Foreign Ownership In Vietnam Property Potential And Barrier

“After nearly 3 years of implementation, the law on foreigners buying real estate here has received positive feedback from sellers and buyers.”

Amendments to the 2015 Housing Law allowing foreigners to buy property in Viet Nam have been positively received. Generally, requirements have become clearly defined and this evolution of the local real estate market has created a new source of demand Foreigners buying houses here will help stimulate investment, tourism and services development. This approach aligns with international practice, benefits the economy and increases Viet Nam property appeal and its potential buyer pool. After nearly 3 years of implementation, the law on foreigners buying real estate here has received positive feedback from sellers and buyers.

According to Savills Vietnam, the HCMC real estate market has seen thousands of successful transactions with foreign clients over the last 2 years. In 2017, many projects reached the 30% foreign ownership limit [of total units] in a very short time.

For example, the second phase of a project in a prime district 2 location opened for sale. The 30% quota was taken up almost immediately with many foreigners turned away. Clients were mainly Asian from countries such as Korea, China, Taiwan, Hong Kong and Singapore. The overall assessment so far is districts 1 and 2 projects by reputable developers in strategic locations such as Thao Dien and Thu Thiem areas are getting attention and good consumption rates from foreigners.
See more: 3 useful FAQs for foreign buyers in Vietnam

However, adjusting limits to make them more suitable for property in areas with special demands, such as condominiums or Grade A apartments, is another direction that needs consideration. The flexibility of limited-area coverage over fixed limits would support the market, especially with over 82.000 foreigners living and working in Viet Nam (*) and the over 4 million Vietnam diaspora.

After several years of the revised Housing Law being in place, many foreigners have expressed interest in Ho Chi Minh City, Hanoi and Da Nang real estate. The number of red books issued to foreign organizations and individuals buying houses has been relatively low considering interest and demand. The key identified barriers are foreigners not knowing local laws and legal procedures and many local administrations not being familiar with foreigners. To find real estate that suits them, foreign clients should ideally use an international consulting firm to clarify legal and purchasing procedures. In market leading agencies ability across multiple languages helps saves time money and frustration. Investors should always identify their own budgets and specific requirements against projects they have interest in too. The agency can then quickly and accurately support to smooth the more complex areas and help realize buyer aims.

(*) According to data released by the Ministry of Labour, Invalids and Social Affairs by May 5, 2016.

3 useful FAQs for foreign buyers in Vietnam

Vietnam is one of Southeast Asia’s premier emerging markets. From 2014 to 2016, Vietnam’s economy recovered, with strong GDP growth of 5.4%, 6.0% and 6.7% mostly due to the implementation of effective monetary policy. 

The positive signals of the economy and new updated land laws have led to a significant growth in demand from foreign buyers aiming to own properties in Vietnam. 

1. What are the regulations on foreign property ownership in Vietnam?

Current Law: effective 1 July 2015 

Who: Foreigners permitted entry to Vietnam. 

Property: Residential properties: apartments and landed houses 

30% total units of any apartment development 

10% of landed villa and/or housing project stock 

250 landed properties in one administrative ward 

Duration: 50 year leasehold with extension, subject to authority approval 

Purpose: Living, sale, lease, inheritance, gift or donation.

2. Why open a local bank account?

To ensure more seamless transfer for local property purchases, foreign investors are advised to set up a local bank account. There are many international banks in Vietnam such as: ANZ, Citi Bank, HSBC and Standard Chartered.

3. What taxes are involved?

A foreigner is responsible to directly declare and pay tax at the district tax bureau where the property is located. A third party may be legally authorized to act on their behalf. 

Purchase: 

• Value added tax (VAT): 10% VAT is applied on any property sale whether local or foreigner. 
• Administration fees: A minor fee is payable for property ownership certificate issuance. 
• Ownership registration tax: 0.5% registration tax against property value to obtain the ownership ‘pink book’ certificate. 

Maintenance fee / sinking fund: 

• Maintenance fees are referred to as a ‘sinking fund’ and are contributed to by development unit buyers. 
• Fees are for major building and common area servicing to maintain development quality standards. 
• Current sinking fund fees are 2% of the house/apartment price, before VAT. 

Resale: 

Personal income tax: Personal income earned through assignment or apartment/houses resale requires 2% personal income tax paid on the transacted value. 

Lease:

Personal income tax: Personal income earned through house/apartment rental requires 5% VAT and 5% PIT on revenue be paid. 

For rental income exceeding VND 100 million pa, a business license tax of VND 1,000,000 per year applies.