In Vietnam: Đà Nẵng – Booming, but will it bust?

When I was looking for somewhere to live in Đà Nẵng, a major requirement was to find a place out of earshot of the numerous construction projects going on, especially in the beach areas. I eventually found a nice place in a quiet back lane. Apart from the usual apartment noise issues (upstairs neighbours walking around noisily, water pipes banging every time someone uses the toilet etc.), and the usual Vietnam city noises (the “Bánh Bao Đây” men broadcasting their wares from motorbike mounted loudspeakers, barking dogs, motorbike engines) it’s been relatively quiet … until last month, when a house almost opposite was demolished in record time, and a new building commenced. This is now the view from my balcony:

I could write a book about the speed with which buildings come down and go up in this city, never mind the improvised building techniques, the health and safety practices (there are none), the living conditions of the workers (many of them live in makeshift tents on or next to the site), the endurance of these men and women (many of the labourers are women). Maybe another post.

I took a brief walk around my area yesterday, not straying more than about 300 metres from my place. These are just some of the building project going on within that radius, and I’ve not bothered with the numerous smaller scale improvements going on.

What is driving this building bonanza? I think it’s partly tourism and partly a response to the growing “expat” community. Korean tourists are everywhere in the city. Apparently Vietnam reminds them of Korea twenty years ago. They come for the beaches, the cheap food and drink and probably other reasons. There are numerous marts that cater specifically for Korean tourists. The largest supermarket near me, Lotte Mart, is Korean owned, and busloads of Korean tourists descend on it, frantically buying up nuts, dried fruit, chocolate, biscuits, coffee and tea. Some areas of the beach are crowded with selfie-taking Korean women.

The expat community (like me) tends to be resident for longer periods, and is willing to pay much higher rents than the local residents, though still a lot less than would be paid in Australia, U.K. and U.S.A. In response, numerous apartment blocks have sprung up, with the aim of being rented to expats.

The worry, I think, is that the current boom is bound to lead to an oversupply. Rents will decline. Apartments will remain empty. Hotel rooms will be vacant. A shock to the Korean economy could precipitate this (though maybe the situation in North Korea might encourage more Koreans to come here). A clampdown on expats working “unofficially” might cause the expat influx to cease. Any number of events might lead to a bust in the hotel and apartment market.

The Vietnamese are incredibly resilient people. Businesses here run on tiny margins, almost it seems on a marginal revenue basis i.e. any revenue is better than no revenue. Shop staff are often family members living on the premises and not being paid much. Restaurants are often someone’s front room. Wages of course are miniscule by western standards. Vietnam will survive, but it could be a bumpy ride for Đà Nẵng.

Copyright Mike Hopkins 2018