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Vietnam Real Estate
Over recent times, Vietnam real estate has experienced ups and downs. There was an explosion of interest and activity in the property market during 2007 due to the newly introduced laws that liberalized the entry of foreign developers. However, in April 2008, after a stock market crash and a tightening of bank credit for Vietnam real estate, the number of transactions declined by 30-40% compared to late 2007. The following will help you determine whether Vietnam real estate is the optimum investment strategy to fulfill your objectives:
The Foreign Investment Department from Vietnams Ministry of Planning and Investment calculated that 91% of the US$6.36bn foreign direct investment (FDI) inflow in the first 4 months of 2009 was in the real estate sector.
Foreigners are permitted to purchase Vietnam real estate, and thereafter benefit from selling Vietnam real estate. Foreign ownership of land is not allowed in Vietnam, but foreigners residing in Vietnam can purchase a house and the land is leased from the government. An international investor can also purchase Vietnamese property by forming i) a joint venture company with a local partner ii) a wholly foreign-owned company iii) a Build, Operate and Transfer (BOT) company or one of its variants.
The prices for the residential segment of Vietnam real estate are below the peak reached in early February, around the Vietnam New Year (Tet holiday). Despite banks reducing the barriers to borrow finance, buyers are still cautious due to the current economic environment. There are approximately one hundred and ten condominium projects in different stages of development with more than 60% of these in the mid-end range. Eight of the condo's are in the luxury category and are all by foreign developers.
For the commercial segment of Vietnam real estate, occupancy rates of Hanoi office space is high although take up of new supply has been slow in recent months. In the retail sector, there is continued shortage of quality retail space, especially in the CBD where shopping centres are fully occupied.
From 1 January 2009 the Vietnam real estate market will make it easier for foreign individuals living in Vietnam to buy real estate. Under the circular 13 legislation, international entrepreneurs will be permitted to purchase real estate provided certain conditions are met. These conditions include: i) the individual already invests directly in Vietnam; ii) the individual is married to a Vietnamese citizen; or iii) via a company. The purchases will be permitted only in approved developments with a 50-year lease, and the property owner must reside in the property, thereby making it unattractive for investors based outside Vietnam.
2010 GDP growth forecasts for Vietnam have varied through the year but the more recent figures are generally more positive than earlier forecasts. In September 2010, the Asian Development Bank (ADB) revised up its forecast for Vietnamís 2010 GDP growth from 6.5%, which was forecast in early 2010 to 6.7%. GDP growth for 2010 is expected to be around 7% as the economy recovers further.
Despite lower interest rates, the financial crisis and aging loans from 2008 have caused Banks to prioritize the collection of debt. The market unpredictability has caused banks to maintain a conservative stance on approving property loans. Real estate developers have decreased sale prices to try and increase volume of sales and hence meet bank payments. Q4 2009 has shown promise for improvement due partly to government stimulus policy and partly to the attraction of the lower house prices.
Taxes are payable in Vietnam for real estate transactions. These included rental income tax, business income tax, capital gains tax, withholding tax, transfer tax. Asia Property Consultants provides comprehensive advice to clients regarding the accounting and taxation requirements associated with investing in Vietnam real estate.
|According to the 2010 Global Real Estate Transparency Index, the Vietnam real estate market is negatively ranked as having extremely 'low-transparency' and is the 6th most corrupt in the world (out of 81 markets). The level of transparency in a market is important to consider when transacting, owning and operating in foreign markets.|
Improving legal framework and greater transparency through a more mature foreign investment environment in the future will assist growth of Vietnamese real estate.
Despite the economic challenges, the market fundamentals for Vietnam real estate remain strong. These include predominantly young population, growing middle class, rapid urbanization and rising in-flow of expatriates. With effect from January 2009, foreigners in Vietnam are allowed to own apartments which will add potential buyers to domestic demand.
Asia Property Consultants independently assists international property investors effectively and efficiently manage all aspects related to the purchase and sale of Vietnam real estate. Our firm draws on the latest market information to advise clients on Vietnam economic factors, recent developments and where to invest to take advantage of one of the strongest potential property markets in Asia.
For more information on Vietnam real estate, telephone us in Singapore at (+65) 6735 0120 or email us here
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