Viet kieu, foreigners invest in homes

The changes to the housing law allowing foreigners and Viet kieu (overseas Vietnamese) to buy houses in Viet Nam (from July 1) has had an impact on the housing market. Photo vietstock.vn

The increasing number of successful deals in the past seven weeks is a good sign for the market, indicating further good times are in store for it.

Nguyen Bich Diep of Ha Noi's Thanh Tri District said her elder sister, who lives in Germany, has bought an 80sq.m apartment in Ha Noi for over VND2 billion (over US$90,000), and aims to rent it out if she cannot return to Viet Nam.

Minh Anh, another overseas Vietnamese from Germany, has bought an apartment in HCM City and said he would sell in soon if he can make a profit. Otherwise, he would let it out for lease.

"A return [on the investment] of 6 per cent is OK," Tin Tuc newspaper quoted him as saying. "It is equal to the interest rates offered by Vietnamese banks for one-year deposits and a little higher than interest rates at overseas banks."

Along with the increasing remittances, more and more overseas Vietnamese are returning home for business and investment.

They not only buy apartments, but also develop coastal accommodation (like guest houses), hoping to get better profits from these properties when coastal areas become prosperous, thanks to investment to boost tourism there.

A spokesperson for HCM City-based housing developer Novaland said overseas Vietnamese made up 10 per cent of the company's customers in July, with most buying apartments in upscale projects in prime locations.

Figures are not available on overseas Vietnamese buying homes in HCM City, but 112 have bought at Vinhomes Tan Cang, according to Le Hoang Chau, chairman of the HCM City Real Estate Association.

According to Tin Tuc newspaper, overseas Vietnamese prefer beach villas, apartments and street houses that can be used by themselves or let out for rent if required.

Remittances by overseas Vietnamese to HCM City have risen sharply in 2015. In the first seven months they were worth $2.42 billion, a year-on-year increase of 12 per cent.

Nguyen Hoang Minh, deputy director of the State Bank of Viet Nam's HCM City office, said remittances through city banks were estimated to rise to $5.3-5.5 billion.

They amounted to $5 billion last year, with 71.4 per cent invested in business and 21.1 per cent in housing, according to banks.

China devaluation

The devaluation of the Chinese yuan has affected other Asian currencies, including the dong, and the weaker dong has hit outbound tour operators hard.

Tong Thi Thu Hien, the managing director of Ha Noi-based travel firm Thang Long GTC, said the devaluation of the Chinese yuan has meant the dollar and the euro – the two currencies used by the world's tourism industry – have become more expensive.

She told Ha Noi Moi (New Ha Noi) newspaper that the stronger US dollar and euro has forced outbound tour prices up. But major travel firms sell tours months or even years in advance, and Thang Long is now reconciled to lower profits from these tours, she said.

Pham Tien Dung, director of Golden Tour, said the volatility in forex rates affect both the inbound and outbound departments of his company.

Vietnamese tourists have to pay for air tickets and outbound tours in US dollars and the stronger dollar has affected their budgets.

Golden Tour has negotiated with its partners to lower prices and to pay for tours and air tickets in their local currencies to ensure that costs do not increase.

Nguyen Cong Hoan, deputy director of Hanoi Red Tour, said the devaluation of the yuan would have an impact on Viet Nam's tourism since the number of Chinese travelling abroad would decline as would the spending of those who do go.

HCM City tour operators are concerned that the dong's devaluation by another 1 per cent and the widening of the dong/dollar trading band from 2 per cent to 3 per cent would eat into their profits.

The director of Viking Travel Company, Tran Xuan Hung, said a weaker dong has rattled tour operators, who find it difficult to cope with such a sudden change.

He complained bitterly that his company lost VND10 million ($445) on a six-day trip for 20 visitors to Hong Kong since it has to pay for tourism services on the island.

However, Viking Travel and other travel companies remain hesitant about increasing prices. Some firms have slightly increased prices but at the same time are reconciled to lower profits to stay competitive.

Many tour operators believe that price hikes would reduce their competitiveness, Saigon Economic Times quoted Hung as saying.

But on the other hand, the cheaper Vietnamese currency would lower inbound tour prices and encourage international tourists to spend more in Viet Nam.

Vo Anh Tai, general director of Saigontourist Travel Service Company, pointed out however that if neighbouring countries too devalue their currencies, this advantage would disappear.

Except for the Singapore dollar, the currencies of most other regional countries have fallen significantly against the greenback.