While foreign investors give a thumbs-up to new rules that allow them to buy housing in Vietnam, they are likely to adopt a wait-and-see approach to find out if a recent property recovery is sustainable, an analyst said.
The amendments to the Housing Law, which takes effect on July 1, allow foreign investment funds, foreigners with valid visas, international firms operating in Vietnam and overseas Vietnamese to buy residential properties.
They are allowed to own a property for 50 years and can extend the period by another 50 years.
There is no limit on the number of units a foreigner can buy, but the total number of units owned by all foreign buyers must not exceed 30 percent of an apartment building or 250 houses in one ward -- a subdistrict-level administrative area that can contain thousands of properties. Ho Chi Minh City, for instance, is divided into more than 250 wards.
“We have been getting around five emails a day during the past two weeks from foreign customers, including individual investors,” Duong Thuy Dung, director of research and consulting at CBRE Vietnam, said.
“Among the common questions is how to get money in and out of Vietnam as they want to resell properties after buying,” she told a conference held by CBRE Vietnam in Ho Chi Minh City Tuesday.
Marc Townsend, managing director of CBRE, said it is necessary to have “clearer legislation and a better banking system” to win over those investors.
Dung said while the new rules create a level playing field for foreigners, it would not have a major impact on the property market in the second half of this year or even in 2016.
She said though property in Vietnam is relatively cheap compared to elsewhere in the region, the country is not yet an attractive destination for foreign home buyers.
“To buy a high-end apartment in Bangkok, you have to pay three times as much as for a similar apartment in Ho Chi Minh City.
“But investors still prefer Bangkok or Singapore because Vietnam’s property market isn’t yet sustainable.”
The Vietnamese market boomed between 2006 and 2007 before slumping for the next five years.
“It needs at least five years then to see if the property rebound is sustainable.”
She urged property developers to market their projects overseas to attract foreign customers.
“Vingroup has set up an agency in the US to promote its projects in Vietnam to Viet Kieu (overseas Vietnamese). That is a wise move.”
‘Bad days are behind us’
A quarterly report released by CBRE Vietnam on Tuesday showed that more than 10,000 apartments were sold in the second quarter of this year, the highest ever quarterly absorption level.
Interestingly, the majority of successful transactions have rippled from the affordable segment during 2012-2013 to the high-end segment recently.
In the second quarter 5,800 high-end units were sold compared to around 2,800 affordable units.
Most luxury projects increased their prices, edging up primary market prices by 3.2 percent quarter-on-quarter to US$1,781 per square meter.
“With such impressive take-up, continued launches around the city and improved price levels seen in the first half of 2015, we can confirm that the bad days are behind us,” Townsend said.
“It is unlikely we will see the same fancy as in 2007 when buyers were queuing to buy units and re-selling almost overnight. However, there is a huge level of maturity and confidence from buyers in the market now, which Vietnam did not have in the last cycle.”
He also said changes in the stock market, gold prices, and interest rates have made the real estate market more attractive than it has been for the last six or seven years and large numbers of Vietnamese families are interested, particularly in the new stock and small units.
Vietnam's new foreign ownership property law
|WHO: Foreigners with a valid visa; foreign investment funds, banks; Vietnamese branches and representative offices of overseas companies are eligible to buy.
TYPES: All residential property types including apartments, villas and townhouses. Previously they could only buy apartments.
VOLUME: There is no limit on the number of units a foreigner can buy, but the total number of units owned by all foreign buyers must not exceed 30 percent of an apartment building or 250 landed property units in one ward. Previously an eligible foreigner could buy only one apartment in Vietnam.
PURPOSE OF PURCHASE: The properties owned by foreigners can be sub-leased, traded, inherited and collateralized. Previously ownership was strictly for residential purpose.