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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The expansion of the city has seen investment from authorities, foreign speculators and developers to the tune of $8billion up to the 3^rd quarter of 2015.  Beneficiaries include:

• Transport improvements in the areas between Saigon Bridge and Vung Tau, including highway and bridge improvements, account for $3billion.
• New luxury units – around 40,000 individual residences – are under construction in Binh Thanh, Thu Thiem and District 2, with an estimated worth of $5billion.
• 300,000sqm of retail space are on their way in the same areas, as well as Thu Duc and District 9. Upon 2018 completion, experts predict a valuation of $300/1sqm for a total of $90million.

The Sun Avenue Apartment of Novaland developer in District 2

Experts excited

The estimates have emerged from reports by industry experts and observers.  One such company, who put forward the transport development figure, are Global Investment and Business Corporation (GIBC).  “We think this investment will result in a relocation of the city’s commercial and service sectors into these purposes built areas” said Mr Huynh Phuc Nghia of GIBC.

Another real estate expert suggested these investments represent a golden opportunity for investors.  “The follow on benefits from the $3billion infrastructure improvements are likely to be upwards of $5billion as additional commercial, recreational and educational ventures flock to the areas”, said University of Economics lecturer Ngo Dinh Han.

“The current central districts for these areas are saturated, and new additions like Thu Thiem Channel, Thu Thiem Bridge 1, Saigon Bridge 2, and Thu Thiem Bridge 2 are ideal in relieving some of the bottlenecks” continued Mr. Han.  “These new areas will also connect the city with outlying provinces, creating a greater metropolitan area, radically altering the shape of the city over the next decade.”

Connectivity to Saigon’s current central districts will be aided by completion of the Metro system, in addition to a new financial center in Thu Thiem.  Upwardly mobile Saigoneers may turn their attention to big new developments like Vinhomes Central Park and Sala premium residential areas over the next 2 years.

Such a churn of development leaves plenty of opportunities for investors, with prices in the new areas estimated at a quarter of D1/D3 equivalents.

Estella Heights apartment from Keppel Land and Tien Phuoc Developers

Some skepticism.

Not everybody is as taken with the sales pitch, however.

General Director of Viet An Hoa Company is one such skeptic.  “$8billion is an attractive headline number, but may not be entirely accurate.  The $3billion is in place but may not do the job of radically improving regional connectivity, while the rush to providing 300,000sqm of additional commercial space may lead to over capacity.”

He added some particular concerns of over-subscription in luxury development: “The market should be rebalanced.  Right now the rush is to provide high-end accommodation but the value of such construction should be spread across varying segments to accommodate eventual variations of demand.”

Whilst District 2 and Binh Thanh, he concluded, can provide valuations of up to $2000/1sqm which hold up, developments in Thu Duc and District 9 should be focused on sub-$100k/unit offerings.

What do you think?  Let us know in the comments below

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Riverside and luxury Vinhomes Central Park apartments of Vingroup developer are open to sell The Park building in this September! Register now to have the best apartment!

Amidst the rush to meet demands for residential property in light of new laws allowing foreigners to buy, Vietnam’s premier developers are racing to fulfill the needs of another sector undergoing a building boom: healthcare.

All the big names are in on the gold rush: Vingroup are building 10 hospitals – branded ‘Vinmec’ throughout the country, as well as a Vingroup Medical University.  Hoa Lam, another big beast of the industry, have broken ground on a vast 40-hectare facility locally known as “Medical City”.  FLC group are also set to join the party, with other construction giants investing heavily in partnerships or readying independent announcements.

Vinhomes Central Park and Vinmec International Hospital

According to Mr. Tran Hong Phong of HCMC Lawyer’s Association, this is a direct result of Government policy: “Each enterprise that invests in hospital construction will have an applicable tax rate of 10% on income during construction, thanks to provisions of the Enterprise Income Tax Law.”

The Government incentives don’t stop there.  Intended to support construction which “benefits the public”, medical construction projects may be eligible for:

• Land tax exemption for 9 years;
• Preferential loan rates for up to 70% of capital outlay;
• Import/export tax exemptions for equipment and logistical costs;
• Relaxation of accounting protocols allowing losses to be pushed back and made tax deductible for up to 5 years.

Ongoing value

Experts estimate that such practices coupled with operational income yields around 20% annually for up to 10 years.  With such grand financial cherries to pick, it’s little wonder that companies – traditionally focused on residential and commercial construction – are looking to leverage every aspect of the medical sector, from hospitals to schools to smaller medical centers.

A former chairman of a large hospital group (asking not to be named) said the picture is very different from five years ago.  “In 2010, it was difficult to get developers on board with such a project due to restrictive registration procedures, and this following long negotiation periods.”

Now though, he says, it’s much easier – but not always entirely in spirit with the law.  “Developers and real estate companies have always liked to retain control over facilities within projects such as entertainment and shopping – now if they include healthcare facilities, they can enjoy the additional benefits of ‘providing for the public’, too”.  Vinpearl Phu Quoc and Vinhomes Central Park are two such projects which include medical facilities, and few dispute the benefits to investor and resident alike of such an approach.
Bed boom needed

What experts are discussing is whether the policy will have a net benefit for the wider public.  Ministry of Health information says that demand for capital currently outstrips supply, with the national budget capable of meeting only 40% of demand (around 20,000billion VND).  The spending aims to bring Vietnam’s healthcare in line with global standards, but the ambition of matching near neighbors is currently some distance from being met.  Hospital bed provision stands at 23 beds per 10000 residents – still short of recommended WHO guidelines (minimum 39/10000) and a long way from South Korea and Japan (at 80 and 140 respectively).

Healthy living space in Estella Heights in District 2

This shortfall – and the desire to catch up fast – spells huge opportunities for companies like Vingroup, Hoa Lam and FLC.  But it isn’t just construction companies, with commercial banks now investing hugely in the field.  Whilst some like VietinBank have entered into negotiation with the Government, BIDV has been the first to formalize its action.  They’ve launched a credit package for with total capital of 20000 billion VND, applicable from from June 15^th 2015 to May 31^st 2022.  Of this, 12000 billion is ring fenced for medical equipment with the remainder dedicated to infrastructure development and maintenance.  Recipients are incentivized with attractive interest rates for up to 15 years.

Time will tell if such dizzying numbers result in benefits to patients – but there is little doubt that Vietnam’s construction and investment industries will be working to make that happen and reap the rewards.

Property in Vietnam has a lot to offer investors – could you be one of the beneficiaries?  Leave a comment below or get in touch and we’ll keep you up to date with industry development.

dollar now buying more dong

Turmoil in the Chinese markets has seen the Yuan devalued twice in recent weeks, and Vietnam has reacted quickly to protect its export values.  The State Bank of Vietnam amended the interbank rate between the US Dollar and the Vietnam Dong on August 19th, meaning $1 is now worth 21,890VND, an increase of 1%, while enhancing the exchange rate bandwidth from +/-2% to +/-3%.

5% increase in USD value

This action follows similar moves in January and May of 2015, cumulatively increasing the value of the dollar around 5% over this period.

According to the president of one of Vietnam’s most prestigious real estate companies, the impact is likely to be felt in the property market over both the short-term and long-term.  Mr. Phan Xuan Can of SohoVietnam said:

“These changes will almost certainly result in shifting investment priorities, from currency to assets.  While some will continue to favor purchases of USD and Gold, land and property will attract those looking to accrue dependable value as currency fluctuations impact savings and related interest mechanisms.”

Experts predict the ongoing devaluation of VND will increase still further the influx of remittances from Overseas Vietnamese (known as Viet Kieu).  Estimates of annual transfers into Vietnam from Viet Kieu range from $11-12billion, with around 18% (around $2billion) thought to be immediately directed into property in the names of relatives.

The Sun Avenue apartment, hot project of Novaland in District 2

With currency market fluctuations favoring holders of USD coinciding with new housing legislation, allowing Viet Kieu to buy in their own names as well as property purchases by foreigners, Vietnam is poised for significant stimulus by foreign capital.

No overheating

However, experts don’t expect this stimulus to translate into an inflationary property bubble:

“There is still a substantial amount of unsold inventory,” said Phan Xuan Can.  “it’s still very much a buyers in market, particularly in the luxury housing sector with many condominiums, villas, town houses and ocean villas nearing completion or recently finished.”

Vinhomes Central Park will be finished in 2017

The primary impact on speculators and homeowners of quickly changing cash values will be in lending rates, which could have an indirect effect on property and construction – although baseline costs are unlikely impacted greatly in the short-term.

Most Vietnamese construction materials developers and contracts are locally sourced, meaning foreign currency fluctuations are unlikely to impact their bottom line.  The exception may be developers who source bespoke furniture and materials from abroad, but they are few in number.

Asset valuations are likely to remain stable therefore, with supply and demand being currently well matched and costs already committed.  Mr. Nguyen Huu Cuong, president of Ha Noi Real Estate Club, suggests that developers who seek to boost prices while carrying inventory would be committing “economic suicide”.

So, investment prospects for foreigners and Viet Kieu remain healthy, with the dollar now buying more dong and asset prices being unaffected.

As the market changes, we’ll report on it.  Keep up to date with Vietnamese property market news by commenting your email below or subscribe our newsletters.

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Vinpearl Premium Villa Facing the ocean

Many of these rules might be plain common sense to some, but the best routes to a successful transaction are often the simplest.  The new law which came into effect on July 1^st 2015 has added a new dimension to the property market never before seen in Vietnam: legal ownership options for foreigners.

Mr. Ngo Dinh Han, real estate lecturer at the University of Economics Ho Chi Minh City, is positive about the impact of these changes, but is keen to reinforce good practice in this brave new world.  Here are his 8 key rules of thumb for a safe and productive investment:

• Get certified

It’s not enough to have a Vietnamese name.  To qualify as a Viet Kieu, and enjoy the same ownership rights as citizens of the country, you need to have your identity documented.

Currently, Vietnamese origin can be certified by the diplomatic missions of Vietnam abroad, the State Committee of Vietnamese living abroad, or regional Departments of Justice.  This should be done as early as possible, or your ability to buy as a Viet Kieu will be limited.

If you can’t verify your origin, you can still buy legally on the same terms as non-Vietnamese foreigners.

Vinhomes Central Park Overview

• Clear your cash flow

If you’re paying via a bank transfer, consult with financial institutions at either end of the transaction to ensure the specific needs of the law are met.  There needs to be a paper trail documenting the origin of your money before a purchase can be ratified.

As for where the money comes from, it’s advisable to generate the cash from your overseas base, to limit exposure to Vietnamese banks’ lending rate fluctuations.

• Keep it legal

Do not part with money without legalities being entirely secured.  This means ensuring the property has a “Pink book”, without which ownership cannot be verified.  If someone offers you a bargain but doesn’t have the paperwork, run away from them. Quickly.

If you’re looking to buy into a new or developing project, double check both the legalities, reputation and realities of the developer you’re planning to do business with.

• Know what you want

Don’t just look at prices and promising rates of return.  Is the property what you actually want?

If you’re buying for rental purposes, is the Villa in Thu Dau Mot really your best option?  If you’re buying now to live in later, will you want to have a property next to a university or industrial park?

Location, as ever with property, is the biggest factor.  But not the only one.  If you’re planning to buy without a deep understanding of the area, conditions, prospects and outcomes of similar projects, then – take a breath, step back and do your homework.

• Work with professionals

A professional, independent brokerage firm might be the wisest part of your investment plans.  Regulations and legislation can be cumbersome, and stump even the natives, despite them being long-exposed to Vietnamese bureaucracy.

Engaging a third party to assist in the purchase is vital in negotiating what is still a new, emerging market.  A trusted partner on the ground will have up to date insight into the real state of the market, as well as essential knowledge of how to deal with all aspects of the agreement.

• Off-plan legalities

By law, new developments must be fully guaranteed by the banks.  If you’ve met all of your own obligations, this is hugely advantageous: if the developer fails to deliver as agreed, this guarantees a refund of all your payments to that date.

You can check which projects have been certified via the State Bank, who can tell you which of 33 banks are backing your project of interest.  If you can’t get this verified, then do not buy off-plan.

• Manage your property

Your investment is only as good as the state of your property.  Ensuring the property is well-maintained is vital to securing any kind of return.

If you have family happy to keep an eye on the place and respond to the needs of tenants, great.  If you don’t, use an asset management company – it’ll pay for itself in the end.

Beautiful riverside Saigon Pearl-good investment now 

• Get a lawyer

If you’re doing this right, then you will have a lot of legalities to manage – your own Viet Kieu origin, dealings with brokerage and asset management companies, not to mention contracts, money transfers and keeping up to date with legislative changes.

Don’t be a hero – get a specialist lawyer you trust, and let them carry the load.

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Of course there are things you can’t predict, and bad luck and dodgy dealing can always happen.  But with the post-1^st July law changes already boosting the market, it’s still a great time to buy – and these tips are a great place to start.

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Q: Current real estate prices in many segments are growing rapidly, some projects are nearby top of price in 2011. It is said that the real estate market is heating up due to speculation rather than real demand. What is your views about this idea, Minister?

Said that the real estate market recovers and have many transactions are due to speculation is incorrect. Because we all know that the period 2011-2013 the market froze, there was no speculation or just a little bit.

Meanwhile, the measures to remove difficulties for the real estate market is made. Among all the solutions, to mount defrosting market to implement national housing is considered the most efficient idea in order to unlock the door to real estate market recovery.

From there, the solution to the market structure, projects, real estate products to diversify the product towards consumers, consistent with many objects have different affordability, to transfer from surplus areas into shortage areas are. Thus, the market has recovered.

Minister of Contruction (MOC), Mr. Trinh Dinh Dung

Q: Then, according to you, with fast rising house prices and series of banks pump capital into real estate market, would it occur the real estate bubble as 4 or 5 years ago?

As the transactions increase, the speculative investment returns is inevitable. The main problem is that we can not control the rocket-speed growth of the market making the bubble. The only way to achieve is controlling well the development of city and balancing between supply and demand.

In detailed, we should strengthen the control of many more real estate projects, restructure the market, projects and housing product in order to balance them with the affordability of people as ensure the balancing betweens areas.

Therefore, we should have strictly implement on 2013 November Decree of the management of urban development investment, which requires following plans. Thus, region should focus on develop urban areas, planning way to balance supply and demand, resources and development capability of each area. By that, we can control and overcome self-development as in the past, which make the problem of unbalance and difficulty to the real estate market.

Decrees and regulations on development of social housing are just completed in 2015 and the Housing Laws has just applied. So that our policies are rank new till now. However, with the drastic of local and government, we built about 40,000 social house to nearly 200,000 people.

However, the implement of social housing projects is slow. The reason is that the policy is new and for long-term, so it doesn’t work in medium or short-term. Besides, it needs so much money to develop social housing building while the state budget doesn’t have enough to invest but need socialization. Another problem is that the projects requires good quality houses with cheap price, to suit low income people. Therefore, investment in social housing is not attractive to investors, which is also the cause of slow implement of social housing project.

MOC have any solutions to accelerate the progress of social housing projects?

We must improve the system of laws concerning with the house projects, create good environment to develop social house project. Besides, local government should have plan and programs to improve the development of social house project, and should take this as a 5-year politics target.

The local should prepare land budget as a good condition for businesses to use more labour, as well as for real estate company to invest in social house projects in purpose of business. At the same time, the provinces need to make conditions for people to invest in development social house for employees of industrial parks. In doing so, I believe that people with need could improve their house and life.

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