Vietnam Needs To Simplify Property Laws For Foreigners.
Legal News & Analysis - Asia Pacific - Vietnam - Construction & Real Estate
18 December, 2018
Viet Nam’s real estate market must solve many difficulties to increase the number of foreigners buying property in Viet Nam, experts said.
“To promote foreigners’ trading of real estate products on the local market, Viet Nam should increase the portion of property products available for foreigners in each project,” Nguyen Hoai An, director of CBRE Viet Nam’s Ha Noi, branch told Viet Nam News.
“It is necessary to complete legal documents, circulars, procedures and support for foreigners in buying property products in Viet Nam,” she said. “The nation needs to complete the process of issuing pink books and certificates of ownership for property belonging to foreigners.”
“Meanwhile, banks need to increase support for foreigners in property transactions,” she said.
Existing projects that want to attract more foreign customers should develop professional customer care processes for foreigners, she said.
Foreign buyers have often faced barriers to buying real estate in Viet Nam, including the limitation of the law on the foreign ownership portion of each property project, An said.
“For apartment projects, foreigners can only own up to 30 per cent of the apartment volume, while for townhouse projects the portion is not to exceed 10 per cent or 250 units,” An said.
According to Nguyen Manh Ha, former head of the construction ministry’s Housing and Market Management Department and deputy chairman of the Viet Nam Real Estate Association, Viet Nam has many laws, decrees and circulars related to property trading. Foreign buyers often do not know all of the country’s laws.
The State should have a handbook for buyers to provide guidance on all steps and the state agencies implementing those steps, Ha said. That would make it easier for foreign buyers to navigate the property purchasing process.
The foreign ownership ceiling, aimed at maintaining a national economic and political balance, in some cases are limiting sales volume to foreigners despite strong demand.
“Instead of a fixed threshold, the ceiling could be a range, varying between types of residential products, location, and grade,” Matthew Powell, director of Savills Vietnam’s Ha Noi branch told Việt Nam News.
“For example, raising the limit for grade A apartment projects in HCM City or high-end villas in Da Nang could only generate more sales to investors of those projects and ultimately benefit Viet Nam economy.”
“Further discussion on the extent of the adjustments should take place between government agencies and real estate consultancy practices.”
“In addition, the administration processes and procedures could be streamlined and updated to accommodate international buyers. Despite of the appeal, many residential markets in Việt Nam, particularly in small towns and cities have not exhibited large number of sales to foreigners as the purchase process and procedures are not facilitating. Further instructions on the implication of the new policy should be issued to local authorities so the implementation of the new law is consistent across residential markets in Viet Nam.”
"Viet Nam has a legal framework allowing foreigners to buy and own property in the country," An said. "However, the process has obstacles in the form of the language and laws for implementing legal documents."
"In addition, foreign buyers have also had trouble getting support with money transfers from banks," she said.
"Most projects of local investors have not had customer support teams to help foreign buyers during property transactions, making it hard for foreigners to buy from those projects."
"Moreover, many foreign customers receiving houses or apartments have had problems getting certificates of ownership," she said.
Stephen Wyatt, Country Head of JLL Vietnam, agreed and added that some projects in HCM City reported foreign buyers were interested in their projects but there were no available units for foreigner buyers due to the legal limits.
“The number of foreign buyers has totalled thousands of units, versus a few hundred recorded before the new law was introduced,” Wyatt told Viet Nam News. “However, the issuance of pink books continued to be a challenge for foreign buyers.”
Since the law that allows foreigners to purchase property in Viet Nam came into effect in 2015, the number of enquiries and transactions from foreign buyers increased significantly, Wyatt said.
JLL recently carried out an international marketing campaign for residential projects in Viet Nam and received a considerable amount of interest and feedback from foreign investors from Singapore, Hong Kong, mainland China, South Korea and Japan, Wyatt said.
“Viet Nam has many opportunities for real estate market development,” he said. “Some positive changes have taken place to the legal structure surrounding residential transaction activity, which will lure more foreign developers and investors into the local market, and to Viet Nam’s law allowing foreign buyers to purchase and own residential property.”
The rights of foreigners over the property are the same as the rights of the locals – the property can be leased out, sold, inherited and used as collateral. In addition, tenure shall be for 50 years and can be renewed for another 50 years.
A safe and stable political situation and economic growth rate are also advantages for the market. Therefore, foreign real estate investors should be aware of Viet Nam as a new market for investment, he said.
Foreign direct investment (FDI) is increasing, contributing to surge in number of foreigners living and working in Viet Nam. Attention to investment in property from foreign buyers will continue to increase, according to An.
On the market, the supply and quality of products are continuing to increase, bringing more options for buyers, including those buying for investment purposes.
In the near future, foreign buyers will continue to play a role in the market because they are able to buy property at a lower price than in their home countries.
Viet Nam’s residential market remains appealing to foreigners, offering increasingly high-quality products at a comparatively low price, Powell said. In Ha Noi and HCM City, buyers usually are long-term expatriates with accommodation needs while in Da Nang and Nha Trang, demand often originates from second home investment purpose.
“As Viet Nam economy continues to expand, more international enterprise will come, generating housing demand for their foreign employees. Meanwhile, resort properties will continue to appeal to international investors along with the development of tourism industry,” he said.
Thousands of purchases have been made over the past three years in Viet Nam from residences in cities to beachfront resort properties in holiday destinations like Da Nang and Nha Trang, according to Savills. The majority of buyers are from Asia Pacific, South Korea and Japan.
According to CBRE, at projects that were offered by CBRE on the market, the number of foreign buyers in the 2017-18 period more than doubled in comparison with the number of transactions in the 2016-17 period. Many of the projects had sold their full quota of units for foreigners during their first market offering.
The Housing and Market Management Department reported that by 2017 there were 800 foreigners with certificates of ownership for property in Viet Nam.
Meanwhile, there are 400,000 foreigners living and working in Viet Nam. This number will increase in the future as Viet Nam integrates further in the global economy, meaning foreigners’ demand for Vietnamese property will continue to rise.
For further information, please contact:
Dang The Duc, Partner, Indochine Counsel