The law - and the subsequent liberal decrees - are hugely important. And the result has been a boom.
In Q3 2016, total dwelling sales in HCMC surged by 49% from the previous quarter, and by 193% from the same quarter last year, according to Savills World Research. Most of the sales were of townhouses, which accounted for 71% of total transactions.
- In Ho Chi Minh City (HCMC) primary market apartment prices rose by 7.4% during the year to Q3 2016, according to Jones Lang LaSalle.
- HCMC secondary market apartment prices rose 7.5% y-o-y
Villas and townhouses in HCMC also had strong annual price hikes in Q3 2016.
- The average asking price of villas and townhouses in the primary market rose by 6.8% y-o-y.
- In the secondary market, asking prices of villas and townhouses increased by 8.5% y-o-y.
HCMC's affordable newbuild segment prices rose most q-o-q (2.2%), but the secondary market has slowed, due to the massive new supply.
Condominium sales transactions in HCMC rose by 33% q-o-q in Q3 2016, according to Colliers International. The mid-end segment accounted for 55.8% of total sales, followed by the high-end segment with 29.8%.
In Hanoi, the country's capital, apartment prices also saw robust y-o-y growth in Q3 2016, according to Jones Lang LaSalle:
- Hanoi's primary market apartment prices rose by 8% during the year to Q3 2016.
- Hanoi's secondary market apartment prices rose 5.3% y-o-y.
Hanoi's Premium segment had the highest q-o-q price growth of 3.6% in Q3 2016. Condominium transactions in Hanoi rose by 10.1% from the previous quarter, to around 5,450 transactions across all segments, according to Colliers. The mid-end and high-end segments had respectively 51.4% and 36.7% of sales in Q3 2016. Although secondary apartment prices are still rising, their growth is slower than in previous quarters, at 1.1% q-o-q, down from the 1.5% quarterly average since Q1 2015.
The average asking price of apartments in the primary market was around US$ 1,500 per sq. m., while it was a little over US$1,000 per sq. m. for secondary apartments. Apartments in the affordable segment can be bought at less than US$1,000 per sq. m. Mid-end apartments are at U$ 1,500 per sq. m., while Premium apartments cost more than US$ 2,000 per sq. m. Luxury apartments could cost more than US$ 4,000 per sq. m., according to Jones Lang LaSalle.
Jones Lang LaSalle predicts a continued property price hike in both HCMC and Hanoi. In HCMC, stronger investment is expected in the succeeding quarters especially in the villa and townhouse sector. In Hanoi, sales are seen to rise due to the expected supply increase, which in turn, is also backed by homebuyers.
Foreigners are not allowed to own land. In fact, even citizens are not allowed to own land. In Vietnam, land is theoretically collectively owned by the people, but regulated by the State.
Foreigners who are residents in Vietnam are permitted to purchase dwelling houses. They can own a house but not the land on which it is built. They have the option to lease the land from the State.
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.
"The jump comes from a rebound of the agriculture sector after a drought suppressed growth," according to Natixis SA's senior economist Trinh Nguyen. Nguyen added that industrial sector continues to be a "key bright spot", while the construction, manufacturing, and electricity sectors are recovering.
Vietnam has experienced three decades of uninterrupted growth, according to 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
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 2016, the unemployment rate was 2.3%, down from 6.42% in 2000, according to the International Monetary Fund (IMF).
The country's annual inflation rate was 4.52% in November 2016. Inflation is predicted to be 2% in 2016, lower than the government’s initial target of 5%.
In January 2016, the central bank announced a move to a market-based exchange rate mechanism, setting a daily reference exchange rates, to discourage hoarding of US dollars. The dong has been pegged to the US dollar for several decades, within a limited band of 1% to 2%. But because of sudden devaluations, many prefer to hold dollars. The State Bank of Vietnam (SBV), the country’s central bank, has devalued the dong five times since 2014, three times in 2015, to buoy slowing exports. The latest devaluation happened in January 2016.
However the new rate is not "free". The central bank will set a reference rate daily, and local and foreign banks in Vietnam can trade within a band of plus or minus 3%. The rate will depend on three factors: (i) the inter-bank rate, (ii) macroeconomic balances, (iii) currency movements in the country's key trade and investment partner countries.