The draft Law on Housing relaxes some of the restrictions on foreigners purchasing houses but the reality is that it changes little.
When asked whether he would like to buy a house in Vietnam, Mr Ben Madely, a teacher from the UK at the Apollo English centre who has lived in Vietnam for a long time, said he was happy to continue to rent rather than buy because of the high prices and complex regulations. “However, if I had enough money and the Vietnamese Government created more favourable conditions for foreigners to buy a house, I would think again,” he added. But while the government has indeed loosened certain elements in its draft Law on Housing there is still a great deal of debate surrounding the content.
After collecting submissions and comments from different agencies, the Ministry of Construction (MoC) last month submitted a proposal that calls for the loosening of restrictions on foreigners buying houses in Vietnam as part of the draft Law on Housing, which is to be presented to the National Assembly’s (NA) Standing Committee this month. Despite the relaxing of restrictions it is still the focus of much discussion.
Decree No 19, issued by the government on June 3, 2008, stipulates that foreigners who wish to own a house in Vietnam must have a valid visa of more than six month’s duration, be an entrepreneur or social contributor, or be married to a Vietnamese national. Many analysts believe that the strict terms of the decree have prevented capital from foreigners coming to Vietnam. Recent figures indicate in the five years since the decree was issued only 126 of the estimated 80,000 foreigners living in the country have purchased homes.
To improve the situation and to stimulate the real estate market, the MoC has loosened just one of the regulations relating to the Housing Law. The draft will allow all foreigners with a visa to own a house, with no time limit as previously. It still requires, however, that those wishing to buy be living and working in the country.
In discussions on the draft law, some members of the NA have insisted that the government retain the restrictions to avoid speculation, which creates disorder in the real estate market. Agreeing with such opinions, Mr Nguyen Kim Thoa, Chairman of the Defence and Security Committee, said that the government needed to limit the types of individuals and organisations that can buy houses in order to ensure national security. The Judicial Committee also suggested that it is necessary to impose restrictions on foreigners buying houses in areas where they are prohibited from living and working, such as border areas.
While most NA members approved the proposal, many analysts, businesspeople and foreigners expressed disappointment in the draft. Some analysts believe that the draft is not much of an improvement on the old law. According to Mr Le Hoang Chau, Chairman of the Ho Chi Minh City Real Estate Association, imposing restrictions on those who can buy houses is unreasonable. “There are many foreign businesspeople who have subsidiary companies in Vietnam,” he said. “They may not live and work here but regularly come to Vietnam and so would wish to buy a house. It’s ridiculous that the government prohibits them from doing so.”
The draft law, many say, would continue to prevent much-needed capital from foreign investors flowing into the country. With the woes besetting the real estate market, there are a great many unsold apartments, especially in the luxury segment. “If the government remains strict on the ownership question, many investors may head to neighbouring countries,” one property analyst believes. “And Vietnam will have lost a large source of foreign capital.” Speaking at the press conference for the release of the Hanoi Q3 2014 Review, Mr Richard Leech, CEO of CBRE., said that the draft law, in the short-term, will not have much of an affect on Vietnam’s real estate market. However, the government needs to adopt suitable regulations to avoid any negative effects in the long term. “The government should clearly regulate the number of houses, their size and location, and how to buy them, instead of limiting who can buy,” he said.
Many countries around the world provide foreigners with almost unfettered access to their real estate market. According to Mr Huynh Phuoc Nghia, Senior Manager of GIBC Co., the restrictions in Vietnam runs counter to what the rest of the world is doing. In times of globalisation and integration, he added, the loosening of restrictions would play an important role in improving the country’s investment environment, attracting larger numbers of developers to Vietnam.
Moreover, encouraging foreigners to own a house would promote a range of other industries. According to Mr Doan Chi Thanh, Director of the Hoang Anh Saigon Real Estate Co., when a foreigner buys a house they will also buy home décor items and household equipment, to the benefit of local suppliers and the State budget. In Mr Chau’s view, the government should only allow foreigners to buy houses in the luxury segment, to avoid the possibility of sidelining low and medium-income earners from the market.