Vietnam’s property market now open for business

Vietnam’s property market now open for business

Vietnam’s property market is heating up, thanks to strong economic growth, and a growing middle-class, after almost five years of a housing slump – but most important is the new Housing Law and the Law on Real Estate Business. These came into effect in July 1, 2015, and allow foreigners and overseas Vietnamese to legally own, sell and transfer real properties.

The market is not yet “really hot” according to some – but it is heating up.

The new Housing Law has potentially enormous significance.

vietnam-construction-floor-areaFirst, it removes critical obstacles to foreign property ownership. Foreigners who have been granted a Vietnamese visa, plus foreign investment funds, banks, Vietnamese branches and representative offices of overseas companies can now purchase residential property.

Foreigners can now own all types of properties, including condominiums and landed property such as villas and townhouses. The properties owned by foreigners can be sub-leased, inherited and collateralized.

Second, overseas Vietnamese who have maintained their Vietnamese citizenship will be treated like locals and are permitted to own unlimited property in their own names.

It is estimated that about 70% of the 4 million overseas Vietnamese around the world still maintain their original citizenship.

vietnam-housing-constructionUntil now, Viet kieu (overseas Vietnamese) and foreigners could only buy one apartment in Vietnam each. The conditions were strict, favouring only those married to Vietnamese nationals, holding managerial positions, or having contributed to the country. These criteria enabled only around 130 foreigners, out of around 80,000, to buy an apartment in Vietnam.

The revised housing law is revitalizing the property market and sending a broader message that Vietnam is open for business. “The government is looking at ensuring that Vietnam continues to be competitive, continues to be attractive to foreign investors, and to create an environment where business can thrive,” said David Lim of ZICOLaw Vietnam.

“There are 4.2 million Vietnamese overseas and about 30,000 foreign executives working here long-term,” said Le Hoang Chau of Vietnam’s Real Estate Association. “That shows potential for a bright future.”

“From my own analysis, from now till the end of 2015, the domestic real estate market will be getting hot because foreign capital flowing into the market is quite huge,” said Dr. Nguyen Tri Hieu of An Binh Commercial Bank. “In particular, at the end of the year, the community of overseas Vietnamese who want to buy houses in big cities will be very high.”

In Ho Chi Minh City, Vietnam’s most populated city, sales volumes in H1 2015 have exceeded total sales during 2014. “I can sell about three to five units per month now, much better than before, when I could only sell the same in the whole year,” said Dung, a property broker.

Prices of high-end residential properties increased 3.2% q-o-q in Q2 2015, according to CBRE Vietnam.

vietnam-gdp-inflation-2In Hanoi, Vietnam’s capital, the average price of newly launched high-end condominium units rose by 2% during the year to Q2 2015, while prices of low-end condo units increased 3%, according to Colliers International. During the latest quarter, prices of new condo units increased 1% in Q2 2015.

And several high-end residential projects in Hanoi saw price rises of about 4% to 6% y-o-y in the first half of 2015, according to CBRE Vietnam.

The upward momentum in residential property prices in Hanoi was also supported by Savills World Research.
The average price of existing townhouses increased 0.9% q-o-q in Q2 2015, to VND60.3 million (US$2,682) per sq. m.
Villa prices rose by 0.1% to VND48.8 million (US$2,170) per sq. m. over the same period
New apartment prices in Hanoi also increased 1% q-o-q in Q2 2015
Prices of existing apartments rose by 2% q-o-q in Q2 2015

The national figures show greater diversity. In Tay Ho and Hoan Kiem, the average price of existing apartments rose by 7% q-o-q in Q2 2015. On the other hand, Ba Dinh and Dan Phuong saw the biggest quarterly decline of 4% over the same period.

Property prices are expected to continue rising during the remainder of the year. Vietnam’s economy expanded by 6.44% from a year earlier in the second quarter of 2015, the highest growth in five years, according to the General Statistics Office (GSO).

The economy is projected to expand by 6.2% this year, up from 6% in 2014, 5.4% in 2013, 5.2% in 2012, 6.2% in 2011 and 6.4% in 2010, according to government forecasts.

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