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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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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Go forwards to catch the policy trend, a big housing company in Ho Chi Minh City has implemented the program “100 first apartments especial for Vietkieu and foreigners” with many promotion packages: leasing commitment equivalent to 8% a year and supportive management package in finishing interior state of apartment, commitment of handle back in cash of buying property price including interest within 1 month if the customer has not satisfied with the product…

Some big developer like Capitaland, Novaland, Phu My Hung, Phat Dat, …are ready to catch new wave of widening ownership law to Vietkieu and foreigner or changing from renting to owning apartment. However, from a statistics report about the real estate market, the volume of transaction relating to Vietkieu and foreigner still disproportionately low.

There are some apartment projects in Ho Chi Minh City that attract much attention from Vietkieu and foreigner can be listed as: Vinhomes Central Park (Binhthanh District), The Sun Avenue (District 2), The Krista (District 2), Sala Premium Residence (District 2), …, land in Binh Duong, New Central Park also attract many Taiwan, Chinese experts to come and observe.

Vinhomes Central Park Project has a beautiful view to Saigon River

Among all these projects, Vinhomes Central Park is a rare project officially announced the number of 112 apartments purchased in 1^st of July. They just sell it within 2 hours to foreigners. Another location Phu My Hung where many foreigner live and work has no significant number of purchase. The number or 100 transactions of foreigner from Novaland is also so small in compare with thousands apartment sold to Vietnamese a year.

Mr. Hoang Anh Tuan, general director of Tac Dat Tac Vang company, said that the foreigner are careful to learn about projects. Besides the potential factor of increasing value of apartment, they pay special attention to the legal isle. Actual number from New Central Park project shows that over 80% land product was sold to Vietnamese while Vietkieu and foreigners are waiting for decrees and circulars guiding the implementation of the new Housing Law.

Taking an overview of whole market, Mr. Phan Cong Chanh, chairman of Joint Investment and Advisory Phu Vinh, said that the market will hardly have the big surge of transaction by foreigners and Vietkieu. According to him, the new law may lead to the tendency of rename for the reason that Vietkieu own property in Vietnam for a long time ago on the name of their relatives.

For foreigners who has a short-term working in Vietnam, the purchasing property will not be convenient that renting property. The transaction of selling is only possible with small group of people who work in long-term or get married to Vietnamese.

The Sun Avenue attract big attention from Vietkieu

In aspect of investment, Troy Griffiths, executive deputy director of Savills Vietnam, said that the new Housing Law will contribute to the competitiveness of the real estate market in region. According to surveying data of Savills, the leasing income in a number of cities and regions around the world shows that Vietnam is the place that bring to investors a higher profit than many other countries.

From the provisions of the new Housing Law, foreigners are still waiting for the instruction paper. Mr. Le Hoang Chau, chairman of HCMC Real Estate Association, analyzed, sell the property for foreigners is like “local export”. This positive impact will contribute to stimulate the real estate market development. Therefore, the authorities should soon issues decrees, circular instruction to open potential demand.

Compiled from Vietnamnet

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