Runaway developer exemplifies problems of Vietnam's property crash

As Vietnam's first property boom crashed around him, American developer Edward Chi kept promising investors their flashy apartments were on track. The businessman even told them he would sell his California properties to pay them back if construction stopped on projects that were heavily marketed by a well-known American real estate company.

But Chi ducked out of a tense meeting with the prospective homeowners last year and never returned, leaving the rusting foundations of an apartment block and at least 128 angry investors, many who had put down more than US$150,000 from life savings or bank loans. Police said Chi had left the country and was unreachable.

Chi was one of scores of developers drawn to Vietnamese property in the late 2000s, when the authorities encouraged state-owned banks to hand out easy credit to investors and developers as part of an effort to stimulate the economy, resulting in sharp land price increases. It was a new phenomenon for Vietnam, which only began opening its centrally planned economy in the 1980s. Many of the developers were state-owned enterprises that had no experience in property. Despite hopes of bringing home ownership to the masses, buyers were often speculators, seeking to buy off the plan and realise a quick profit.

"Suddenly everyone stopped manufacturing shoes, widgets or whatever and became developers overnight," said Marc Townsend, managing director of the Vietnam unit of CB Richard Ellis Group, a global firm. "And the remains are all around town."

As countless other countries have learned, house prices can drop as quickly as they rise. Vietnam's did with a vengeance in late 2010 as the economy slipped. Prices are down by 50 per cent in some parts of the country, and no one is predicting a rebound. Banks are weighed down with bad debt, much of it secured against property, and are reluctant to lend, strangling growth in the once red-hot economy.

With half-finished skyscrapers and housing complexes scarring Hanoi and elsewhere, tales of runaway developers are emerging online and in the tightly controlled media, opening up a new avenue of anger at officials who oversaw the rampant speculation.