Invest In Vietnam Property
Comprehensive Guide On Vietnam Property Outlook and Investment Opportunities
Located on the Indochina Peninsula Vietnam is the 15th most populous nation. The country is slowly emerging as an Asian powerhouse with one of the fastest growing economies and the government has predicted that by 2020 it will be a developed nation.
Vietnam Real estate is one of the key sectors that are still untapped and with growing desire for Singaporeans to invest overseas there is huge potential on the Vietnam property market. In this post, we are going to have a detailed and in-depth discussion on Property investment opportunities and provide the all-important answer to what can you buy in Vietnam?
Vietnam Gross Domestic Product
Vietnam has a total population of 96,823,275 equivalents to 1.26% of the world’s combined population. The country’s economy is the socialist-oriented market economy as a result of its communist history.
As of 2018, Vietnam has a GDP of $240.779 billion making it 47th largest economy in the world. Agriculture is a key sector that contributes huge amounts to the country’s GDP as it’s a leading agricultural exporter in Asia. Manufacturing, energy and service and tourism industry expanded during the 1st half of 2018 resulting in a growth of the country’s GDP.
Vietnam economic growth is stable and robust with broad macroeconomic stability, in 2018 the country economy grew by 7.4% as a result of domestic reforms and sustainable global recovery. The growth has significantly boosted job creation and income generation improving wealth generation and reducing poverty.
The GDP growth is fueled by expansion of key drivers of the economy, manufacturing sector grew by 13% due to increased external demand, agricultural output increased by 3.9% as a result of strong performance in the fishery subsector while the service sector remained stable and resilient growing by 6.9% mainly driven by growing retail sector, increased consumer spending and tourist arrivals.
The number of newly established firms continues to improve. During the first quarter of 2018, there were 26,785 newly established firms with a total capital of VND 278.5 trillion a 1.2% for the number of companies and 2.7% in registered capital from 1Q17
Vietnam economic growth has also been fueled by demographic and social changes with almost 70% of the population being under the age of 35 years with a life expectancy of 73 years. The emergence of the middle class as of 2018 stood at 13% boosting the consumer growth and the property market as more and more people look for affordable and safe housing. Vietnam’s economic outlook remains vibrant and stable signaling investor confidence in the country and favorable government policy framework.
Key Vietnamese Industrial Sector
Tourism is a key player in Vietnam’s economy, in 2018 the estimated total income was $13.5 billion an increase of 22.5% from the previous year. As of today, there have been a total of 7.9 million tourist and China accounts for 4.1 million visits as more and more Chinese choose to visit Vietnam for both business and pleasure.
The high growth in the Tourism sector is partly driven by Vietnam property investment as more and more developers enter the real estate market to provide world-class facilities to cater to the growing hospitality and service sectors. For investors, business travel offers the perfect opportunity to get to see the country first hand.
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Why invest in Vietnam?
The government has made enormous efforts to open and integrate economy into the global economy, after becoming a member of World Trade Organization the government has entered into agreements with both global and regional partners opening Vietnam to foreign investment.
Market size and growth potential
Vietnam has a population of approximately 90 million making it an attractive country with the enormous potential to yield profit whichever investment you choose. With stable economic conditions, consumer purchase power has substantially improved as a result of a shift from satisfying basic needs to boosting social lifestyles and status.
The country is situated at the heart of ASEAN making it closer to major Asian market especially China. With a long coastline providing direct access to the South China Sea and main shipping routes have made trade easier and efficient.
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Government policy framework
The government over recent years have made enormous changes in its legal framework and institution to create a transparent and conducive business environment for investors, restructuring the economy has promoted innovation and boost the country’s competitiveness that rival’s world leading economies.
Competitive labor costs
The country has low labor cost despite an increase in minimum wage. The Vietnamese labor force is highly skilled, providing alternatives to investors looking for lower labor costs.
Vietnamese infrastructure has been upgraded over the years boosting efficient business operations and reducing transactional cost. Its transportation routes provide domestic and global connectivity for easier movement of goods and services, it has state-of-the-art communication facilities with its internet service being one of the cheapest in the world.
Real estate in Vietnam
Vietnam’s real estate sector has grown over the years as a result of its economic growth rate. More investors view Vietnam as a destination hub for stashing their wealth by buying property in Vietnam.
In 2018 the Vietnamese real estate sector is at a recovery phase as a result of improved economic conditions and efforts by the government to clamp down lending. The ever-growing population has attracted foreign investors with $1.52bn in foreign direct investment to the local market to cater to the emergence of Vietnamese middle class who want luxurious and affordable housing units.
2018 has witnessed flurry investments ranging from commercial outlets and offices, luxury apartments and mixed-use developments. A surge in Tourism sector especially in Da Nang and Nha Trang have attracted investors to develop more hotel and resorts to cater for the increased number of tourist in the region.
The Vietnam property market outlook commercial leasing activities are predicted to remain robust throughout the year, stable occupancy levels and rental growth for all types of property. The condominium sector will continue with the strong momentum from previous years that’s spearheaded by the expansion and entry of new developers.
From the capital market front, there is high competition to acquire income-producing assets and land sites by both foreign and local investors as a result of improving Vietnam property price index and positive sentiments.
Ho Chi Minh property market is a prime location to Vietnam property developers with $800-1,500 per square meter mid-range condos accounting for almost 40% of the market supply share and 56% of the total sales in 2017.
In 2015-2016 Ho Chi Minh City witnessed the development of 80,000 condominium units while Hanoi had 64,000 newly-launched units. During the same period, there was a rise in the supply of high-end luxurious condominium units taking up 25% of the total supply. Most of these projects are slated to be completed in 2017-2018.
As a result of project launch in previous years, 2017 witnessed a slow down as investors have cooled down in large-scale projects as a result of oversupply. Newly launched condo units in ho chi Minh city districts stands at approximately 38,000 units.
Commercial space has significantly increased with the launch Saigon Centre Phase 2 and Deutsches Haus in the 2nd half of 2017. Since then no Grade A building has entered the Vietnam real estate. Etown Central was launched the same year adding 34,000 square meters of grade B office spaces. Vacancy rates for both grade A and B remained low at 8.2% and 2.8% respectively.
The retail market sector both foreign and local retailers look to expand their networks, in the Q1 of 2018 grade A Van Hanh Mall was opened offering total retail space of 55,000 square meters, the same period there were 1800 mini-marts and convenience store with an estimated 272,000 square meters an increase of 5.1% q-o-q.
In Hanoi property market, for mid-range and affordable category more than 47,000 new units are slated for completion by the end of 2018.
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For commercial space the uptake rate for both grades A and B exceeded 27000 square meters with Grade B taking up most of the absorption, the overall occupancy rate in 2018 reduced slightly from the previous year as a result of new supply entering the market.
The vacancy rates for the retail market fell to 165 bps q-o-q to 9.3% in the 1st quarter of 2018 due to the increased purchasing power of city dwellers and improved leasing activities. Sales for residential units in 2018 was 15,586 units a rise of 95% y-o-y due to clever market strategies adopted by developers. The total number of villas and townhouses sold in the same period was 1,573 units translating to 10-20 property units sold in a month.
Demand for warehouse market is predicted to increase due to increased manufacturing and consumer consumption that has attracted multi-nationals, especially in Northern and Southern Vietnam.
Rent and price trend
The average rental price for retail space slightly dropped $28.5 per square meter per month in the 1st quarter of 2018 a 0.8% rise from its previous quarter. The office market also witnessed a stable increase for both grade A and grade B buildings both rose by 1% q-o-q and 1.6% q-o-q, respectively.
For residential units, average prices for primary market stood at $1,137 per square meter a decrease of 3.9% q-o-q while for the secondary market the average price was $1,208 per square meter.
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Property taxes in Vietnam
Before buying property in Vietnam familiarize yourself with Vietnam real estate law. When purchasing/selling there is a 10% value-added tax payable to the government that should be paid at the same time with progressive payments. Foreigners are not allowed to buy land but the law requires them to pay 0.03 – 0.15% land tax.
You are also mandated by the law to pay a 2% sinking fund that is payable on the completion date mainly for maintenance of common areas and forming MSCT. After purchase, there is a 0.5% registration tax ownership certificate that is paid when applying for ‘pink book title deed’
During the transfer of ownership, there is a 2% stamp duty payable to the government on the total property value. For commercial property’s there is a business license tax on rental income that stands at 5-7% and only applicable if rent income exceeds VND 1.5 million a month presenting opportunities to investors who are looking for high rental yield and capital growth.
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Can Foreigners Buy Property in Vietnam?
Contrary to the common misconception that foreigners cannot own property in Vietnam its possible. However certain conditions and requirements must be met in accordance with Vietnam property law. There are several ways to buy property in Vietnam as a foreigner
- Establish 100% foreign owned company- This allows you to purchase apartments and houses within a limited term. Registration takes between 4-6 weeks.
- Forming a joint venture with a Vietnamese citizen allowing you to buy, lease and lease purchase property.
- Buying a house as an individual for foreign residents as they are allowed to buy a house or apartment for their own needs, this law prohibits you from renting your house to third parties.
Acquiring loans by foreigners
It very difficult for foreigners to obtain mortgages in Vietnam. However, local commercial banks offer loans and you are required to provide collateral, banks have different rates and payback periods and it’s important to choose important to choose the bank that will be beneficial to you.
The Infiniti Riviera Point
Located at the heart of district 7 enjoys the Vietnam property development is spearheaded Keppel Land and Tan Truong. The property will have 4 block and 800 units with world-class facilities and luxurious waterfront. The apartment units will be a mix of 1-3 and duplex bedrooms
The development has world-class facilities that offer a modern lifestyle to future residents, its close proximity to Phu My Hung township offering closeness to a variety of modern amenities. The Infiniti Riviera Point is one of the few developments that allow Vietnam property foreign ownership with a 50-year tenure.
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Vietnam has a robust economy with one of the most competitive property price indexes compared to other countries coupled with governments change in laws to foreigners. There is no better time to invest in the country. Vietnam property outlook is positive. However always check the market thoroughly before making lifetime decisions.
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