Vietnam allows foreign property investment

Ha Long Bay, Vietnam, is already hugely popular with foreign tourists Photo: Guido da Rozze

Previously, only foreigners who were married to Vietnamese citizens were allowed to purchase property in the country. From 1st July next year, though, the landmark legislation will allow non-residents granted a valid visa will be allowed to buy residenti property, including condos, villas and townhouses.

This highly anticipated and long discussed amendment has had support from all levels of the government and throughout the property industry.

While eligible buyers were limited to one condo, there will be no limit on the number of units a foreigner may purchase, although CBRE notes that they are not permitted to own more than 30 per cent of any apartment building or 250 houses per administrative area, or ward.

The recent amendment follows the relaxation on Overseas Vietnamese who now have "full and unfettered ownership rights", notes Savills.

"In 2013 overseas remittances were up 10% year on year to US$11B, much of this can now effectively and confidently be held in real estate."

Indeed, property can be bought by foreigners on a leasehold basis, with leases lasting 50 years and renewable upon expiration. Foreigners married to citizens, on the other hand, are permitted to purchase property freehold.

What does it mean for the market?

Savills predicts that it will add "greater liquidity" to a market that is now showing signs of a "modest recovery" across the nation.

"Importantly the amendment helps Vietnam's property market become more competitive within the region. It will also allow investors with entry visas to have exposure to a very attractive asset class within an emerging market that has excellent structural characteristics and strong growth potential."

The amendment comes at a time when foreign investors are showing increasing interest, adds Savills.

Indeed, Don Lam, chief executive officer of Vinacapital, predicts that overseas buyers already connected to Vietnam will target beach houses for their second homes.

"The new law is expected to lift demand for homes, helping property developers reduce their inventories and banks clean up their bad debt," Le Hoang Chau, chairman of the Ho Chi Minh City Real Estate Association, told the Wall Street Journal, although he added that it might take time for demand to take off.

"We don’t expect a huge boost for sales as Vietnam isn't yet an attractive destination for foreign home buyers."