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The Vietnam residential property market went through a boom period in 2007 when new legislation allowed foreign developers to compete more equally with local developers. Negative sentiment in relation to the global economic downturn had a negative impact on the Vietnam residential property market in 2009. Currently Vietnam is on a gradual recovery. Following is information to help decide if the Vietnam residential property market should be part of an investment strategy:

Even though there are lower interest rates in Vietnam, the effects of the financial crisis and the 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 showed improvement due partly to government stimulus policy and partly to the attraction of the lower house prices. The lower housing prices have caused a recent speculative race of quick purchasing and selling by local investors, pushing housing prices to new artificial levels in certain areas. Villas have seen prices increase more than apartments. Land prices in urban residential areas, especially suburbs, have also risen sharply this year.

Experts struggled to predict the real estate markets performance in Vietnam in 2009. Reasons for 2009’s unpredictability and vulnerability were due to the real estates market in 2008 falling short from everyone’s expectations and predictions. 2008 saw high inflation, high construction material prices and tight monetary policies preventing cheap financing. Even though all of these issues having been resolved, confidence is still lacking in Vietnam real estate markets. More positive results are expected during 2010. 2010 GDP growth is expected to jump to over 6% as the economy recovers further.

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.

Land in Vietnam cannot be bought; the process of purchasing property in Vietnam requires registrations of land use rights. Once contracts are exchanged, the buyer will receive the Land Use Rights Certificate (LURC), which gives the right over the land as well as the description of the land's property.

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 law governing real estate transactions is called Circular 13. Under Circular 13, foreign individuals will be able to invest in the Vietnam residential property market as long as they can be classed into five categories which are i) individuals who already invest directly into Vietnam ii) individuals who have received an award from the State President or Prime Minister iii) individuals with a university degree in a desired sector iv) individuals who are married to a Vietnamese person iii) via companies that are not real estate related. Restrictions are that the apartments must be in approved housing developments and have a lease period of 50 years.

Taxes are payable in Vietnam for real estate transactions. These included rental income tax, business income tax, capital gains tax, withholding tax, transfer tax. Healy Consultants provides comprehensive advice to clients regarding the accounting and taxation requirements associated with investing in Vietnam real estate.

As the Vietnam market opens up to more for foreigners and expatriates, there are more options for financing property investment in Vietnam. ANZ is one bank that has an option of borrowing up to 60% of the property valuation. Healy Consultants will source competitive property finance for purchasing property in Vietnam. Our firm works with leading international banks including HSBC, ANZ Bank, DBS Bank and OCBC Bank.

Contact Us

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

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