Evaluating the progress of foreign property ownership across Vietnam

Evaluating the progress of foreign property ownership across Vietnam

Entering into force in July 2015, the Law on Residential Housing No.65/2014/QH13 and the Law on Real Estate Business No.66/2014/QH13 partially lifted the barriers for foreigners pouring money into Vietnam’s real estate market, and thus opened the floodgates for overseas investment in this sector. The two laws have not only simplified the legislation, but also expanded the rights and protections afforded to investors while maintaining certain restrictions to keep them from overrunning funding into Vietnam’s real estate opportunities.

Among the notable changes, international investors are now permitted to acquire 30 per cent of apartment units within one apartment building or 250 individual residential houses comprising villas and terraced houses in one ward. This change is encouraging as non-Vietnamese individuals were only allowed to own one apartment unit in an apartment building prior to the implementation of the new laws.

They also loosened restrictions and conditions imposed on foreign investors whereby individuals are allowed to own residential property without residency status or have any investment in Vietnam as long as the individual enters the country with a valid passport. This makes it more accessible for foreigners to invest without the need to go through stringent conditions which may not be proportionate to the investment return and thereby deter foreign backing in the country.

Further, foreign-invested enterprises can now lease real estate for sub-lease, and this was not available to them prior to the implementation of the new laws.

While they have brought about changes welcomed by overseas investors and thus encouraged more investments, there is still room for improvement, particularly in relation to the different treatment ­between local and foreign ­investors, and the implementation of a level-playing field between them so as to ­increase competitiveness in the real estate sector.

In terms of the land-use right certificates issued to foreign individuals for residential houses in a residential project, they will only be granted a term of 50 years while local investors are entitled to an indefinite term. Although an extension of 50 years is available, the right to extend the term is not tested and the conditions for extension are not provided in the legislation. The purpose intended to have different terms of the right to use the land is not known, and it discourages foreign investment as the remainder terms affect the liquidity of the sale to non-Vietnamese buyers. The sale of the property is also inhibited as the pool of buyers is limited to locals who will enjoy an indefinite term of use upon purchase of the property from foreigners.

Similarly, as the percentage of foreign ownership in a single apartment building is limited to 30 per cent, any sale of apartment units may face the same limitation. The pool of buyers will inevitably limit the price that the owners can obtain if the quota for foreign ownership in that particular apartment has reached the allowed percentage and so, sale to potential overseas buyers will not be permitted.

With the government’s commitment to ensure growth of foreign investment in Vietnam, and the optimism in the market as demonstrated by international investors, it is hoped that their rights in the real estate sector will further improve to allow them the same rights as local investors in all areas of real estate investment, and clear and consistent guidelines will be provided to increase competitiveness in the real estate sector. We have to remember that the doors to foreign ownership in real estate only cracked open in 2008 but in the 10 years since, the government has made considerable advances in opening this sector and we have reasonable expectations that this trend will continue further in the future.

By Kevin Hawkins – Co-executive partner ZICO Law Vietnam

(source: vir.com.vn)

May 30, 2019 / by / in
Strong demand for high-end property

With robust economic growth in Vietnam for the past several years, foreign buyers are diving into the real estate market as is evident by the pent-up demand from those looking to buy. Bich Ngoc reports on the most attractive segments so far for overseas buyers.

Since 2015 when Vietnam legalised foreign property ownership, the market has been receiving increasing interest from foreign buyers, specifically Asian investors taking advantage of the bargain price compared to the rest of the continent.

Henri Limyuen, a 36-year-old from the Philippines, told VIR that he is looking for a suitable apartment to buy in Ho Chi Minh City. Limyuen was visiting a launching ceremony of the Rome Residential project which is located in District 2. He said he has worked and lived across different Asian countries, and Vietnam is a top destination of his in terms of purchasing a home. “I think the regulations to permit foreigners to buy a house in Vietnam are open, and I see an opportunity for a good house here at a much cheaper price compared to other neighbouring countries,” he said.

Limyuen added that the price of homes in Vietnam still remains lower than those in other neighbouring countries such as Singapore or Thailand. Buying an apartment in Vietnam, he can live in or lease it to have rental yield which is also higher at around 7 per cent per year, compared with only 2 per cent in other countries.

With robust economic growth enjoyed over the past several years, foreigners, especially from Hong Kong, Taiwan, South Korea, and mainland China are finally diving into the real estate market. The trend is evident by a pent-up demand from overseas nationals looking to buy.

Nguyen Hoang, director of research and development of real estate consultancy DKRA, said that since 2017 Chinese mainlanders have increased their interest in buildings in Ho Chi Minh City, especially luxury and premium apartment units. Most come from Shanghai to buy homes in Vietnam for investment purposes.

At the end of last month, a group of more than 30 real estate agencies under Asia Bankers Club from Hong Kong came to Vietnam to visit River Panorama and Sky89 developed by An Gia Group and take a better look at the Vietnamese real estate market, as well as promote Vietnamese projects abroad. Asia Bankers Club, which is one of the most active international real estate investors operating in Vietnam, has co-operated with many developers in the country such as Keppel Land, CapitaLand, Gamuda Land, and other domestic developers.

Asia Bankers Club had been looking into Vietnam for quite some time, but what really awakened its interest was when Vietnam loosened the rules on foreign real estate ownership.

Luxury and premium on the rise

The luxury and premier residential projects in Ho Chi Minh City has seen most attraction from foreign buyers coming from Asian countries.

Property trading centres and consultants noted that luxury and high-end apartment projects in downtown Hanoi and Ho Chi Minh City are attracting the greatest interest from foreigners who are eligible to buy property in Vietnam. These are mostly individuals who buy property and then re-lease it for a rental fee or re-sell it for profit.

In Hanoi, major projects located in the city centre – the heart of culture in Hanoi – and around the West Lake, which offers the greenest living space of the whole city, are attracting strong foreign interest. The Manor and Keangnam Landmark Tower in Hanoi are favoured by South Korean buyers, while Ecopark, Ciputra, Sunshine City, Eldorado, and Pacific Place are very popular among foreigners.

Meanwhile in Ho Chi Minh City, Phu My Hung New Urban Area remains a popular destination for its advantages of being very well planned and for having good infrastructure. Some high-rise projects in Phu My Hung are now reserved especially for the South Korean and Japanese community. Phu My Hung has a population of 30,000 people, of whom 40 per cent are foreigners, including buyers and leasers.

Some other outstanding projects are Vinhomes Golden River and Vinhomes Central Park, both invested by Vingroup, The Nassim by Hongkong Land, and Keppel Land’s Estella Heights.

In 2018, purchases by foreigners reached unprecedented levels with the vast majority of high-end projects hitting their 30 per cent foreign quota at launch. One of the main reasons foreign buyers focus on high-end apartments is the buy-to-let method. High-end apartment projects in districts 2 and 9 of Ho Chi Minh City now receive a rental yield of 6-8 per cent, which is considered acceptable for investing.

Meanwhile, vacation and hospitality properties in the coastal areas are also garnering interest from foreign buyers. the southern cities of Vung Tau and Phan Thiet, the central cities of Danang and Nha Trang, the northern province of Vinh Phuc and the northern port city of Haiphong are all popular destinations for foreign buyers seeking a second home.

According to CBRE Vietnam, through only CBRE’s successful transaction, only 2 per cent of the foreign buyers was Chinese in 2016 and 4 per cent in 2017. This rate however increased to 31 per cent in the third quarter of 2018.

“The reason for Vietnam’s property market is more attractive to foreign investors, was because the Vietnamese government has opened up for foreign buyers since 2015,” said Dung Duong, senior director at CBRE Vietnam “Moreover, Vietnamese developers have also actively bringing their projects abroad, to introduce to potential buyers.”

Foreign ownership limit

According to many experts, since the home ownership ceiling for foreign buyers currently being reached in several estate projects, it should be considered to be loosened.

Bui Quang Tin, general director of BizLight Business School, said that as bank credit for the real estate sector is tightened while other capital sources, such as the stock market, are more difficult, it is necessary to lift the foreign ownership limit to lure more foreign investors. “The rise should be made gradually, to 35 to 40 per cent in the immediate future, instead of 30 per cent currently,” Tin said.

Meanwhile, Le Hoang Chau, chairman of the Ho Chi Minh City Real Estate Association, maintained that local authorities should issue as soon as possible the “certificates of homeownership/land-use rights” for foreigners. At the same time, effective measures should be taken to prevent illegal foreign estate business or speculation in Vietnam.

According to Chau, foreign direct investment in the realty industry is an important capital source for developers in the context that commercial banks are tightening their control on credit for real estate.

Official figures on the number of foreigners and overseas Vietnamese owning homes in Vietnam remain undisclosed. However, according to the Ministry of Construction, there are fewer than 200 foreigners and fewer than 700 overseas Vietnamese who have already received a red book or the ownership certificate in the country. This is a very modest proportion of the 100,000 foreigners and five million overseas Vietnamese who live and work in the country. (source: vir.com.vn)

May 30, 2019 / by / in
Government ignores affordable housing: experts

Hoang Thi Thuy Van, 48, of HCM City’s Thu Duc District, was able to buy a low-priced apartment four years ago because of a preferential credit package, but many people still cannot afford to buy a home.

“I feel much more fortunate than many of my colleagues who have not been able to buy an apartment,” she told Viet Nam News.

Current housing prices are too high for them, no matter how much money they save, she said.

“I once thought of moving closer to the city centre in Binh Thanh or Phu Nhuan districts, but have decided to give up as the price is far beyond what I can afford,” she said.

Four years ago, the State Bank’s preferential loan credit package of VND30 trillion (US$1.29 billion) helped thousands of low-income people purchase low-cost apartments in big cities.

However, since the credit package stopped disbursing funds in mid-2016 many people have given up their dream of home ownership because of surging prices.

The real estate market has experienced several so-called fever periods in recent years, pushing up property prices to a level that is unaffordable for people with low or modest incomes.

For example, a 70-sq.m one-bedroom apartment in an upscale project in Binh Thanh District which borders District 1, could cost up to VND4.5 billion (nearly $200,000), a broker in the district who has been in the industry for 10 years told Viet Nam News.

A small house in a side alley without access for a car in District 4 or Phu Nhuan District could cost up to VND5 billion ($215,000), he said.

For houses on large streets in central districts like districts 1, 3 and other nearby districts like Binh Thanh, Phu Nhuan and District 4, the prices were too expensive for most people, the broker said.

Huge demand

The real estate market is suffering a severe shortage of affordable homes despite huge demand, experts have said.

The property products in the country do not match market demand, especially in major cities like Ha Noi and HCM City. The supply of high-end apartments is plentiful while there is a shortage of affordable housing.

Since mid-2017, the Grade C apartment segment (affordable apartments priced under $1,000 per sq metre) has seen a sharp decline in supply, according to research conducted by DKRA Viet Nam, a joint-stock property company.

Grade A apartments (high-end segment priced from $1,800-3,000) and Grade B apartments (mid-range segment priced from $1,100-1,800) are far more plentiful than Grade C apartments.

Worse still, there are times when the affordable segment has no new supply, according to DKRA’s research.

Under the VND30 trillion loan package administered previously by the government, homeowners could buy an affordable apartment with an area of 70 square metres or below at VND15 million per square metre.

Le Hoang Chau, chairman of HCM City Real Estate Association (HoREA), said the imbalance between supply and demand in the affordable segment was a sign of unsustainable development in the market.

The affordable apartment segment accounted for the smallest proportion of available housing, followed by the mid-end and high-end segments, which should instead account for the smallest percentage, he said.

“It’s very likely that affordable housing will not even exist in the near future unless the Government takes action,” he noted.

In a recent meeting between real estate businesses and HCM City leaders, Nguyen Van Duc, deputy director of Dat Lanh Real Estate Company, said the supply of low-cost housing had gradually plummeted in the city in recent years.

More than 10 years ago, some real estate enterprises in the city such as Khang Gia, Nam Long, Dat Lanh and Le Thanh invested in low-priced houses.

“However, not many of them are implementing such projects now,” he said.

Dat Lanh Company, for example, faced a shortage of capital to implement new low-cost projects.

The lack of investment was due to low profits from such housing, Duc said. If material prices or bank interest rates increase, the company could face losses.

“Investing in low-cost housing has low profits, only about VND1-2 million per square metre,” he said.

Le Huu Nghia, director of Le Thanh Real Estate Company, said that real estate businesses were more interested in high-end housing because of far higher profits.

The problem had been made worse by challenges in accessing credit, complicated administrative procedures and a lack of land available for construction, he said.


Experts say that Viet Nam should develop new preferential policies in land, tax, interest rates, credit and mortgages for affordable home developers, and allow the development of apartments of different sizes.

Developing affordable homes is an urgent issue as rapid urbanisation is putting pressure on city infrastructure, such as power grids, water networks and schools, they said.

Chau, chairman of HoREA, said: “The demand for affordable housing is huge in HCM City, and regulations on low-cost housing should be issued.”

According to statistics from the Central Institute for Economic Management, on average more than 1 million people migrate from rural areas to large cities like Ha Noi and HCM City each year. The figure is expected to continue to rise.

It is estimated that demand for affordable homes accounts for around 60-70 per cent of total market demand, but the supply is less that 20 per cent.

Apartments of less than 60 square metres with prices of less than VND700 million ($30,090) account for only five per cent of market supply.

According to statistics from the Construction Ministry, by next year around 1.7 million people will be in need of homes in urban areas together with 1.7 million workers demanding stable accommodations, requiring the development of nearly 1 million apartments.

Source: VNA

May 29, 2019 / by / in
Experts caution against investing in shophouses

Investing in the booming shophouse segment in HCM City could end in losses, if market observers are to be believed.

Since 2014 shophouses built in condo projects have been in huge demand thanks to the high returns they fetched when resold or leased.

Even managing to buy one became difficult, such was the demand.

In a report, property consultant CBRE said the prices of shophouses rose by 261 per cent in the secondary market last year while villa prices only rose by 35-37 per cent.

They cost US$2,700-4,000 per square metre and fetch rents of $10-30, meaning returns are much better than on bank deposits, researchers said.

Yet insiders warn it buyers should be very careful when investing in one.

According to a broker in District 7 the leasing market now is not as good as it was in past years.

“Only shophouses in old condo projects with high occupancy rates are in high demand and those in new projects are difficult to lease,” she told Viet Nam News.

Experts say it is difficult to lease shophouses since 80 per cent of their customers are residents of the condo and they are not convenient for outsiders because of parking and other issues.

The broker said that in fact in some places in District 7, owners had been unable to rent out their shophouses for more than one year.

Yet their prices were still rising.

According to another property consultant, Jones Lang LaSalle Incorporated (JLL), demand for shophouses which are built in new urban area projects is much higher than the one in condo projects.

Shophouses in condos are still attractive to investors since they fetch 1.3-1.5 times the returns condos do.

Source: VNA

May 28, 2019 / by / in
Vinhomes targets 40 percent profit increase this year

Vinhomes is aiming at a 40 percent increase in 2019 after tax profits by expanding to cities outside Hanoi and HCMC.

The company’s targets were announced at its annual general meeting (AGM) on Monday, the first since the company listed in May last year.

The AGM was chaired by Nguyen Dieu Linh, who was appointed chairwoman to replace Pham Nhat Vuong, founder and chairman of parent company Vingroup in February.

Vinhomes announced it plans to generate VND73.2 trillion ($3.13 billion) in revenue from its real estate business, a 90 percent increase from VND35.8 trillion ($1.53 billion) in 2018.

With an additional VND3.9 trillion ($167 million) of revenue the company plans to receive from joint ventures with Vingroup, its parent company, and Vingroup’s subsdiaries, Vinhomes hopes to raise its overall profit after tax figure by 40 percent in 2019 to VND20.6 trillion ($880 million).

Responding to doubts from shareholders that the targets set were too “ambitious” given the recent slowdown of liquidity in Hanoi and HCMC markets, chairwoman Nguyen Dieu Linh said that Vinhomes will look to expand to cities outside Hanoi and HCMC, but did not specify names.

According to the Vietnam Association of Realtors (VARs), the respective total value of real estate transactions in Hanoi and HCMC in the first quarter of 2019 was only 61.7 percent and 28.04 percent of the same period in 2018.

Recent regulations tightening control over banks’ short-term capital for medium and long-term loans, causing banks to raise interest rates, are to blame, they said. Buyers are unwilling to take home loans at high interest rates, the association said.

“[Slowdowns in Hanoi and HCMC] are only a short-term problem. There is a housing shortage in Ho Chi Minh City, and one of Vingroup’s real-estate projects in District 9 will soon complete formalities for selling,” Linh said, also affirming that the Hanoi housing market was still stable with good consumption.

“Vinhomes will combine selling flats individually as well as in bulk to strategic investors. These strategic investors will also allow faster completion of housing projects, which usually takes 5-7 years if undertaken by Vinhomes alone,” she said.

Vinhomes will also expand its serviced apartment leasing arm, Vinhomes Serviced Residences, and begin leasing office space in its urban complexes, she said.

Vinhomes operates 17 urban areas in Hanoi, Ho Chi Minh City, Quang Ninh, Hai Phong, Thanh Hoa, Ha Tinh and Bac Ninh.

In the first quarter, Vinhomes recorded consolidated net revenues of VND5.85 trillion ($250 million) and net profits of VND2.69 trillion ($115 million). Its VHM stock has the second highest market capitalization on the HOSE, Vietnam’s main stock exchange.

(source: vnexpress.net)

May 28, 2019 / by / in
Vietnam to stop foreigners acquiring land through local proxies

The government will crack down on locals acting as proxies for foreigners to buy land, Deputy Prime Minister Trinh Dinh Dung says.

His reassurance came after lawmakers at the ongoing National Assembly session expressed concern over Vietnamese acquiring property in their name for foreigners, who can buy apartments but are prohibited from buying land or individual houses.

Le Hoang Chau, chairman of the Ho Chi Minh City Real Estate Association, had said earlier there was increasing demand for Ho Chi Minh City real estate among Chinese investors.

The biggest concern was that they asked Vietnamese to buy for them, even properties of very large value, Chau said.

National Assembly delegates representing the central city of Da Nang said last November there was increasing buying of land by Chinese along the coast.

Lawmakers demanded a stop to this trend. “Vietnamese should be prohibited from being proxies for foreigners for acquiring land,” a house proposal to the government demanded.

Dinh Duy Vuot, a delegate from the Central Highlands province of Gia Lai, even wanted land acquired this way to be appropriated.

In 2015 the government widened foreigners’ rights to buy housing in Vietnam under the amended Housing Law. But red tape remains a bottleneck to their exercising the right.

(source vnexpress.net)

May 28, 2019 / by / in
How to find an apartment in Sai Gon?

District 2 – Thao Dien & An Phu Wards

Saigonees may be familiar with Thao Dien Ward in District 2 with another name as the-Expat-zone in Ho Chi Minh City. The Ward is called like that because many Europeans and other foreigners choose this place to settle for long-term business as well as for living.

Most foreigners decided to settle in Thao Dien because they were attracted by the peaceful beauty of the greenish, quiet, and private villas built there in the Ward. Those mentioned features explain why the Ward can always create a comfortable feeling, yet also retains the elegant sides that attract many Western visitors to live in long term.

District 1

District 1 is the central business district of Ho Chi Minh City, where manay companies will base their offices and where have a majority of bars and restaurants are. Living here in this heart of Saigon, you will feel the bustling life of the city at night.

Binh Thanh District

Binh Thanh is squeezed between District 1 and District 2 and is known for cheap housing that is popular among English teachers on low wages. However, the district is also known for having high-class apartments that are concentratedly built in Nguyen Huu Canh Street. Yet sometimes there would be flooded in the rainy season, but one of the greatest things of living here is that you can enjoy seeing the Saigon River every morning driving to work.

District 4

Currently, the HCMC government has been putting more investment into transportation as well as the infrastructure of District 4 in order to make it easier to connect the D4 with District 1. Furthermore, the government is also having urban planning on the slums in District 4 into high-class apartment projects or office buildings, … Owning a very favourable location which is located next to District 1, it’s sure that the rental properties will continue to increase its price here in District 4 in near future.

May 23, 2019 / by / in
Saigon among top 50 cities in the world for coworking growth

A recent report ranks Ho Chi Minh City 41st among world’s 50 fastest growing coworking markets in the world.

Every 47.5 days, a new coworking space opens in Vietnam’s southern metropolis, according to the 2019 Global Coworking Growth Study recently published by CoworkingResources, a global information hub for modern workspaces.

The report is based on research that tracked all coworking space openings for 10 months, from June 2018 to April 2019. It ranks major cities around the world based on the number of days between new space openings.

London topped the list, with a coworking space springing up in the U.K. capital every five days, followed by New York (7.5 days), Toronto in Canada (13 days), Austin (15 days) and Denver (16.8 days), both in the U.S.

The top 10 was dominated by seven American cities, reflecting the wide popularity of the coworking space concept in almost every city in the U.S.

The report says Vietnam came in 31st among top 50 global economies with the highest growth in per capita coworking space numbers.

Luxembourg, Singapore and Ireland were the top three countries, with the first chalking up 8.5 new spaces annually for every 1 million inhabitants, almost double the following two.

Vietnam has seen the coworking space market expand in recent years. Major local operators like Toong, UP, Circo and Dreamplex are all expanding at an accelerated rate, and the number of smaller operators with just one venue is also increasing.

As of April last year, there were 23 coworking operators in Vietnam managing a total of 34 spaces, according to real estate consultants CBRE.

Nguyen Hong Hai, CEO of office rental service Pax Sky, said coworking spaces are now popular because the supply of office space in HCMC’s central districts fails to meet demand of the rising number of entrepreneurs choosing to base themselves in the city.

Hai told VnExpress that grade A office space in the city costs $50-60 per square meter plus taxes a month, and grade B office space, $22-30.

But occupancy rates of over 95 percent mean customers have to wait for a long time to find a good place, he said.

There is still a lot of untapped potential in the coworking industry in HCMC because of its very vibrant entrepreneurship scene, he added.

(source: vnexpress)

May 22, 2019 / by / in
Growth quality concerns over disproportionate investment in Saigon real estate

Real estate attracted the highest proportion of capital by far into Saigon Jan-Apr, raising sustainability concerns.

A recent report on the socio-economic situation of Ho Chi Minh City in the first 4 months of 2019 says real estate accounted for 32.7 percent of all domestic investment into the city, the highest proportion, followed by the sale and maintenance of motor vehicles, at 17 percent.

Investments in processing and manufacturing were so negligible that they did not merit mention in the list.

Real estate also made up the lion’s share of foreign investment registered for the city in the four months, at 46.8 percent, while the tally for the processing and manufacturing sector was only 6.7 percent.

Nguyen Thanh Phong, Chairman of HCM City People’s Committee, has expressed concern that capital was being overwhelmingly directed at real estate instead of production, threatening the quality and sustainability of growth.

“In order to promote sustainable growth, resources should be focused on developing processing and manufacturing. Even at the recent HCMC Investment Conference, there was no talk on manufacturing projects, it was all about real estate, and real estate …” he observed.

Phong said the city’s processing and manufacturing industry still has a lot of potential. For instance, the food industry is still in its infancy, while the city is geographically connected to major agricultural regions like southeastern Vietnam and the Mekong Delta.

He has assigned the municipal Department of Planning and Investment to coordinate with the Department of Industry and Trade to actively seek investors for these sectors.

“We can’t sit and wait for them to invest in the right areas,” Phong said.

HCMC recorded nearly VND271 trillion ($11.61 billion) in total domestic investment in the first four months of 2019, down 3.9 percent over the same period last year.

Of this, VND211.7 trillion ($9.07 billion) were capital registered for 13,094 newly incorporated enterprises, and VND59.3 trillion ($2.54 billion) was capital supplements in existing ones.

Source: vnexpress

May 13, 2019 / by / in