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Jan 07, 2014

Buying costs are low in Vietnam


How high are realtors´ and lawyers´ fees in Vietnam? What about other property purchase costs?

Transaction Costs

Who Pays?
Value Added Tax (VAT) 5% buyer
Registration Fee for Real Property 0.50% buyer
Registration of Title VND20,000 (US$1) buyer
Notary´s Fees VND1 million (US$48) + 0.06% of property value over VND1 billion (US$47,480) seller
     
Costs paid by buyer 5.51%
Costs paid by seller 0.06%
ROUNDTRIP TRANSACTION COSTS 5.57%
See Footnotes
Source: Global Property Guide

How difficult is the property purchase process in Vietnam?

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.

However the leading foreign estate agent in Vietnam, Chesterton, is marketing a 50-year lease scheme, which is almost a sale. Under this scheme, the buyer acquires a right to the apartment for 50 years, and the right to renew the lease at the term´s expiry without payment of additional rent. If property ownership by foreigners becomes legal within that time, the complex owner will transfer the apartment title to the buyer. If the building for some reason has to be sold, the buyer will get a pro-rata share of the proceeds. And because the contract is only a lease, the buyer can sub-let his apartment. In other words, the contract gives the buyer many of the rights of ownership. Chesterton for example sells 38-year leases in the Parkland building, which has been in existence 12 years (the maximum lease length under Vietnamese law is 50 years).

A foreign investor may also invest in Vietnamese real property by forming a joint venture company with a local partner, or a wholly foreign-owned company, or by forming a Build, Operate and Transfer (BOT) company or one of its variants.

Foreigners who are residents in Vietnam can own dwelling houses but cannot sub-lease these dwellings. Foreign residents can also sell, donate, inherit, or give dwelling houses as gifts. But where they terminate their residence in Vietnam without disposal of their dwelling, 90 days after their departure from Vietnam their dwelling house certificates will automatically cease to be valid, and the Vietnamese State will manage and use their houses.

One thing that separates real estate transactions in Vietnam from the rest of the world is it´s done in pure gold. In June, according to Thanhnien News, one tael (1.25 ounces) of gold is equivalent to VND11.45 million (US$544). It is very important to keep this in mind when looking for a property. The buyer must be aware of the prices and conversions at all times.

Registering property in Vietnam is not particularly onerous, taking about 69 days to finish the four procedures needed, and costing considerably less than elsewhere in the region.




Footnotes to Transaction Costs Table


The round trip transaction costs include all costs of buying and then re-selling a property – lawyers’ fees, notaries’ fees, registration fees, taxes, agents’ fees, etc.

Currency:
Vietnam uses Vietnamese Dong. Exchange rate is at US$1=VND16,659.8 as of 28th June 2006.






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