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Although Vietnam’s new law allowing foreigners to invest in residential developments took effect in January, direct ownership of properties continues to be outlawed. But there are options.

IndoChina Capital, which is developing parts of the popular China Beach area, is offering investors a stake in a foreign company that, in turn, owns a Vietnamese one.

“Essentially all the owners own all the villas but agree through our offshore agreement to allocate one villa per owner, sharing income and expenses according to usage,” said Rick Mayo-Smith, the company’s managing director.

“The structure is similar to a New York co-op in the sense of sharing expenses and allocating usage of condo or villa through contractual rights,” said Dao Nguyen, a Saigon-based partner in the law firm of Johnson Stokes & Master, which devised the structure.

The first property to use the sales method is the all-villa resort attached to the Nam Hai Hotel, which opened in December. When villas are not occupied by their owners, General Hotel Management, the British-based company supervising hotel operations, will rent them as part of the hotel’s regular room pool.

There are only 1,000 hotel rooms along China Beach, but with tourist numbers growing about 15 percent a year, the authorities have allocated land for as many as 10 more developments within the next four or five years. The beach is just 15 kilometers, or 9 miles, from Da Nang International Airport, which has direct flights from Singapore, Bangkok and Taipei and is expected to get direct flights from Hong Kong soon.

About 30 of Nam Hai’s 40 private villas have been sold to international investors, mainly to people in the financial services industry. Prices for the remaining villas range from $1 million for a large one-bedroom villa to $2 million for a three- bedroom, bringing the average price per square foot to $280.

While these prices compare favorably with those of similar luxury properties in other sought-after destinations like Bali and Phuket, Thailand, investors may need some patience if they decide to resell the 50-year leasehold properties.

“I think it’s a very opportunistic investment for people wanting to capitalize on the tourism story,” said Nicholas Heaney, a banker who

is considering the Hai Nam project. “But even if the property price doubled in a few years, as is expected, you will need to find a buyer that can pay cash, as you can’t get a mortgage on those properties. That might be a bit more difficult if you’re in a hurry, because that’s a lot of cash.”

MACQUARIE Mortgages is seeing a significant drop in the volume of refinancing and it expects home loan defaults will jump as last year’s interest rate hikes bite.

In a survey for the 12 months to November 2006, Macquarie Mortgages found that “an extraordinary 61.4 per cent” of respondents expected to see high arrears and defaults this year.

The figure was almost 27 per cent higher than its previous (2005) annual survey of more than 900 mortgage brokers, financial planners, accountants and others involved in lending.

Head of Macquarie Mortgages Australia Tim Brown said refinancing fell by 15 per cent in November, when the third interest rate rise in 2006 was announced.

He said between 40 and 50 per cent of its borrowers refinanced to take out, on average, an additional $50,000 to $150,000 for renovation or investment.

“People are holding back and waiting to see if they can absorb the third interest rate rise.”

Macquarie Mortgages had a loan book of $23 billion and its average loan was $350,000.

Mr Brown said there had already been a significant number of possessions, where the bank foreclosed on properties after borrowers failed to meet their repayments.

But he was unable to quantify the number of possessions as the trend had only recently emerged.

He expected demand for mortgages to slow even further in January, traditionally, a slow month in the industry.

The survey predicted property prices would remain at their current level for the next 12 months and that property sales volumes were “likely to fall significantly this year”.

Last week Moody’s Investors Service said that delinquencies in the Australian non-conforming housing sector reached “historically record levels” in the fourth quarter of 2006.

Moody’s said delinquency rates continue to trend upwards as a result of rising interest rates, record indebtedness and flat property prices.

BERLIN: In one of East Berlin’s most traditional retail centers, a dark red castle of a building that would not look out of place in the “Lord of the Rings” movies is slowly rising in an unused lot south of the Alexanderplatz.

In a few months, a shopping center with 30,000 square meters, or almost 323,000 square feet, of retail space, a light-flooded food court and 180 stores will move into the complex, just meters away from two big department stores and across some railroad tracks from a mini-mall.

“We’ll offer a nice atmosphere,” said Silvia Peschke, the German spokeswoman for Sonae Sierra, the Portuguese developer that is building Alexa mall in conjunction with the French developer Fonci?re Euris. “We’re building for this generation, but it will also fit the coming generations.”

It might seem risky to build a new retail temple in an area already full of shopping possibilities, in a city with an unemployment rate as high as 16 percent, and in a country where the consumer researcher GfK noted that people still spend less than 30 percent of their income in the retail sector.

But rather than the exception, Alexa is proving to be the rule.

Fueled by international investors’ seemingly never-ending thirst for German property and by a public that is beginning to change its buying habits, the shopping center is experiencing a flat-out boom here.

Last year, 12 new centers brought the country’s total to 384; by 2008, 41 more will be finished, according to the EHI Retail Institute in Cologne.

The malls, once relegated to German suburbs, now are appearing in the inner cities of places like Essen and Dortmund, angering small retail owners and worrying traditionalists. In Braunschweig, the 19th-century fa?ade of the former city palace, torn down in 1960, is being rebuilt to face a 30,000- square-meter, three-level center.

“People are starting to go shopping once a day and, rather than spend their time walking along an unattractive shopping area, they’ll decide in favor of the well-mixed shopping center,” says Klaus Striebich, managing director of leasing at ECE, a shopping- center developer. The company, the biggest builder of malls in Germany, invests an average of \500 million, or about $648 million, a year in new projects, and by 2010 it plans to have opened 20 new centers, although half of them will be abroad.

Merrill Lynch, Morgan Stanley and the Canada-based Ivanhoe Cambridge are some of the big names working with international shopping-center developers in Germany. Private equity companies, which have hungrily bought commercial and residential real estate in Germany at cheaper prices than in other European countries, are apparently turning their attention to department stores, warehouses and malls, according to the German Council of Shopping Centers.

“An equity hurricane from Australia, the United States, Ireland and the U.K. is blowing over Germany and Central Europe and can’t seem to avoid any sort of commercial property,” said Wolfgang Bays, the director of the German Council of Shopping Centers.

The “hurricane” has blown despite some troubling numbers. Less than a third of Germany’s total retail volume is produced in shopping centers, according to the council. And at the moment, malls make up only 10 percent of the country’s retail landscape, although developers say that is changing.

“We’re moving away from a bazaar to an event,” said Bays. “The customer wants to be entertained.”

But the entertainment comes at the cost of the surrounding retail landscape, critics say. “Usually, it’s a zero-sum game,” said Werner Sewing, a Berlin-based architectural sociologist and shopping-center critic. “What the shopping mall gains, the other stores lose.”

On the other side of the tracks from Alexa there are about 30 stores in the Rathaus Passagen, and the Alexanderplatz itself offers both the Kaufhof department store and the recent return of the traditional German retailer C&A to the building it occupied before World War II.

Now Sewing is worried that Alexa, which will feature mainly small stores like the Spanish fast-fashion retailer Zara and the discount consumer electronics store Media Markt, will pull shoppers away from the existing retail choices.

“If Alexa has the right offers, then people will go there,” he said. “But they’ll no longer go to the Rathaus Passagen, and that area will be worse off.”

Advocates say that it will be up to the retailers themselves to create an environment that will be a success with customers. “People nowadays, in this fast- moving world, want change, and retail has fallen behind,” said Peschke, the Alexa spokeswoman.

RENTERS could be paying up to $40 more a week after new land valuations are released on Monday, the Property Council of Australia has warned.

Chief executive Queensland Robert Walker revealed yesterday he was briefed by the Department of Natural Resources and told that unimproved land values for residential properties in southeast Queensland would jump on average between 20 to 30 per cent.

He said the result would be that some landlords would need to pay more land tax or start paying land tax and those costs would be passed on to renters.

“Rents will go up,” he said. “Rents will go up by 10 per cent.”

Mr Walker said the news for people looking for an affordable home to rent was, “they have no chance”.

Although the land tax threshold has been increased in Queensland, Mr Walker said the increase in valuations would be enough to push many investors over the limit.

“What the Government does not realise is that a lot of investors in rental properties are mum and dad investors or self-funded retirees,” he said.

“There will be a whole new raft of people now paying land tax.”

He said the Government should just hang out a big sign saying, “property investors keep out of Queensland”.

Housing Minister Robert Schwarten said the tight rental market was an increasing issue, forcing potential tenants to bid for properties.

A report from the Rental Tenancies Authority, Rent Bidding, found between 5 to 10 per cent of the rental market offered more than the advertised price for their property.

Further, some real estate agents were advertising properties without prices or with price ranges.

“Given continuing low rental vacancy rates, all of the rent bidding practices may increase,” the report said.

Mr Schwarten said the practice was unethical and the Australian Competition and Consumer Commission could take action against landlords or real estate agents who did business that way.He also said he was considering regulating rents to stamp out the practice of bidding.

Mr Schwarten said misleading and deceptive conduct could be policed through the RTA which collects bonds.

“So all we need to say is that we won’t collect a bond from a certain real estate agent and, effectively, that closes the rent roll of that real estate agent,” he said.

There is a review under way to consider whether legislation needs to be introduced to address the issue.

“I have no beef with a proper return on a residential or commercial property because we need private investment,” Mr Schwarten said.

Mr Walker said residential properties will not be the only ones hit by the rise.

Industrial properties are set to experience an average jump of 160 per cent, commercial properties about 110 per cent and retail properties 100 per cent.

He said the result in those markets could be that millions of dollars would drop off the potential sale price because of the increased tax liability.

Home owners concerned a jump in valuations will affect their rates, have been assured by Lord Mayor Campbell Newman that he does not intend to raise general rates in the next budget above CPI.

A spokesman for Natural Resources Minister Craig Wallace refused to comment on the valuations, saying the figures would be released by State Valuer Des Lucas on Monday.

JOHN Howard has confirmed he is considering relief for renters as landlords increasingly move to rental auctions in the tight housing markets.

While the Prime Minister stopped short of promising direct rent relief yesterday, he argued that one of the problems was the failure of state governments to release more land, driving up the cost of housing.

However, some landlords are leaving the real estate market to take advantage of the federal Government’s superannuation changes and to avoid spiralling state property taxes.

One option could be to pressure the states to release more land when Mr Howard next holds talks with the premiers, and to maintain the political pressure to reduce stamp duty and other property taxes.

Speaking in Perth yesterday, Mr Howard said he was aware the problem was placing pressure on families.

“I am conscious that rents have got up in different parts of the country,” he said.

“Other people have put views to me about rental assistance … we are considering those things, I am not going to say any more.

“In some parts of the country state governments have been far too slow at releasing land and that has contributed to the shortages.”

According to the Reserve Bank, rents rose faster last year than they have in the past 15 years, and the bank has predicted rents will rise even higher this year.

Around one-third of Australians rent with the balance split between those who own their homes outright and those with mortgages.

Opposition Leader Kevin Rudd said rising rents was another pressure point for families.

“There is no silver bullet for this. But we’ve got to begin by recognising there is a problem,” he told Southern Cross Broadcasting in Perth.

Rents could rise up to 30 per cent in the next three years as strong migration and the lack of building activity cut into the amount of available rental accommodation.

Economic forecaster BIS Shrapnel expects Sydney rents to rise by about 30 per cent by mid-late 2009 followed by Melbourne and Brisbane with 20 per cent rises. Adelaide, Perth and Canberra can expect rents to increase 10-15 per cent in the next three years.

Vacancy rates for residential properties fell in almost every capital city in the three months to September with the trend expected to worsen in every city except Perth, according to the Real Estate Institute of Australia.

While both Sydney and Brisbane’s vacancy was 1.7 per cent in the September quarter, Canberra had the tightest rental market at 1.1per cent - well below the national long-term vacancy rate average of 3 per cent.

REIA president Graham Joyce expects the rental crisis to intensify with the lack of housing affordabilty forcing traditional first home buyers to stay in the rental market, and investors deterred by flat housing prices.