Proposals to loosen regulations on foreigners buying property have sparked some degree of optimism but should only be seen as one piece of the puzzle to re-start the country's real estate market.
After living in Vietnam for 12 years, Ms Jane Boland, a British consultant working in Ho Chi Minh City, is frustrated at being a renter. “I really want to buy a house,” she said. Her enquiries as to how to go about buying a house have come to little, as the existing regulations on foreigners owning property remain overly complex. “It would take me about two weeks to buy a house in another country, but here it would take years,” she said. The situation may soon change however, as Resolution No 19/2008/QH12 on permitting foreign individuals to purchase housing ended its five-year pilot programme at the end of last year. A new law is being reviewed by the government that will replace the resolution and include a number of improvements that remove some of the challenges faced by foreigners and foreign companies hoping to buy property in Vietnam.
Prime Minister Nguyen Tan Dung recently expressed his support for proposals that will make it easier for foreigners to buy housing in Vietnam, which is also seen as a further attempt to resuscitate the flagging property market and resolve bad debts. The PM instructed relevant agencies to continue amending laws to create the most conducive environment possible for would-be foreign homebuyers. Among several proposals from the Ministry of Construction (MoC) submitted to the PM is the removal of all restrictions on foreign individual buyers, extensions of leasing terms, the loosening of sub-leasing and reselling conditions, and the expansion of housing types that foreigners can buy.
All foreigners with a visa valid for at least three months may be allowed to purchase houses, even if they have not conducted any investment in Vietnam previously or do not hold a managerial position. Not only individuals but also organisations like foreign investment funds, banks, and Vietnamese branches and representative offices of overseas companies may be permitted to purchase housing under the new proposal. The proposal also contains two options regarding ownership duration: the first allows ownership for 50 years with the possibility of a 50-year extension, while the second is 70 years with no extension. The ministry also recommended that foreign individuals and organisations be allowed to purchase and own both apartments and landed property, with the land area set at a maximum of 500 sq m. The number of properties a foreigner can buy is to be either two or unlimited. Such properties can be leased if their foreign owners are not living in them.
Under existing law, persons allowed to buy houses in Vietnam are limited and restrictions attached, and they must follow very complicated procedures with local governments. The law also regulates that a foreign buyer can only buy one apartment as a primary residence, not for financial investment or another purpose. They must pay tax in Vietnam and cannot sub-lease the property. By widening the asset classes open to foreigners to apartments and landed houses, by extending the tenure to up to 70 years, and by eliminating the sub-lease prohibition, together with sharp falls in prices since early 2008, the new legislation may well open up new opportunities to support the depressed property market, according to Ms Duong Thuy Dung, Associate Director, CBRE Research and Consulting. After five years of the resolution being implemented, only 126 foreign organisations and individuals had purchased houses in Vietnam as at June 2013, according to MoC figures. Of these, 80 per cent were businesses. It seems that the shortest path a foreigner can take to own a house in Vietnam is to marry a Vietnamese citizen. Of the 126 foreigners granted certificates of housing ownership, 108 were married to Vietnamese citizens.
With Vietnamese lawmakers debating draft laws and proposals, property developers feel optimistic about the ministry’s initiative. Ms Le Ngoc Khanh Tam, General Director of La Vallee de Dalat, a luxurious villa project, said that a number of foreigners had looked at the project after infrastructure was finished, foundations poured, and the first villa completed, but all were waiting to see whether the new law permits ownership. “We have offered a long-term lease option but serious investors prefer ownership,” she said, adding that with growing investment in Vietnam there is increased interest among foreign investors in the property market. “With more and more companies moving to Vietnam, especially those moving away from China, and with the pending Trans-Pacific Partnership, we expect much more foreign interest in villa ownership,” Ms Tam said.
The new policy will indeed provide a source of potential homebuyers for the local property market, said Mr Pham Vu Hai Anh, Manager of the Marketing Department at the Hong Hac Dai Lai JSC, with the number of foreigners interested in its projects rising significantly over recent months. “Local developers can also gain experience in creating a transparent and stable market thanks to the upcoming involvement of foreign investors,” he said.
Rather than just sitting back and waiting for the new proposals to be approved, many developers have spent a great deal of effort supporting foreign homebuyers. According to Mr Nguyen Buu Hoi, Deputy Director of the Phu My Hung Development Co., the first cases of foreigners certificated with housing ownership in the Phu My Hung urban area were seen in the early days of this year. “The largest bottleneck foreigners face is the complex procedures,” he confirmed. “We have a specific Legal Affairs Division that is responsible for supporting our foreign customers in completing procedures in the shortest possible time.”
Insiders are encouraged by the move and believe it is a positive step forward for the property market, but also predict that it is unlikely there will be a massive influx of foreigners buying property in Vietnam. “Removing the restrictions on foreign ownership is not the only solution to the problems facing the real estate sector over the last five years,” one insider said. Housing prices remain relatively high, and this is one reason foreigners are hesitant to buy houses in Vietnam. Foreign buyers have been and will be following the market carefully and will be keen to buy only when they see the market is turning round.