a good step by some people, but also a cause for resentment by others.
For those who appreciate Hanoi's long standing history and feeling of being an overgrown city, the days are numbered. With an economy with an average growth of 7 percent over the last 6 years, investment money has been literally pouring into the country. Tran Quoc Thai of the Hanoi Architectural University said, "The old living style in the ancient quarters is changing."
Property prices which were already high dramatically increased higher in 2007 as nearly $5bn was brought into Vietnam's market by international investors. With 2008 predicted to be a banner year, the central bank may have its hands full trying to keep inflation down.
