Why investing in Property in Vietnam now
Why investing in Property in Vietnam now
Within Asia, Vietnam – Southeast Asia’s third largest population and one of the fastest-growing economies, has been getting a lot of attention from foreign investors in the region. The recent changes in laws that occurred in July 2015 must be seen as an opportunity.
The context: Foreigners have had till 2015 few options when investing in Vietnam.
The Vietnamese government relaxed property ownership rules for foreign investors:
The newly reformed Vietnamese Law on Residential Housing (LRH) officially started in 1st July 2015, later than Thailand and Malaysia. Several major past restrictions on property ownership have been removed for foreigners. Encouraged by fast economic growth, supportive government policies and low entry costs, home prices in the country’s two largest cities, Ho Chi Minh City and Hanoi, have already seen considerable growth in recent years.
Anyone with either a 3-month tourist or residence visa may now own a property.
|Largest City:||Ho Chi Minh City|
|Currency:||Dong (VND) (US$1 : VND 22,000)|
|Population:||The current population of Viet Nam is 95,854,294 (October, 2017, United Nations estimates)
It is equivalent to 1.27% of the total world population. Ranks number 15 in the list of countries (and dependencies) by population.
Its population density in Viet Nam is 308 per Km2 (798 people per mi2).
The total land area is 310,070 Km2 (119,719 sq. miles)
34.7 % of the population is urban (33,121,357 people in 2017)
The median age in Viet Nam is 30.9 years
|GDP Growth:||6.7 percent GDP growth rate in 2017 is ‘within reach’, the Ministry of Planning & Investment (MPI) has set a 6.5 percent growth rate for 2018.|
|Key Industries:||Agriculture, fishery, forestry, Energy, mining & minerals, Industry & manufacturing, Services & tourism, Banking & finance.|
|Main Export Countries:||United-States
As you can see, Vietnam population is very young and the middle class is growing fast.
Meanwhile, other nearby countries are starting to see their population decline. Vietnam is seeing its economy shifting swiftly from an agrarian economy to a post-industrial, service-driven economy. This generation is starting to adopt a western lifestyle and start moving out earlier than the previous one into its own home.
Vietnam’s population is expected to grow from 95 million today to almost 120 million by 2040.
In the 2 mains city, the urban landscape is changing very quickly as Residential property for this young population is becoming a huge market.
Higher-end options are also coming to maturity with price going well above USD3,000 per sqm.
With Hong Kong, mainland China and also other countries in the region such as Australia with housing prices plummeting, investors are looking overseas for more affordable targets.
The Vietnamese housing market is somehow still at its early stages. No so long ago, there were not many quality apartment options. When you buy an apartment from a developer, for the best projects, prospective buyers will often face stiff competition during special selling fairs. They are organized by developers with live charts of units selling very quickly on screens displayed at these events.
Ho Chi Minh City’s potential
Ho Chi Minh City is growing very fast and expending mostly toward the west with many cranes / new buildings on the horizon. It has been largely the result of the social economic factors mentioned previously but also thanks to the impact of tourism and a strong industrial activity.
Infrastructures investment as a support for growth and property market development…
The first line of Ho Chi Minh City’s metro is scheduled for completion by 2020. We do recommend our clients to buy apartments in projects along the line going from District 1 to District 9 where the chances will be also high to rent out fast and at a good price.
In a similar way, the water boat taxi starting November 2017 could be also be a criteria while assessing an investment.
Here is an idea of the price you may expect for your property investment in Ho Chi Minh City.
Price / Sqm
US$1,500 to US$2,000
Medium to Top-end
Price / Sqm
US$2,500 to US$5,000
|District 2 is geographically close to the city center and provides a high-standard of living. High population of Western expats living mostly in either villas or modern apartments.
The main area to consider for investing are Thao Dien, followed by An Phu.
The best international schools are also in District 2. A strong sense of community with multiples restaurants and stores has attracted many expats and upper-class locals.
Price / Sqm
US$7,000 to US$9,000
|The CBD of Ho Chi Minh City, District 1 is Vietnam’s main center for business, commerce, and finance.
Rental prices and property values are the highest in the city. Expats living there are mostly single or without children and prefer living in District 1 and 3 because of the proximity with the restaurants, bars, and other recreational activities.
These prices, even for the top end properties, are still much cheaper than prices for similar standard and size in some of the more mature markets such as Bangkok, Hong Kong or Singapore.
The annual rental yields you can expect are around 6 to 7%. They can be achieved mostly in new urban districts such as Ho Chi Minh City’s district 2 and in a lesser extend in district 7, where many expatriates have settled. These areas offer plenty of modern leisure facilities and educational options for them while not being too far from the CBD, district 1.
The Ho Chi Minh City Real Estate Association estimates 700 foreigners bought property in the city from July 2015. We don’t have statistics for 2017 but we think this number has increased considerably thanks to these relatively low prices and high annual rental yields.
Taxes involved in your property investment in Vietnam
Value Added Tax: 10% VAT is taxed on any sale of property by local or foreigners.
Registration Tax for Ownership: 0.5% registration tax for obtaining the house ownership certificate on the apartment value.
Personal Income Tax (For Resale): If personal income is earned through the assignment or resale of apartments or houses, a 2% personal income tax has to be paid on the transacted value.
Personal Income Tax (for Rental Income): If personal income is earned through rental of house/apartment, 5% VAT and 5% PIT has to be paid on revenue..
For rental income exceeding VND 1,500,000 per month, a business license tax of VND 1,000,000 (approx US$45) per year applies.
Administration Fee: A minimal administration fee is to be granted an ownership certificate at the current regulation
How we can help you
Vietnam is flooded with new construction projects that may or may not be the best option for you.
Our approach is different from the developers who will try to sell you whatever they have in their stacking plans.
If you are interested, we propose you to have free interview with you to clarify your investment need and see how we can support you.