Property rights for foreigners mulled

A new law is being reviewed by the ministry to replace the National Assembly’s Resolution 19/2008/QH12 on allowing foreign individuals to buy accommodation in Vietnam, which will end its five-year pilot programme at the end of this year.

The ministry (MoC) has proposed a number of improvements that would remove some of the issues that foreigners and foreign companies face when they want to buy property in Vietnam.

According to the MoC’s proposal, apart from organisations already permitted to own houses, foreign investment funds, foreign banks, branches and representative offices of foreign companies operational in Vietnam are expected to have the right to buy.

The proposed regulation would allow individuals who have obtained visas of three months or longer to be able to buy houses instead of only apartments, but the regulations exclude people who are working in embassies or consulates and non-governmental organisations.

In addition to expanding the number of foreigners, the ministry also recommended that foreign individuals and organisations be allowed to purchase and own both apartments and landed property in Vietnam with a maximum land plot area of 500 square metres. At present, foreigners are only allowed to buy apartments for 50 years.

The number of properties that a foreigner could buy is  under consideration, with a maximum two or potentially an unlimited right to buy. These properties could be leased if their foreign owners are not living in them, a right they is not enjoying at the moment.

The ministry also proposed two options for extending the freehold for foreigners, including a possible extension to 100 years, or a marginal increase to 70 years.

Tran Manh Hung, managing lawyer from BMVN International LLC (in alliance with Baker & McKenzie) thought that easing the right-to-buy restrictions for foreigners would have a positive effect on the real estate market as this would encourage more foreigners to invest in Vietnam.

Hung said the exclusion of people working in embassies or consulates and non-governmental organisations seemed lacking in logic, but added  that the law might be intended to explicitly target foreign investors, who may have a more long-term interest in investing.

Hung said that currently, the Vietnamese market had a high housing stockpile, particularly in the luxury segment. For that reason, authorities should not limit the types of property ownership, because foreigners who owned property in Vietnam would help reduce inventories and they would be encouraged to spend in-country and consequently contribute to the domestic economy.

Moreover, he noted, the expanded freehold would encourage foreign direct investment (FDI), investors, and buyers to invest on a long term basis. 

However, Tran Nhu Trung, associate research director of Savills Vietnam said that the new regulation would not have a massive effect. “The important thing is administrative procedures to house ownership in Vietnam which are considered too difficult and deter foreigners from bothering to buy houses here,” added Trung.

Hung added that complicated administrative procedures had deterred foreigners and overseas Vietnamese from owning housing in Vietnam. Specifically, a lack of transparency had been a key issue. For example, it remained difficult to formally check the status of property ownership before a buyer could decide to buy. In other countries there was a formal registration system where potential buyers could search an online registry or visit offices to determine the ownership status of a property.

Hung said if Vietnam could employ something like this, buying, selling and generally investing in property would be significantly easier. Furthermore, the price of real estate in Vietnam’s major cities, such as Hanoi and Ho Chi Minh City, far outstripped Thailand and Malaysia, and could act as another deterrent.

Trung from Savills said that over recent years, the country’s tourism market had experienced a downturn and Vietnam needed to learn from the success of other countries such as Thailand that had allowed foreigners to own property, which encouraged repeat visits.

Existing tourism destinations in Danang, Ha Tinh, Hoi An, Nha Trang or Phu Quoc could well be popular locations for foreigners to purchase houses.

“In my opinion, this would provide a huge opportunity for Vietnam as second home ownership in holiday destinations is still a huge market and creates an automatic guaranteed return visitor,” added Trung.

According to the Resolution 19 dated June 3, 2008 issued by the National Assembly, only an extremely limited number of foreigners are allowed to buy property in Vietnam. Under the current regulation, foreign organisations and individuals were only allowed to purchase and own apartments in residential projects.

According to the MoC, the current regulations were a major factor in decreasing the attractiveness and competitiveness of the real estate market to foreign individuals and investors.

The reality has been that according to figures from the General Department of Land Management under the Ministry of Natural Resources and Environment, in the four years from the date the government started permitting overseas Vietnamese and foreigners to own their houses in Vietnam, less than 130 properties were bought, with individuals accounting for 80 per cent of the sales. The overly-tight property ownership rules often led to property disputes when foreigners had to resort to allowing their spouse or relatives to buy property on their behalf.