Overseas investment in Vietnam is on the rise, attracted by newly opened markets and a growing economy.  Property values are expected to be the latest beneficiary, with foreigners now able to buy legally.  One expert, however, is urging patience and caution to new entrants in this emerging market.

Ngo Dinh Han is a lecturer at Ho Chi Minh City’s University of Economics.  He expects foreigners to reap the benefits of legislation introduced on July 1^st, allowing them for the first time to own property in Vietnam.  He reminds would-be buyers to be aware of these 7 common errors when taking their first steps on Vietnam’s property ladder.

Riverside Vinhomes Central Park Project of Vingroup developer

1. Don’t follow the crowd

The projects with the most hype are not necessarily the best investments.  Some unscrupulous agents have ploys to simulate high interest and attract those looking for quick wins.  Don’t be fooled by promises of quick profits – do your homework. 

“Look beyond headline figures to the developer’s track record in timely delivery.  Check and double check the payment schedule and conditions.  Don’t sign anything you don’t understand – get an agent or legal expert to translate every document if you don’t speak Vietnamese.  Some, like Vinhomes Central Park, offer everything in English, which is great – but check, and check again before making any commitment.”

2. Avoid early-stage peaks

The last round of ‘early bird’ offers before completion are designed to prompt impulse buys – but are often the least profitable in the short-term.

“This is the highest price before general release, and, with over-capacity issues prevalent at the minute, is something to avoid.  You may well see a return in the long-run, but its unlikely prices in the first 12 months will match those final totals offered in the last cycle of development.”

Luxury Gateway Thao Dien Apartment in District 2

3. Look at value before prices

This advice is applicable in every market, but is perhaps more relevant here.  Some prices reflect the low appeal of a neighborhood or confidence in a developer, while other higher prices reflect surrounding development such as the new metro system.

“Always remember why you’re buying somewhere.  Profit is likely in a growing market – the only question is how long you want to wait.  Are you buying to live, or buying to let?  Are you looking at long-term growth or a short-term flip?  Make judgments based on your value strategy.”

4. Limit your leverage

With some uncertainty over the viability of long-term profits, be sure to bank on a conservative return rather than the maximum, and plan your borrowing around that to limit your exposure to market changes.

“There’s been a great deal of fluctuation in local interest rates, and these could eat up your profits if you’re not careful.  Look at properties where large-scale lending isn’t necessary.”

5. Wait and see

Unit prices are much lower than neighboring metropolises like Bangkok and Kuala Lumpur currently.  But the effect of the recent property laws have yet to be felt, and Ngo Dinh Han believes it may be a little while before a true picture of market values emerges.

“Getting in on a good development early is always preferable – but don’t go too soon.  Property speculation can feel like a gamble, so look at the whole board.  Observe the progress of promised infrastructure developments, population changes in your chosen area, and any new amenities opening up.  Transport, city-wide migration and services are the trinity of any property investment decision.  Take your time.”

6. Don’t bank on a quick flip

For all these reasons and more, speculators banking on fast turnaround at profit are likely to be disappointed.

“Emerging markets do offer enormous potential – but equally, enormous risks.  Patient, sensible investors with research in-hand who are not over-leveraged are likely to succeed.  Speculators looking for a fast profit are not, however.  Don’t go beyond your financial limits, and don’t gamble what you can’t afford to lose on the promise of a quick win.”

The Sun Avenue from Novaland – middle-income apartment in District 2

7. Vary your investments

Buyers on a larger scale should follow the ‘Buffet model’ in all areas, but in an emerging property market especially.

“Don’t risk it all in one sector or one area.  Diversify your interests across districts, cities, and property types.  The luxury end is most profitable right now – but will that remain the case in the long-term?  Hedge your bets, and look at middle-income apartments, houses, tourist villas and commercial property to keep you in the game until the end.”

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We offer regular updates on the Vietnamese property market, specializing in helping foreigners and Viet Kieu buy property in Ho Chi Minh City and beyond.  We offer regular market updates on these pages, so stay tuned for the latest news.  Get in touch with any questions about how you can invest in Vietnamese property, or with any issues you’d like to see covered in these pages.

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At a housing conference, the market’s appeal to overseas investment was a hot topic.  There was broad consensus that overseas Vietnamese (Viet Kieu) would be attracted to their country of origin, but less agreement was found on the other new sector of the market: non-Vietnamese foreigners, particularly those that live here and rent currently.

Gateway Thao Dien – Hot and luxury apartment in District 2

Recently conducted research didn’t offer any knockout news for those on the fence, but did confirm that prices are far lower than other regional hubs like Bangkok and Kuala Lumpur.

Much cheaper

In fact, the comparison with neighboring countries was stark.

A ‘standard’, non-luxury apartment in Ho Chi Minh City can start at around $30,000, while similar units in Bangkok, Hong Kong and Manila go at around ten times that rate with median prices at around $300,000.

A cross-section of comparable properties also came out in Ho Chi Minh City’s favor:

In every category, ticket prices in HCMC were considerably lower than counterparts in Bangkok, Jakarta and Manila, ASEAN competitors for foreign investment dollars.

Price and affordability

At the ‘luxury’ end of the scale, average prices again come way under other regional metropoles.

CBRE specializes in research on property worldwide.  A recent report of theirs shows that the average price of luxury apartment in HCMC around $1781 per square meter, (around $178000/unit at 100sqm). Similar apartments in Singapore, Shanghai or Malaysia it cost around $500,000 to $600,000.

Whether these substantially cheaper prices will rise over the next 5-10 years, thus offering greater value to speculators, is questionable – as is any declaration that low prices equate to high value.

What is insightful however is Vietnam’s position in the affordability index.  It suggests that there is scope for locals to invest in first or upgraded homes with a greater degree of ease than some neighboring countries, with average incomes rising and capacity at a favorable level for buyers.

Surveys by market-leading agents like Savills received mixed responses when seeking opinions about current prices.  It came to no conclusion about whether the overall perception that costs were ‘cheap’ or ‘expensive’, but did find common optimism that the market will favor early investment in the first months following permitted foreigner purchases. “The market is still emerging, still taking shape – but all the indicators are that Vietnam’s appeal to foreign businesspeople, investors and professionals will increase substantially over the next decade.” Said Mr. Troy Griffiths, CEO of Savills Vietnam.

The highest-end offerings in the market represent the biggest bargain – and the biggest opportunities for growth, say some leading experts.  Mr. Peter Ryder, “The luxury segment retains very high potency.  Prices are incredibly good in comparison with other cities, averaging around $2900/sqm here in Saigon versus $20,000/sqm in the top-line Bangkok and KL equivalents.”

What do you think?  Got any thoughts on property prospects to share?  Leave a comment below or get in touch for any questions or feedback on the Vietnam property market

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[HOT] Project Estella Heights Apartment in District 2 will be opened to sell second stage in this September after a successful first stage.

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Though the broad legalities sanctioning property sales were brought into force on July 1^st 2015, expected circulars and decrees to offer guidance on their application have yet to be published.  Domestic real estate developers and agents are urging the Government to accelerate publication to negate any market uncertainty.

The Sun Avenue in District 2, hot project of Novaland

Chairman of the Basico Law Company, Luong Thanh Duc, is clear that the new law allows all foreigners and organizations who enter Vietnam legally to buy property if they wish – but detail on regulating some of the finer points is still to be clarified.

Of particular concern is the limitation in the law stipulating foreign ownership may only account for “250 houses or 30% of an apartment block” in any administrative ward.  Mr. Duc is still unclear as to who will “monitor and manage this stipulation, and keep vendors informed about whether that ward can allow the sale.  If parties proceed under this cloud and then the contracts is voided in such a circumstance, how will this be handled?”

Mr. Le Hoang Chau, chairman of Ho Chi Minh Real Estate Association (HoREA), is buoyant about the impact of foreign ownership in his constituency.  He too, however, would like to see questions answered by the government – and sooner rather than later.

Specifically, further detail is needed on definitions of “Viet Kieu”, Overseas Vietnamese who, in the same law, were granted the same property rights as their resident relatives.

“In practice, many Viet Kieu – particularly 2^nd or 3^rd generation – may not have any extensive documentation outlining their heritage.  We’d like the Government to confirm that documentation acquired from the Viet Kieu’s host country is sufficient to enjoy the benefits of the law.”

Regarding the provision limiting sales to foreigners by ward, he said the industry would like to see rational flexibility applied to account for natural migratory demand.

“It’s natural that communities of expats form over time.  We’ve seen many foreigners cluster together in Hanoi, Da Nang, Khanh Hoa, Hai Phong, Binh Duong, Dong Nai, and Thanh Hoa.  In Ho Chi Minh City, foreign demand is highest in Tan Phong Ward, District 7, Thao Dien Ward, District 2.”

Gateway Thao Dien, luxury apartment for foreigner in District 2

Some members of HoREA have also suggested that, to protect domestic supply to local low and middle-income families, restrictions on ownership in these areas are limited to properties starting at VND 21 million/1sqm($1.000/1sqm), although there is little prospect of this being applied.

Mr Nguyen Huu Cuong, chairman of Ha Noi Real Estate Club, agrees that percentage flexibility should be applied.  “In Ha Tinh province there are a lot of foreigners already, so we expect to see big demand in this area which we hope the Government will allow us to meet.”

Exemptions in the law apply to areas controlled by the Defense department, and Mr. Cuong considers extension of this provision be applied to areas in close proximity to key facets of national and civil defense, such as airports, sea ports and other sensitive geographic areas.  These need to be established to allow thorough transparency.

With the legislation being so new, there is little data yet on how property laws surrounding foreigners will complement laws on immigration and residency.  He cites the United States and Canada “which allow foreign ownership but separate this from residency rights.  We’d like more information on the separation of these in Vietnam to best inform buyers.”

In the meantime, enterprises and associations are urging that prospective buyers keep in touch with reliable agents and advisors to stay in touch with expected developments.

Want more information about buying property in Vietnam?  Need to know more about your legal right to purchase as a foreigner?  Then get in touch today.

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