Why long-term lease agreements might be a better option for foreign investors in Vietnam


As you know, I have a great deal of interest in the burgeoning property market in Vietnam – it’s a country that is increasingly welcoming to foreign investors, largely thanks to a progressive approach by the country’s government and a market that is still affordable relative to places like Hong Kong. I’ve spoken here before about the opportunities to be had in places like Danang – only a short flight from Hong Kong, and of course in the booming Ho Chi Minh City. But how straightforward is it really for foreign investors to buy into the Vietnamese property market? Despite the recent changes in the law that have made the process easier, I thought it would be a good idea to reflect on just a few of the obstacles that remain – and a potential route around them.

A new legal framework

Firstly, a quick recap of those new laws that were introduced back in July 2015. They were brought in by the government with the intention of opening up the Vietnamese property market to foreign investors, and in many ways it’s fair to say that the changes have, to a large extent, worked. Today, if you’re a foreigner looking to invest in property in the country you’re now able to buy somewhere on the basis of a leasehold agreement, with a term of up to 50 years and the potential to extend this if you want to once the initial term ends.

So this sounds great – and it is – but there are a still few restrictions on this arrangement, even after the new laws were introduced. Firstly, as a foreigner you are only allowed to own up to 30 per cent of any one condominium, or up to 250 houses in a single administrative area. Clearly for those investors looking to build up a larger portfolio or who are wanting to focus their investments in a particular geographical and administrative area this could present a few problems. However it’s my hope – and my expectation, given the past record of the Vietnamese government – that these kinds of restrictions for foreign investors might soon be relaxed.

A few teething problems remain

The other point it’s worth making however is that these laws are still relatively new, and so the financial administration around foreign ownership of property is still not as straightforward as it could be. One of the experts at VinaCapital – a private equity and venture capital firm – recently suggested that it can be difficult for foreign investors to get money in and out of the country if they are looking to sell a property. There have also been suggestions that there can sometimes be complications related to the kind of visa you’re using – and that even foreign investors using a residential visa may still find it difficult to send any rental income they’ve made abroad. Once again, these are still early days for the new legislation and it seems to me that it is more than likely that these kinds of issues will soon be ironed out.

Administrative hurdles

One of the biggest issues surrounding the ownership of property in Vietnam by foreign investors however is the nature of what you actually own – under the current laws it is still incredibly difficult for a foreign investor to completely own a property outright. This is partly down to slow-moving administration, both at a local and a national level. For example, the so-called ‘Pink Book’ is the primary title document for owning residential property in Vietnam, and the new rules now allow foreigners to have a Pink Book for any property they invest in. There has been an issue however around creating the lists of areas in which foreign investors are not allowed to buy property – for example for national security reasons – and this delay at a local level has meant that it can still sometimes be tricky for foreigners to actually buy houses in Vietnam. It’s just one of the reasons that the long-term leasehold agreements I mentioned earlier are an increasingly popular way for foreign investors to buy property in the country.  

As a final note, I think that it’s well worth re-iterating that all land – both commercial and residential – in Vietnam is still collectively owned and managed by the national government, rather than being in the hands of private individuals. One of the major consequences of this is that while you may own a property – or the leasehold on the property – for the next 50 years or so, you won’t actually own the land underneath it. That will still belong to the state.

The extent to which you’re comfortable with that arrangement – and with the idea of a long term lease arrangement – will go a long way towards dictating whether you’re prepared to invest in this promising market.

Robert Weider 

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