Ownership limitations prevent foreigners from buying Vietnamese real estate

Ownership limitations prevent foreigners from buying Vietnamese real estate
August 16 13:12 2018

An ownership cap is preventing foreigners from buying high-end apartments in Saigon, especially its eastern part.

Vietnam’s Housing Law, which was last amended in 2014, expanded the rights of foreigner’s to buy housing in Vietnam but stipulates that each real estate development but stipulates that foreign ownership can only be 30% for each project.  

Matthew Powel, Director of Savills Vietnam said that many apartment projects in HCMC, especially those in expat dense areas such as HCMC’s district 2 and 7, reached their 30% foreign ownership limits in 2017.

Housing is in such high demand that in the third quarter of 2017, a property project located in a prime location in District 1, accessible via the Thu Thiem Tunnel, was so attractive to Korean investors that they were willing to take 50-year leases on apartments if they could not buy apartments outright as a result of the foreign ownership limit.

Nguyen Xuan Quang, Chairman of Nam Long Investment Joint Stock Company, said the participation of such individual foreign investors was a positive sign for the market at a time when apartment sales were slowing.  “Foreign investors might see good market prospects here as returns from property in the city could be better compared to other countries.”

Nguyen Loc Hanh, Deputy General Director of sales and marketing at Danh Khoi Real Estate Company made a comment to local press that most apartment projects in the eastern part of the city have already reached their 30% foreign ownership limit, especially high-end projects with fewer than 500 apartments, which are preferred by foreigners.

Alan Kan, a member of the Hong Kong Business Association Vietnam (HKBAV), said in an interview that Hong Kong property prices have risen to unaffordable levels, and many Hong Kong people there are interested in investing in real estate projects in Thailand and Vietnam.

According to data from Hong Kong real estate companies that are selling projects across the regions, gross rental yields average between 4.5% ~ 5% in Bangkok whereas yields in Vietnam are averaging 6 ~ 8% per annum.

Matthew Powell of Savills Vietnam said that conditions and legal procedures related to foreign ownership could be improved if Vietnam wants to attract more investors.  He said that it was important to have ownership limits to ensure proper oversight and avoid negative impacts on the economy, but that the Vietnamese government could relax the regulations to meet demand, especially in the luxury segment.

According to property consulting firm Jones Lang LaSalle (JLL) other Southeast Asian markets are changing their laws and regulations to attract foreign demand.  While Indonesia only allows foreigners to hold a right of use title for 30 years (extendable for another 20-years), Malaysia has a relaxed realty policy that encourages foreigners to buy various kinds of properties and Thailand allows foreigners to buy up to 49% of a housing project.