Should You Invest?
Vietnam is a market to keep a close eye on thanks to its
untapped potential and very affordable prices. However, it is
a market where you are currently looking at future rather than
immediate potential and there is some risk involved. At the moment
there are legal restrictions that prevent foreigners from owning
their own property, so they must instead lease it. Further, at the
end of a 50 year term it must be sold, unless the term is extended.
There is talk of lifting these restrictions, and indeed there have
been recent improvements in Vietnamese property law so if you are
prepared to take the risk, the opportunities here could be
massive.
- The real estate market is still in its early stages of
development, offering numerous opportunities for investors. There
is a huge potential for growth, and a property boom could well be
on the cards.
- The government has made significant changes to the property
investment laws, and offered certain ownership concessions to
Vietnamese citizens living abroad. This could well suggest that the
government is moving to relax property investment laws.
- Since the laws were enacted in 2006, foreign commitment into
Vietnamese property has increased, indicating a confidence in the
future market. Foreign investment in the Vietnamese property market
is expected to reach US$9 billion in 2010 according to real estate
and marketing research company VietRees.
- Vietnam's GDP growth has been rapid, out-stripping most of its
south-east Asian neighbours. Over the past five years, the
country's GDP growth rate averaged 7.4% per annum, second only to
China. This rising GDP will help to aid an expansion in the real
estate market, as FDI and Vietnamese purchasing power rises.
- Recent membership of the World Trade Organisation should help
Vietnam sustain and even improve its high level of growth.
- Real estate growth will also be effected by rising FDI. In 2006
FDI inflows into Vietnam reached a record US$10.2 bn.
- Rising remittances from overseas Vietnamese, which reached USD
4 billion in 2005, have driven up demand for better-quality
housing.
- With economic expansion, there is a rapidly growing urban
population, fuelling the demand for property in the city. The total
amount of people living in Vietnam's urban areas is projected to
reach 30.4 million by 2010.
- A growing Vietnamese middle class, for whom it is increasingly
fashionable to live in an apartment, will continue to stimulate
demand. From 1980-2006 real GDP per capita rose by more than 250%.
This rising middle class, along with tourists and expatriates
provides excellent rental opportunities for investors.
- Rising tourist numbers have also increased the demand for
accommodation. International arrivals to Vietnam in the 1st half of
2007 were an estimated 2.11 million, an increase of 14.7% on the
same period a year previously. The World Travel and Tourism Council
predict that Vietnam will be among the top ten tourist
destinations in the world in the next ten years.
- There has been a huge effort to upgrade tourist infrastructure,
which will enhance future investment in real estate. Prime Minister
Nguyen Tan Dung has approved a list of 31 key infrastructure
projects that will be developed between now and 2020, including a
north-south expressway and the Hanoi-HCM City express railway.
- There is already evidence that we can expect a housing boom in
Vietnam. In 1995 there were less than 200 residential units
catering to the luxury and expatriate market, by 2005 there were
almost 150,000.
- The Supreme Council of French Notary has agreed to assist the
Vietnamese government in modernising and improving the Vietnamese
registration and regulation process.
Rental Yields
Foreign investors are allowed to rent out their leased
properties. The biggest cities and other attractive tourist
destinations offer the best opportunities for rentals. Ho Chi Minh
City and Hanoi are the country's two main metropolitan centres for
investment. Given their population profile, extent of FDI and their
ideal location they offer excellent opportunities for renting to
expatriates, executives or locals. In central areas of HCMC it is
not uncommon to see rental yields of 10-14%. The average rent in
HCMC is around US$15.32 per square metre, while Hanoi's rents are a
bit lower, at up to US$12 per square metre. There should be a
growing rental market as numbers of expatriates, tourists and
middle class Vietnamese grow.
Price History
The property market in Vietnam has generally low entry prices,
with good potential for capital growth. In several areas of Ho Chi
Minh City prices have doubled within the first three months of 2007
and on the outskirts of the city prices are around US$600 per
square metre.
However, in certain areas of the major cities like HCMC and
Hanoi, prices have already risen dramatically and some sources have
deemed them unsustainable. Buyers should investigate the local
situation when considering property here. Prices of luxury
apartments are particularly high and rising. High end apartments
can go for as much as US$1,000- $2,300 per square metre in central
districts such as Phu My Hung in HCMC.
In areas outside the main cities, prices are cheaper. In
Colliers' Aquaba Luxury resort in Phan Tiet (Binh Thuan province)
the purchase price of a two bedroom apartment is approximately
$107,333.
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