Vanishing act for property US dollars

The State Bank last week issued documentation to enhance oversight of illegal quotations in foreign currencies by construction and real estate developers.

Bui Quang Hung, a lawyer at the Bui Quang Hung & Associates law firm, said the majority of the high-end real estate projects quoted in US dollars.

“This is understandable because the US dollar is more stable than the Vietnamese dong,” Hung said. “The US dollar also offers safety to them,” he added.

Forcing developers and investors to quote in Vietnamese dong is not new, however, it has largely been ignored.

Some buyers may be forced to resign contracts to make them dong compliant

Decree 107/2008/ND-CP dated September 22, 2008 stipulating administrative sanctions applicable to speculation, hoarding goods, excessive price increase, providing groundless information, smuggling and trade fraud. According to the decree,  fines between VND20 million to VND30 million can be applied for US dollar quotations.

Real estate expert Dang Hung Vo, a former deputy minister of natural resources and environment, said: “Customers do not dare to oppose developer’s quotations, because if they [developers and customers] have conflicting opinions, the final solution is that the developer will  give money back to the customers.”

Vo added that competent bodies need to step up their vigilance to police the market.

“We have to admit that the Vietnamese dong recently has been fluctuating,” Vo said.

A representative of a real estate consultant in Hanoi said foreign investors preferred making quotations in US dollars because many project materials were also imported and paid for in US dollars.

“I think that investors will have to adjust their quotations according to the regulation. The problem is that price of property will fluctuate sometimes and this must be negotiated with the customers very carefully,” she said.

Vu Thi Phuong, a customer of the Royal City project in Hanoi, said project investors who had signed contracts in US dollars may have to re-issue new contracts in Vietnamese dong.

“I think this change will not impact much on developers, because in the contract there is an article that the developer can adjust the price by 5 per cent if the exchange rate is changed,” Phuong said.

For investors who have bi-dual quotation in both Vietnamese and US dollars, Hung said that if the investor proves that a transaction was in dong, but still used US dollars for reference, they had not violated the regulation.