Thanks to its spectacular coastline and rich culture, tourism to Vietnam is soaring—and so are the country’s property prices. But it’s still a difficult market for international property investors, according to James Gonzalez, market analyst for Obelisk, the property firm.
The Vietnamese government will have to remove hurdles to foreign ownership for the property market to truly take off, he says.
But there are clear signs of movement. In many areas prices have increased by more than 50 percent in the last year. And more than $5 billion flowed into property developments in 2007, primarily foreign investments into Ho Chi Minh City, where an apartment priced at $80,000 in 2006 might sell for $240,000 in 2007 (about €55,000 to €164,000), Gonzalez says.
New legislation may also open doors to international property buyers.
In an e-mail interview, Gonzalez discusses the quirks, challenges and opportunities in the Vietnam market.
Can foreigners buy property and build houses in Vietnam?
A foreigner cannot own land in Vietnam at all and can only ‘own’ property through funding a development.
Property agents have remarked that government plans to allow both Vietnamese living overseas and foreign investors to own freehold property has actually accelerated the Vietnamese rush to purchase property for future resale to the western world—thus affecting prices.
What is the market for second home and retiree buyers at this point?
Expatriate Vietnamese, retiring back to their country, will see many good changes to their country such as renewed infrastructure, resorts and luxury accommodation along with fewer restrictions on property and land ownership for them.
Unless a property buyer registers as a resident of Vietnam, they will not be able to purchase a property for personal use.
Legally, foreigners cannot buy buy-to-let properties in Vietnam. However, there are ways that foreigners can have ‘virtual ownership’ of properties, i.e. several contracts can state that if a change in law—to allow foreign ownership of properties—a ‘right to long-term lease’ contract could be converted to a ‘right of ownership’ contract (or title deed).
What do you mean “register as a Vietnam resident.”
A person of non-Vietnamese origin who relocates to Vietnam and obtains residency is able to purchase a property for personal use.
However, if the person leaves the country for reasons such as: returns to the country of his or her origin or relocates to another country and cancels his or her residency in Vietnam, the property must be sold within 90 days of his or her departure.
Any particular areas of the country attracting foreign investment?
Golfing is a big attraction for tourists visiting from neighboring countries.
Many tourists from Taiwan, Hong Kong and Malaysia for example holiday specifically for golf and spa leisure facilities and since the first golfing development, many new resorts have been springing up all over the coast from north to south.
In comparing Vietnam to other markets for investors and residential developers, what are the appealing factors?
If as a foreign investor, financing directly into a resort development, the opportunity presents a good solid long term income—in the form of continual rental yield—certainly as the country enjoys all year round average temperature of 22˚C.
Property investment funds are also developing rapidly as the big financial institutions pick up on the profitable market.
All sales in Vietnam are in cash?
This certainly is not the norm in overseas property investment but there have been many cases in Vietnam where the seller has been paid in gold!
When dealing with off-plan or pre off-plan, where the property is not complete for 1-3 years, the payments are generally very easy stage payments or deposit followed by full payment on completion, which in most cases can be covered by a local mortgage.
You mentioned in a press release that new laws were enacted in 2007 to curb soaring prices.
Policy makers and economists are now pushing for the new legislation in a bid to avoid a market bubble and sustain the country’s high growth rates, for years to come.
The draft proposal details measures to impose an annual tax on owners who have acquired more than one property, however, the law would not come into effect until 2010.
At present only transfer taxes are payable on the sale of a property, but most sales are paid in cash making it difficult for the government to gage volumes and collect on capital gains tax.
To sum up, how would you characterize the opportunity in Vietnam?
Now firmly out of its post-war status Vietnam has a booming travel market with the government encouraging foreign visitors, which has enabled Vietnam to gain a good investment market share in Asia.
Vietnam certainly offers a rare opportunity for visitors to see a country that blends both the traditional with the modern world.
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