What went wrong in Vietnam’s property market
From afar, the gleaming metal and glass edifices of Hanoi’s EVN Tower illustrate Vietnam’s rapid economic development. Up close, the rubble-strewn entrance and missing windows tell another story: one of loose lending and property speculation that now hangs over the country’s banks.
State-run monopoly Vietnam Electricity began construction of the 33- and 29- story dual-tower development in 2007, a year when 54 percent credit growth helped fuel the fastest economic expansion since 1996. Now, the economy has slowed, banks are struggling with an increase in bad debts, and unfinished property projects, empty offices and lower rents risk adding to the pile of non-performing loans.
“Banks were far too eager to lend and a lot of the projects that have been built haven’t been well-thought through,” said Stephen Wyatt, managing director for real estate broker Knight Frank Vietnam in Ho Chi Minh City. “A number of developments are on hold, purely because they have run out of funding. Banks are no longer willing to fund these massive developments.”