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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. Currently growth is on a gradual increase as the economy is trying to recover from the financial crisis. 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.

Real estate agents in Vietnam’s two biggest cities are optimistic about property prices with almost half believing they are set to see a mini boom in coming months A survey by research firm Vietnam Report, shows that 43% of agents in Hanoi and Ho Chi Minh City said that real estate prices in big cities would surge, while the rest said they are likely to remain unchanged.

The report, Vietnam’s Real Estate Market in 2009 and prospects for 2010, also shows there is confidence among buyers. Over 61% said they planned to buy properties to live in while 11.5% said they would do so for short term investment purposes and 27% as a long term investments.

Savills Vietnam indicates that the commercial rental market is near bottom. It is predicted that Grade A rentals would start to increase in early 2011 at a steady pace and the Grade B rate would take longer to recover because of ample supply.

From 1 January 2009 the Vietnam real estate market has made it easier for foreign individuals living in Vietnam to buy real estate. Under the circular 13 legislation, international entrepreneurs are 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 iii) via a company. The purchases are 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.

Investing in emerging and frontier markets can often help investors to diversify equity holdings and provide exposure to growth opportunities not available in advanced economies. But with any opportunity for big gains often comes significant risk, including the potential for political instability, currency revaluation, and government intervention in the private sector. There's also the issue of corruption in the world's developing economies. While corruption exists everywhere, it is a way of life in some countries and has the potential to significantly impact returns on both foreign and domestic investment.

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.

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.

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.

For more information on Vietnam real estate, please contact us at our Singapore office at (+65) 67350120 or email us at email@healyconsultants.com

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