Vietnam's thriving property market
Maria de Guzman | March 19, 2018
In Q4 2017 in Ho Chi Minh City (HCMH) primary market apartment prices went up by 3.6% during the year to Q4 2017, according to Jones Lang LaSalle. Secondary market apartment prices increased by 0.5% y-o-y during the same period.
The average asking price of HCMC villas and townhouses rose by 13.6% y-o-y in Q4 2017. In the secondary market, asking prices of villas and townhouses went up by 4.5% y-o-y.rose by 44% y-o-y in Q4 2017.
Villas and townhouse sales in HCMC increased by 25% both from the previous quarter and from the same quarter last year, according to Savills World Research.
In Hanoi apartment prices fell during the year to Q4 2017. Primary market apartment prices fell by 2.5% during the year to Q4 2017, according to Jones Lang LaSalle. Secondary market apartment prices fell by 6.6% y-o-y.
A continuous growth of supply in Hanoi, as well as a shift in buyer interest to mid-end and affordable segments, in part, might have contributed to the softening of property prices in the capital.
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.
Property prices and rental yields: alas, data unavailable in Vietnam
We find it extremely difficult to get buying data in Vietnam rich enough for a representative sample of buying prices. Due to restrictions on non-resident foreigners buying property in Vietnam, ‘for-sale’ properties tend to be infrequently posted on English-language property sites (for consistency of data quality, our property data comes from English-language property portals, as switching between English and local-language property sites produces an uneven sample quality).
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.
Vietnam has a high flat rental income tax
Rental Income: Nonresidents are liable to pay tax on their Vietnamese-sourced income at a flat rate of 20%.
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$439) is taxed at a flat rate of 10%.
Residents: Residents pay tax on their worldwide income at progressive rates, from 5% to 35%.
Buying costs are low in Vietnam
Buying property is technically a transfer of leasing rights on the land. The total roundtrip cost of buying a real property is around 5.57% of the property value.
Vietnam's strongly pro-landlord rental market
Vietnamese rental practice is strongly pro-landlord.
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.
Vietnamese economy to accelerate in 2018In 2017 the Vietnamese economy recorded its fastest growth in more than ten years. The country's GDP accelerated by 7.7%, comparing Q4 2018 to Q4 2017, according to the country's General Statistics Office (GSO). For the whole year of 2017, the economy expanded by 6.8%, exceeding the government's economic growth target of 6.7%.
Vietnam's robust growth is expected to continue in 2018. Vietnamese Prime Minister Nguyen Xuan Phuc expects the country's economic growth in 2018 to be as high as 6.7%.
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 continues to ease business regulations and is pursuing a long-running privatization drive, to boost growth further.
The country's unemployment stood at 2.02% in Q3 2017. From 6.42% in 2000, Vietnam's unemployment rate has continuously declined, according to the International Monetary Fund (IMF).
In January 2018, Vietnam's annual inflation stood at 2.7%, far below the 5.2% inflation recorded during the same period last year, according to the GSO. Inflation is expected to remain below the central bank's target inflation rate of 4% in 2018, according to the Ministry of Finance.