The gold market booms as Vietnamese use bullion to buy homes
Friday, November 29, 2002
asia.scmp.com
BLOOMBERG in Hanoi
Vietnam's property boom is spurring demand for gold bars used to buy homes, defying a slump in sales of the precious metal across Southeast Asia.
"The country's economy is now open. The life of the people has improved, and that is one reason why gold demand has increased," according to Vu Duong, deputy director of Kim Quy, a Hanoi-based trader of the precious metal
Economic growth that has averaged 6 per cent annually over the past five years has enriched the Vietnamese, and property is among their favoured assets.
"The primary reason that people buy gold here is to buy property," said Brett Ashton, director of the Ho Chi Minh City branch of property consultant Chesterton Petty Vietnam.
Vietnam's standard gold bar measure - the tael - is stamped for authenticity by trading firms. It has become an alternate denomination in which house prices are frequently negotiated.
The revival in Vietnamese gold demand has been driven in part by a shift to more expensive inner-city property buying after the government introduced regulations to stem rural land purchases and avoid a speculative bubble.
Many investors had bought rural land, hoping that it would be re-designated as residential and become more valuable, thus allowing them to pocket hefty profits through speculation.
"Due to regulatory curbs on land transactions in suburban and rural areas, property buyers were forced to look for investment opportunities within the inner city," Mr Ashton said. "It also increased the price of anything that had already been designated residential."
The price of an inner-city home can represent several garbage bags of the local currency - the dong - so gold bars have become a favoured way of payment.
"The inner-city property market has revived once more, boosting demand for gold bars which are used in property deals," the World Gold Council said.
Property deals are not the only spur to gold sales. The Vietnamese traditionally have avoided putting surplus cash into bank accounts that invite the scrutiny of tax officials, and offer low interest and little growth after inflation.
Retail investment in gold rose 9.1 per cent in the third quarter, the Gold Council said in its Gold Demand Trends report.
In five years, the number of gold shops in Hanoi has doubled to about 400, according to a Hanoi-based gold trader.
Vietnam's gold demand rose 5.4 per cent in the third quarter while total sales in Southeast Asia - covering Indonesia, Thailand, Malaysia and Singapore - fell 5 per cent for the same period, the council said.
Gold demand in Vietnam last year rose 4.7 per cent to 57.6 tonnes, making the country the third-biggest gold consumer in Southeast Asia, after Indonesia and Thailand.
In the first nine months of this year, gold demand in Southeast Asia has fallen 1.1 per cent against the same period last year. |
