On November 25th, the Vietnam’s National Assembly passed the long-awaited amended Housing Law that addresses a number of issues including regulations on foreign ownership of properties in Vietnam, replacing the pilot scheme that expired in December 2013.
The new law, to take effect from July 1, 2015, removes many of the previous restrictions on foreign individual buyers, summarized as below. WHO: All foreigners who are granted a visa to Vietnam are allowed to buy residential properties in the country; All foreign investment funds, banks, Vietnamese branches and representative offices of overseas companies are eligible to buy. TYPES: All types of residential sector including condominiums and landed property such as villa and townhouses. (previously only applicable to condominiums) VOLUME: There is no limit on the number of dwelling units a foreigner can buy, but the total number of dwelling units owned by foreigners must not exceed 30% of the total units in one condominium complex, or not exceed 250 landed property units in one particular administrative (or the equivalent of) ward. (Previously an eligible foreigner could buy only one condominium in Vietnam.) PURPOSE OF PURCHASE: The properties owned by foreigners can be sub-leased, traded, inherited and collateralized (previously only for owner occupying purpose). TENURE: The tenure allowed to foreign individuals buying homes is a 50-year leasehold with renewal possibility upon expiration, which remains unchanged compared to previously stipulated. Foreign individuals married to Vietnamese citizens are entitled to freehold tenure. What does it mean for real estate? The relaxation of foreign ownership restrictions is more significant than previously anticipated and marks a strong step towards opening up the Vietnam real estate market to overseas investment. There are only two major restrictions imposed on foreigners, including a leasehold tenure of 50 years and a cap on the total number of units owned collectively by foreigners in one single condominium project or one administrative (or the equivalent of) ward. In addition, there are also no cap on sizes of dwelling units or number of units a foreigner can buy, or additional tax. This recently passed Law makes the market more attractive to Vietnam based expats seeking an investment in residential properties in Vietnam and clears away the initial barriers to create a level playing field. It should be noted that the implications may not be felt immediately, it will definitely benefit the already improving residential market. Generally, it will provide another boost to the strengthening of confidence and market sentiments, which is currently much needed for Vietnam real estate investment after it lost its lustre post 2008. Historically, the Vietnam real estate market is dominated by local players including the developers, contractors, buyers and investors, partly due to Foreign Ownership Restrictions. Other reasons have included lack of quality developers, a speculative bubble in 2006 to 2008, fall-out from the speculative bubble from 2009 to 2013, a small leasing market, limited home loan and mortgage market and more transparent opportunities elsewhere in the region. This long awaited change in the Foreign Ownership Law will help create a more balanced, transparent and sustainable residential property market in Vietnam and is expected to play a major role in correcting, to some extent, the above-mentioned issues, but the participation of the private sector players will also play a big role.