High-end property in Vietnam attracts foreign investors

With such robust economic growth in the past several years, Vietnam is now considered a top destination for foreign buyers purchasing houses, most notably nationals from Hong Kong, Taiwan, South Korea, and mainland China. The demand for investment in properties in Vietnam has increased significantly since 2015 when property ownership was first opened to international investors. The market has been receiving increasing interest from Asian investors taking advantage of the bargain prices in comparison to the rest of the continent.

Vietnam’s real estate market became the second most attractive investment field for foreign investors and it lured USD 1.1 billion in FDI during the period between January-April, or 7.5% of the total FDI inflow. In 2016 Chinese buyers of high-end and luxury property products accounted for 2% of all total buyers and represented 4% in the year 2017 but reached unprecedented levels in 2018 hitting 30% .

The regulations allow foreigners to buy a house in Vietnam and as previously outlined, prices are cheaper compared to other Asian Countries such as Singapore or Thailand. There are currently governmental restrictions on new projects in Ho Chi Minh City, therefore, the market will not be over-saturated with new developments as the supply will be limited. Current regulations set the ceiling of foreign ownership in a single apartment building at 30% of the total number of apartments in Vietnam and although 30 % ownership may seem low, it will mean  that the building will be more occupied. The home ownership limit for foreign buyers has been reached in several estate projects and is expected to be loosened and subsequently bank credit will become easier to lure more foreign investors.

New home prices in Ho Chi Minh City central business district averages at about USD 5,500-6,500 per square meter and property owners are  liable for additional taxes and fees, while buyers in Vietnam only need to pay 10% VAT and a one-time 2% payment for maintenance fees.

Since 2017 Chinese mainlanders have increased their interest in the buildings of Hanoi and Ho Chi Minh City, especially luxury and high-end apartment projects downtown. High-end apartment projects in districts 2 and 9 of Ho Chi Minh City currently receive a rental yield of 6-8%. The luxury projects in Districts 1 and 3 are expected to see their price increase by 5-7% per year due to the lack of supply. The prices in the luxury segment in these areas stand at VND 168-280 million per square meter.

Vacation and hospitality properties in the coastal areas are also attracting interest from foreign buyers, however, the market has slowed down in the early part of this year (one possible cause can be linked to the number of licenses issued for new housing projects in 2018-2020), but not in the high-end and luxury condo segments which accounted for 60% of the supply in the market.