Banks offer depositors an average interest rate of 8 percent per year. Gold has hovered around VND21 million (US$1,180) per tael, or $984 an ounce, since it peaked at a record high of VND21.65 million on June 1.

Vietnam’s major market in Ho Chi Minh City rallied for a seventh week last week, posting the world’s second-biggest gains over the period.

Hien said those who made out well on the rally had opted to invest in land rather than apartments as housing was too expensive.

Hot land

In the first week this month, land prices at several projects in new District 7 development areas rose 4-6 percent compared to May.

Several 100-200 square-meter lots at Him Lam – Kenh Te urban zone on Nguyen Huu Tho Street have sold at VND47 million ($2,641) per square meter, an increase of VND2-4 million per square meter compared to last month.

At the nearby Trung Son residential zone, prices for similar lots have risen VND3-4 million per square meter. Lot prices at the Phu My zone have also climbed VND1 million to VND34-35 million ($1,900-1,966) per square meter.

Project land prices in Hanoi are following suit, with lot prices in Van Khe, Ngo Thi Nham, and Geleximco urban zones showing sharp increases recently.

The price of a lot in Ngo Thi Nham urban zone rose from VND26 million per square meter in May to VND33.7 million this month.

Tan Lap urban zone lot prices have increased around 70 percent to VND21-22 million this year.

Nguyen Van Tuan from property brokerage Ha Dong told Thanh Nien that his firm was tending to far more customers and finalizing many more transactions than earlier this year.

Despite the land price hike, an official from the Ministry of Construction’s Real Estate Department, who wished to remain anonymous, said it would be hard for the property market to heat up nationwide as the government was not encouraging property loans.

“Many people expect a property market fever this year, similar to 2007, but I don’t think so,” said Hien.

“A hike in the general property market requires huge support from banks, which is impossible now,” he said, implying that banks were not lending for property purchases.

Apartment market still frozen

While land is hot, apartments are cold, said Pham Van Hai, general director of ACB Real Estate Co., an arm of the Asia Commercial Bank.

“I think the market is gradually rejecting construction project owners who couldn’t finish their construction work on time or have been in legal disputes over their apartment transactions,” Hai said.

Sales of apartments worth more than VND1.5 billion ($84,000) are low, said Bui Tien Thang, general director of property firm Sacomreal-S, a subsidiary of Sacombank.

Savill Vietnam Managing Director Brett Ashton said around 5,500 new medium-to-high class apartments have gone on the market this year alone.

He said the global economic crisis had put people more in the market for low-price housing.

Reported by An Nguyen – Tran Thanh Binh