Foreign Investors Remain Hesitant About Setting Up Home in Vietnam’s Real Estate Market
HCMC – Despite a new real estate law that was implemented last July, ostensibly giving foreigners the same property rights as local Vietnamese, foreign investors still remain wary about stepping into the market.
Under the regulations of the new real estate law, foreigners are supposed to be able to do the following:
- Obtain mortgages
- Rent out their homes
- Hold ownership certificates for 50 years, which can be renewed another 50 years
- Lease or own a maximum of 30 percent of the apartments in a condominium building and up to 250 houses in a ward-level populated area (excluding those in the areas of defense security)
Chief among foreign investors’ worries is that it is still unclear how the new law will actually take effect. In most cases, when a new law is implemented, it is quickly followed by a series of circulars and guiding decrees, which are intended to clarify how the law will operate. The Vietnamese government has still not issued any of these types of guiding documents.
Another worry centers on the problem of transferring money. As of now, it is still unclear what the legal process is for sending money obtained from the sale of a property back overseas. Vietnam’s anti-money laundering regulations have greatly complicated the process by, for example, requiring people to prove their source of income and limiting transfers to that monthly amount.
Foreign investors are also calling on the government to change the regulation limiting the amount of apartments or houses they can own. The government has acknowledged that this section of the law may need to be updated and could allow higher rates of ownership in certain areas, such as those with high populations of foreigners (for example, Districts 2 and 7 in HCMC).
The revised Housing Law is the latest government effort to boost activity in the property sector, an area that has been underperforming since 2008, when the selling price plunged by 50 to 70 percent. Over the past few years, property investors have continued to keep an eye on Vietnam, with many seeing optimistic signs in the country’s economic condition and improving government regulations. However, there still appears to be a wide gulf between investor optimism and investor action, with most investors taking a wait and see approach to the country’s real estate market.
Recent events in Vietnam’s real estate market
- In December 2014, the Vietnamese government liberalizes its real estate laws related to property ownership by foreigners (the laws took effect in July 2015).
- In February 2015, a proposal was put forward for the State Bank of Vietnam (SBV) to support the commercial housing market through a VND50 trillion (US$2.3bn) credit package.
- In 2014, the Vietnam National Bank reported that there were around 1,477 new real estate projects, worth a combined total of US$13.41 billion in investment.
- In November 2014, Vietnam’s National Assembly set a target of reducing the amount of non-performing loans in the country’s banking sector to three percent by the end of 2015.
- In June 2014, after a three-year downturn, Vietnam’s real estate market was thought to be showing signs of recovery following recent stock market gains, three consecutive interest rate cuts, and renewed government interest in helping the market recover.
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