A worker arranges steel structures at a construction site of a rental office in Hanoi
The construction ministry’s recommendation that foreigners be allowed to buy property is a step in the right direction for a maturing market but would not have a big impact on the market itself, analysts have said.
In its recommendation to the government late last month, the Ministry of Construction suggested that foreign investment funds, banks, Vietnamese branches and representative offices of overseas companies, and foreign individuals with a visa for at least three months should be allowed to buy homes in Vietnam.
Existing regulations allow certain categories of foreigners to buy apartments for living in them.
The new proposal seeks to permit foreigners to buy all kinds of houses with less than 500 square meters of land, and to lease them out.
The houses can only be sold or gifted only 12 months after the ownership certification is issued.
Asked about the proposal, deputy chairman of the Vietnam Construction Federation, Pham Sy Liem, said it would be good news for the real estate market, especially the high-end segment, but would not help the market recover due to the limited demand from foreign buyers.
Expats who want to own property in Vietnam are those working here for a long time, which number is not big, he said. Most foreigners work in the country for just a few years, so renting a house is better for them than buying one, he said.
Since many companies provide housing for their foreign experts, the latter do not have the need to buy houses themselves, he said.
Dung Duong, associate director of research and consulting at property firm CBRE Vietnam, concurred: “Obviously, removing the restrictions on foreign ownership… is very positive news but that is not the only solution to the problems that have been plaguing the real estate sector for the last five years.”
“Like first time buyers, retirees, up-graders, Vietnamese overseas and newly married couples, foreigners should be seen as a logical extension of a maturing market, not just a quick fix.
“Foreign buyers have been and will be following the market carefully. They will be keen to buy when they see the market turning round and not before.”
The relaxation would not have any impact on foreign investment either, Liem said.
“Investors come here to make profits. All they want is simplified investment procedures.
“The changes to the regulation will not affect their business decision. If they are unable to buy a house, they can live in rented houses or hotels. I don’t think it is a big problem.”
The ministry recommended two alternatives for individuals: they can either buy any number of housing properties or will be limited to one or two. For organizations, it will depend on the number of foreign employees they have.
The proposal also has two alternatives for the duration of ownership by individuals. The first is to allow ownership for 50 years with the possibility of a 50-year extension, or 70 years with no extension.
There is no suggestion of changing existing regulations for organizations, whose ownership of property will expire along with their license.
Too expensive for foreigners
Many foreigners are uninterested in buying houses in Vietnam not only because of the regulations but also high prices, so the new proposal is not likely to strongly boost demand.
Under the current law that took effect in 2009, certain categories of foreigners can buy apartments but cannot lease them out or use them for any other purpose except living.
Individuals have to sell or give away their apartments after 50 years, the general duration of apartment ownership in Vietnam.
According to the ministry, only 126 foreign nationals and organizations had bought apartments as of June, mostly in southern and south-central localities like Ho Chi Minh City and Ba Ria-Vung Tau, Binh Duong, and Khanh Hoa provinces.
Liem said property prices remain high in Ho Chi Minh City and Hanoi despite the slump. A villa in Hanoi, for instance, costs a million dollars, much higher than in a city like the French capital Paris, where it could cost a few hundred thousand dollars.
An apartment in the two cities could cost $100,000, too high for many foreigners.
Wayne M Worrell, an English teacher from Britain who has lived in Vietnam for four years, is indifferent since he does not intend to buy a property.
“It is not easy to raise more than $100,000 to buy a flat,” he said.
“Renting is better to me. For just $500 a month, you could rent a convenient flat in Hanoi.”
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By Ngan Anh, Thanh Nien News (The story can be found in the August 23rd issue of our print edition, Vietweek)