Investors flood central Vietnamââ‚¬â„¢s Da Nang beaches despite local fears of rising sea levels
Workers build an embankment on Thuan Phuoc Beach in Da Nang Cityââ‚¬â„¢s Lien Chieu District. Like other provinces and cities in the central coastal region, Da Nang has been sufering from erosion and other effects of climate change.
Waterfront properties in the central city of Da Nang have become a hot item after a brief lull in the local real estate market owing to the global economic crisis.
The market effervescence, especially in the segment of coastal high-class villas and houses, is apparently inured to the dire warnings about the impacts of rising water levels in the sea.
Tuoi Tre newspaper recently cited Savills Vietnam ââ‚¬" a real estate consulting company, as saying many villas in Da Nang were bought even as they were being built. In the third quarter of 2009, there were 387 villas from 6 coastal tourism property projects in Da Nang introduced into the market. Surprisingly, villas from one of those projects, the Olalani project, priced at roughly US$2.5 million each, were all sold out.
In another project, the Hyatt Regency, 70 percent of 27 three-bedroom villas, the cheapest of which costs $1.5 million, have been booked. In the Ocean Villas project, divided into three sections, 26 percent of villas whose prices ranged from $420,000 to $720,000 have also been bought. In other projects like Montgomerie Links & Estates and the Son Tra Spa & Resort, sales of villas which cost $500,000 and above are also reported to be brisk.
Some might buy villas as an investment. They can wait for one or two years before selling them when prices are even higher. Or they can rent them out, as people often do in the US. However, leasing in fact is a rather high-risk business which doesn't usually bring in the high expected profits.
WHO ARE THE BUYERS?
Tuoi Tre newspaper quoted Mario Lotti, manager of Hyatt Regency project in Da Nang, as saying that 63 percent of buyers of the project's high-end villas were from Hanoi. According to a survey conducted by the real estate consulting company Savills Vietnam, among the buyers of luxurious villas and houses, most of them (60-70 percent) are from Hanoi, then from Ho Chi Minh City and abroad. Investors based in Da Nang are very few.
The Wall Street Journal reported that during the real estate boom, a lot of Americans bought everything relating to property, from houses and land to condo offices and condo hotels (condo hotels are typically high-rise buildings developed and operated as luxury hotels, similar to villas and rest houses in coastal areas of Da Nang and Phan Thiet Town in the south central province of Binh Thuan). Investing in a condo hotel is one of the riskiest investments, because the number of guests can fluctuate depending on the state of the economy, and at the moment, the US economy hasn't recovered from the economic crisis.
The journal took up the story of Moji Adekunbi, a 47-year-old engineer, as an example. In 2005,
Adekunbi bought a room at a condo hotel named Signature at the MGM Grand for $550,000. "It was a really bad investment," Adekunbi lamented. He said he was convinced by the salesman of the construction company that this hotel could attract enough guests to fill 94 percent of its capacity and the room price could be up to $350 per night. However, it turned out that he could only get from $400 to $1,800 a month, which was not enough to pay the bank interest.
Signature at the MGM Grand is a condo hotel built in Las Vegas that is labeled as "more luxurious than the most luxurious hotels in the city of casinos."
Common manââ‚¬â„¢s view
Most Da Nang residents are not very enthusiastic about tourism real estate, because their earnings are far from the prices commanded by coastal villas or luxurious apartments. And with a population of only 900,000, Da Nang does not have the same economic environment as Hanoi or Ho Chi Minh City.
Most importantly, however, the people of Da Nang know best the disadvantages and difficulties of living near the sea. They know how unsafe it is to live on the beaches during the stormy season.
The unpredictable occurrence of storms and floods in recent years shows how risky it is to live near the sea. According to the official website of the Da Nang People's Committee, during the storms that attacked South Hoa Hiep Ward, Lien Chieu District, in 2007 and 2008, sea water entered deep inside the land, flooding several houses and shrimp ponds. Also in the area, a section of the dyke almost 2 kilometers long along the banks of Cu De River (across the Nam O Bridge, North Hoa Hiep Ward) was heavily damaged, threatening the safety of the Nam O Bridge. Dozens of houses collapsed or were damaged by land erosion caused by the sea. The sea also encroached 100 meters into the residential area north of Nam O edge.
Like other provinces and cities in the central coastal region, Da Nang has been suffering from several climate change impacts.
At the conference named "Assessing the vulnerability to climate change of Da Nang, its perils and solutions" (May 6, 2009), there was a rather striking report, which predicted that 30,000 households with over 170,000 residents in the coastal wards of Da Nang would lose their homes when sea levels rise by 30cm in 2040. Rising sea also causes deeper and longer-lasting inundation in flat areas. At that moment, can luxurious villas and houses in the coastal areas avoid being flooded?
The report also said thousands of manufacturing and service units would be flooded. Moreover, droughts caused by climate change would be more and more critical, creating water shortage for more than 70,000 urban residents and about 1,000 hectares of agricultural land. The report said "this will be a huge disaster for life and the development in Da Nang."
In late December, the writer witnessed the danger of the rising sea. At one stretch of the My Khe coast, although the sea was just very rough, the waves were so strong that they could push sand onto new coastal roads which are 100 meters away from the edge of water.
Rising sea water is not a problem of the future. The Vietnam News Agency has quoted Nguyen Van Duc, deputy minister of Natural Resources and Environment, as saying that in the past 50 years, temperatures have increased by 0.7 degrees Celsius and sea water levels has risen by about 20 centimeters in Vietnam.
Is it that tourism real estate investors in Da Nang have not anticipated the risk, or are they hoping to sell those expensive assets before the rising sea water problem becomes critical? Or are they hoping the Da Nang administration will be able to find some solutions to the problem in the future?
Reported by Ngoc Tran