As I write “As of July 4, 2024, 16,479 lodging establishments have been requested to stop operating, and 100% of investors have signed a commitment to comply.”
And if you are in the fire and safety equipment, it is the highest season ever for your business.
Unfortunately for Hanoi, you will not help decrease fires and casualties for the reasons our article explain below.
In first half of 2024, a recap of the deadly fires concentrated in Hanoi Capital city of Vietnam
A quick recap on deadly fires shows multiplying death in Hanoi in the past few months, at improvised mini rental apartment buildings:
Jun 2024 3 dead Bac Giang 2-story town house,
May 2024 14 dead Hanoi Cau Giay 5-story building,
Jun 2024 4 dead in Dinh cong Hoa – Hanoi 5-story building
Oct-2023 3 dead home explosion Thanh Tri district
Sep 2023 56 dead in Thanh Xuan mini-apartment building fire
Dec 2023 Carina apartment 13 dead: Management head get 8-year jail-term
What is it that the youth are attracted to today?
A brief History of Hanoi capital center: landlords, real estate pricing and overcrowded
Hanoi historic center -around the lakes- got no infrastructure or urban planning investment since 1954 with Dien Bien Phu
- ndeed, the French colonialists withdrew, Hanoi was left with a legacy of beautiful colonial architecture and city landscape but no budget to revamp the city center. The war dragged on till 1975.
- Then Hanoi faced the Vietnam closure to the West, the US economic embargo on Vietnam till Feb 1994 and the failure of the communist economy went all the way to the 2000s.
- Since 2000, the huge needs in housing diverted the budget to the new districts and suburbs of Hanoi, leaving the heart with antique infrastructure.
- Then regulations and laws were set-up to preserve the historic Hanoi center around the famous lakes, with fines commensurate to low salaries -ie. a couple of millions are not dissuasive enough in comparison to the billions of VNDong generated by illegal additions to the buildings on tiny and dense land. Thus, the officials in charge or urban regulations and safety turned a blind eye to infringements for a ‘co-fee money’ in Vietnamese parlance.
Military and party politician real estate owners keep their original family as a treasury of war
- The center was home to old families of militaries and leaders of Vietnam victory. Their habits were thrifty and non-expansive when it comes to home space. Now becoming decision makers, the fortunes shifted so they could buy land and apartments as apparatchiks of the party. Selling their ever increasing small family house in Hanoi historic center became unnecessary.
- Owners with power of military or high ranking officials or the owners with sheer power of money can talk/bribe their way around into building a few floors more or on supposedly non constructible land. The calculation goes, if I build 1 more floor for 2 apartments sold at say VND2Bn each at aa 500Mio profit, I can pay for the fine of a dozen millions or pay the ‘stamper’ in chief VND50-100Mio to authorize & legalize my construction. Let’s try!
Vietnamese families Hanoi landlords live in antiques and cramped homes
- For the not so well-off families -not part of the happy few generals and entourage of the party leaders-. Their home of the ‘foot soldiers’ are living space, the business outlet shop house and the warehouse. It is common to have 3 generations in the same town house with an average of 7 people sharing the house.
- Additionally, to increase their income some landlords would build dependencies to rent to the rural migrants searching for scarce cheap city center accommodation.
- Asking for construction permits, for the ‘untouchables’ contributors to the war militaries’ descents is an easy game as respected members by the authorities -when they are not the authorities themselves-. In Don Corleone parlance, they have ways to make the city planners ‘an offer they can’t refuse’ to build more space for themselves or to rent.
- Since the French colonialists left, the practice compounded -from the 1950s up to now- and you get the level ‘urbanism’ uncivility and safety uncompliance of the old hanoi center.
The Hanoi Vietnam real estate: terrain and environment to 2024
Many expats ask me why the prices are so ‘artificially high’ compared to New York, Paris or London. One should understand that the Hanoi capital city center can only increase in price due to scarcity and Vietnam currency control. All wealth of 100Mio Vietnamese is redirected to land ownership, built to cater à few 100,000 inhabitants both in Hanoi and Saigon by the French. And it is where business and local or foreign tourism will always be flowing in, for Vietnamese it is a priceless money making location.
Hanoi city center no-high-rise urban policy for preservation boosts the land and house prices
It is not unusual for a family to sell at well above $25,000/sqm. Moreover, as you may know, Vietnamese are under a strict currency control; the VN Dong is not convertible and the people can not invest or own assets abroad. All the wealthy people can only invest inside Vietnam. The scarcity of land and no high-rise allowed to preserve the beauty of Hanoi’s historic center contribute to make Hanoi one of the most expensive land prices per sqm.
Limited Investment in Hanoi Capital city center infrastructure refurbishing
For families in need to sell their tiny home they would calculate the price of similar value in land outside of the city, plus adding an income for life as their prime location is often their shop house business income generating for the whole family. The Hanoi authority will never forcefully expropriate the land owners who are often old families heroes of the war alongside Ho chi minh or they are the Hanoi authorities themselves.
As infrastructure spending would have negative ROI Return On Investment due to high costs of evictions of the populations and no possibility to build high-rises, the public electricity, water or fire hose pipes and sewage grid are inadequate and decaying.
How a Hanoian poor and uneducated landlord can optimize business value of his home?
The only way to satisfy demand and to multiply profit on the value of the land is to build up. Mostly building vertically illegally on top of old buildings bribing the city planners and construction department.
The sad recent case of Sep 2023 56 dead in Thanh Xuan mini-apartment building fire resulted in ‘banning charging electric motorbike’ during the night inside the parking lot. Investigations revealed many complaints about safety to the fire departments by the neighbors, addressed with lenient stamps by inspectors during the visits. Also over the years 5 floors were illegally constructed, but legally stamped for approval over many years. The units were sold to new owners by the landlord, the newspaper articles don’t explain who or if the ‘red book’ property rights were delivered to new owners living on top of the original owner property.
The press release does not precise if the hundreds of motorbikes parked in the basement -causing the fire- were the owners, the tennant or outside neighbors vehicles. There were discussions about the city indemnifying the victims for death and property, but no mention of any private insurer having to refund clients. Those cases are very difficult to point the responsibility as most authorizations stamped and paid for are illegal or long gone with the money to higher positions
The irrational economics and dangerous mindset of the Vietnamese landlords ready to bribe city planning authorities
When you receive a good bunch of money -circa the 100 millions of US$- where other than a nice piece of land/building/house it can go unnoticed, especially if you buy under a nominee family member. Obviously illegal money can not land in a bank account as there is no such thing as private banking as the Ministry of Finance can see through any bank accounts.
Hanoi old quarters homes are ‘residential businesses’
Even small houses of the historic old quarters have 4 functions: residence, shophouse, warehouse, rental units or sold dependencies. That was the case of the burnt mini apartment buildings burnt in Thanh Xuan district leaving 56 dead. Very rare are sellers or buyers: the former want to keep their money making home and the latter can not afford the asking price for small property. For larger properties, the market has no limit in price as it is providing a discreet shelter for large sums of money.
The millions of migrant workers looking for rentals in Hanoi city
In such pressure on houses for rent, the conjunction of 4 factors magnifies the death toll. Getting a safer home facing a large street is impossible as it is reserved for shop commercial space, hotels or high-end foreigners apartments for rent. Cheap rentals are pushed deep into the difficult to access infamous ‘hẻm’ dead-ends alleys. Promiscuity is part of the cheap deal, the average ‘headcount’ x3.7 times the ‘official’ capacity of the living space. To keep rentals low, the landlords ignore or skip any ‘superfluous’ investments in security basic installations and equipment, sometimes resorting to bribing the city urban planners and the fire dept supervisors to avoid costly -and sometimes unfeasible- upgrades. To seal the bleak surrounding, promiscuity means all belongings and valuables of the tenants are kept in one place attracting thieves; as foreign visitors always wonder why in small town houses all windows are covered by ‘security metal bars’ preventing residents from escaping in case of fire. The answer: tenants in Vietnam want to prevent thieves from forcing their way in.
The city will not upgrade the housing infrastructure rain or shine.
As mentioned before the ROI is negative: pouring budget into the upgrade of Hanoi city center will make it more attractive to land speculators and rentals whilst not being able to build more new housing to respect city planning. Note some rules are weird to foreign eyes like not building higher than the people’s committee, old palace height or the feng shui geomancy divine instructions to the city mayor.
Rain and floods due to climate change have become unpredictable. The modern times have multiplied x5 fold the household needs for TV, karaoke and aircon in each room of the house, whilst wiring dates back the early 1900s for some parts of the city or for sure the calculations of wiring capacity is under evaluating the crowds in residency. Top top the risk cocktail, the Hanoi legendary humidity and heatwaves is a bounty -or a nightmare- for home insurance sales people.
NB. Most landlords in Vietnam are not insured as despite high risks, the government has never imposed compulsory home insurance for third party property damage, bodily injury or accidental death.
Conclusion: Hanoi capital ‘historic center’ needs for infrastructure are not met, resulting in increasing fire death toll years after years.
The situation may only stabilize or get worse but destroying the illegal constructions or relocating are complicated economical and political issues:
- Forcing the Expropriation of families of ex-military contributors to the Party victory at prices that includes a residence and income for life to compensate loss of central located commerce or
- Destroying illegal constructions authorized and stamped over time by the corrupt Hanoi city authorities and administrators, unraveling their names and requesting the relevant compensations.
You can also read In Vietnam the landlord is rarely your friend
Why most Expat tennants buy home insurance
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