The market is not yet "really hot" according to some - but it is heating up.
The new Housing Law has potentially enormous significance.
First, it removes critical obstacles to foreign property ownership. Foreigners who have been granted a Vietnamese visa, plus foreign investment funds, banks, Vietnamese branches and representative offices of overseas companies can now purchase residential property.
Foreigners can now own all types of properties, including condominiums and landed property such as villas and townhouses. The properties owned by foreigners can be sub-leased, inherited and collateralized.
Second, overseas Vietnamese who have maintained their Vietnamese citizenship will be treated like locals and are permitted to own unlimited property in their own names.
It is estimated that about 70% of the 4 million overseas Vietnamese around the world still maintain their original citizenship.
Until now, Viet kieu (overseas Vietnamese) and foreigners could only buy one apartment in Vietnam each. The conditions were strict, favouring only those married to Vietnamese nationals, holding managerial positions, or having contributed to the country. These criteria enabled only around 130 foreigners, out of around 80,000, to buy an apartment in Vietnam.
The revised housing law is revitalizing the property market and sending a broader message that Vietnam is open for business. “The government is looking at ensuring that Vietnam continues to be competitive, continues to be attractive to foreign investors, and to create an environment where business can thrive,” said David Lim of ZICOLaw Vietnam.
"There are 4.2 million Vietnamese overseas and about 30,000 foreign executives working here long-term," said Le Hoang Chau of Vietnam's Real Estate Association. "That shows potential for a bright future."
"From my own analysis, from now till the end of 2015, the domestic real estate market will be getting hot because foreign capital flowing into the market is quite huge," said Dr. Nguyen Tri Hieu of An Binh Commercial Bank. "In particular, at the end of the year, the community of overseas Vietnamese who want to buy houses in big cities will be very high."
In Ho Chi Minh City, Vietnam’s most populated city, sales volumes in H1 2015 have exceeded total sales during 2014. “I can sell about three to five units per month now, much better than before, when I could only sell the same in the whole year,” said Dung, a property broker.
Prices of high-end residential properties increased 3.2% q-o-q in Q2 2015, according to CBRE Vietnam.
In Hanoi, Vietnam’s capital, the average price of newly launched high-end condominium units rose by 2% during the year to Q2 2015, while prices of low-end condo units increased 3%, according to Colliers International. During the latest quarter, prices of new condo units increased 1% in Q2 2015.
And several high-end residential projects in Hanoi saw price rises of about 4% to 6% y-o-y in the first half of 2015, according to CBRE Vietnam.
The upward momentum in residential property prices in Hanoi was also supported by Savills World Research.
- The average price of existing townhouses increased 0.9% q-o-q in Q2 2015, to VND60.3 million (US$2,682) per sq. m.
- Villa prices rose by 0.1% to VND48.8 million (US$2,170) per sq. m. over the same period
- New apartment prices in Hanoi also increased 1% q-o-q in Q2 2015
- Prices of existing apartments rose by 2% q-o-q in Q2 2015
The national figures show greater diversity. In Tay Ho and Hoan Kiem, the average price of existing apartments rose by 7% q-o-q in Q2 2015. On the other hand, Ba Dinh and Dan Phuong saw the biggest quarterly decline of 4% over the same period.
Property prices are expected to continue rising during the remainder of the year. Vietnam’s economy expanded by 6.44% from a year earlier in the second quarter of 2015, the highest growth in five years, according to the General Statistics Office (GSO).
The economy is projected to expand by 6.2% this year, up from 6% in 2014, 5.4% in 2013, 5.2% in 2012, 6.2% in 2011 and 6.4% in 2010, according to government forecasts.
Analysis of Vietnam Residential Property Market »
Gross rental yields figures for apartments in Hanoi and Ho Chi Minh are therefore unavailable, due to insufficient data.
Round trip transaction costs are low in Vietnam. See our Property transaction costs analysis for Vietnam and Property transaction costs in Vietnam, compared to the rest of Asia.
Capital Gains: Income earned by nonresidents from transfer of real estate is taxed at a flat rate of 0.10% on gross sale proceeds.
Inheritance: Inheritance exceeding VND10 million (US$445) is taxed at a flat rate of 10%.
Residents: Residents pay tax on their worldwide income at progressive rates, from 5% to 35%.
Rent: The rent can be freely negotiated by both parties. It is usually fixed for the duration of the lease term, typically 1 to 2 years. Rents are paid well in advance and interest is charged on late payments.
Tenant Security: If payment is delayed by 15 days, the landlord has the right to terminate the tenancy agreement by sending a 3-day written notice to the tenant. The landlord is entitled not to return the security deposit and to charge the tenant one month's rent penalty.
Vietnam has experienced three decades of uninterrupted growth, based on figures from the International Monetary Fund (IMF).
- 1981-1990 – average real GDP growth of 5.9% per year
- 1991-2000 – average real GDP growth rate of 7.6% annually
- 2001-2010 – average real GDP growth rate of 6.8% annually
In 2014, the economy expanded by a robust 6%, after growing by 5.4% in 2013, 5.2% in 2012, 6.2% in 2011 and 6.4% in 2010, according to the IMF. The economy is projected to expand by another 6.2% this year, based on government forecasts.
The Vietnamese government is now in the process of easing business regulations and pursuing a long-running privatization drive, to boost growth further.
Unemployment remains low. In Q2 2015, the country’s unemployment rate was 2.44%, from 2.22% in Q1 2015, 2.1% in Q4 2014, 2.17% in Q3 2014, 1.84% in Q2 2014, and 2.21% in Q1 2014, according to the GSO. From 6.42% in 2000, the overall jobless rate continuously dropped to 2.45% in 2014, according to the International Monetary Fund (IMF).
In August 2015, the inflation rate stood at 0.6%, down from 0.9% in the previous month and far below the 4.31% inflation during the same period last year, according to the GSO. The country’s inflation rate for 2015 is projected at 3%, below the government’s initial target of 5%.
Vietnam has pegged the dong to the US dollar for several decades, within a limited band of 1% to 2% - an important measure used by the SBV to maintain macroeconomic stability.
However the State Bank of Vietnam (SBV), the country’s central bank, has devalued the dong twice so far this year, most recently in May, in an effort to buoy slowing exports.
The exchange rate is expected to remain unchanged for the rest of the year. “Between now and the year end, it's not necessary to raise the issue of devaluing the Vietnamese dong, especially when the State Bank has full ground to forecast that inflation in the whole of 2015 will be at 3% instead of 5% as per the government's target at the start of the year," said Deputy Governor Nguyen Thi Hong.