New housing law triggers market stir

New housing law triggers market stir

Posted: 10 May 2015 09:50 PM PDT

VietNamNet Bridge – Real estate developers are anticipating the implementation of the Law on Housing which opens more rights for foreigners to own property in Vietnam this July. Deputy managing director of Savills Vietnam Troy Griffiths has a look at the proposals.

Real estate developers are actively preparing to sell housing to foreigners from this July when the revised law on housing comes into force. Developers are obviously ready now as the products will initially be the same as offered to domestic buyers. Depending on the level of interest from foreigners, there may be changes to cater for offshore investors. An example of this may be to offer terms that suit investors more than occupiers, such as guaranteed returns.

Foreign developers, however, already have their sales channels in place and can move to the market quickly. Local developers will need to have a good sales strategy and either align with good marketers or go direct themselves to these foreign markets. This is all contingent on the amendments allowing foreign investment as contemplated.

While welcoming the decree on increased foreign ownership rights, Troy Griffiths argues the devil is in the details

In conjunction with our regional offices, Savills is already planning to host several events. One of the key issues now is having sufficient quality stock to provide investors with a good choice.

Regarding the type of products which would be most attractive to foreigners, I think it will be the broader-based investment product.

Many of our neighbouring countries have record low deposit rates, so if Vietnam offers a product that has reasonable yields then this will be very attractive.

There will be variations around this theme as some areas will also provide capital growth, thereby enhancing total returns in Vietnam. Other regional markets have had restrictions in policy as well as soft economic conditions weakening their residential markets. This together with low performance by cash and other asset classes should see a flight to Vietnamese property with good total returns.

The key markets will be those that have mature trading as well as access to the larger populations with investment potential. We see these markets as primarily Singapore and Hong Kong. Recently there have been very successful project sales in Cambodia and Myanmar that have marketed investment products. Generally these are smaller more affordable apartments with some sort of guaranteed return. Historically, developers have aimed for the end-user market, catering to the ultimate occupants. However, for investors they will care more about the potential to rent and receive a yield. This may change the focus to better locations, higher density districts and those with emerging capital growth potential.

Recently, we have seen some agencies from abroad coming to Vietnam to introduce their products. I think this could be a good option. Provided Vietnam’s amended laws support purchasers’ rights, then this will certainly work. It has worked extremely well in other locations. This is why the flight of investment capital has continued from Asia into Australia and the UK. Fundamentally it’s the transparency and enforceability of title and rights that purchasers are seeking.

For example, in 2014 a single residential agent in our Savills Taiwan office brought over 80 residential investment sales into Australia.

However, this is a competitive market with purchasers having a number of good choices available within the region, so the product will need to be priced and delivered against this backdrop.

On the attractiveness of the revised law for foreigners to buy houses in Vietnam, let us see how the decrees and circulars guide the amendments. It would be premature to comment prior to these being circulated. We are very happy that the government continues to provide policies that assist property development.

If the guiding decrees effectively limit the foreigner purchasers to those that are working in Vietnam then the impact would be very limited.

However if the amendment permitted ‘golden visas’ or investment then there would be strong demand. The next step to be contemplated is the ‘exit’. If there is potential for foreign investment then competing countries would also offer depreciation allowances to be offset against income for tax. There would also need to be a solid capital gains taxation regime and a clear pathway for repatriation of dividends.

In the coming time, if we look to mature markets with relaxed foreign ownership then usually no greater than 5 per cent annually of all transactions are to foreigners.

I expect the government to offer a support policy to assist the residential sector; however there will be strong parallel guidance through visas, tax and dividend remittances etc.

Amongst our regional peers, the Malaysia My Second Home programme is hugely successful and has been running for over 15 years, however there has not been a massive influx of any single foreign nation, nor have there been adverse effects. To the contrary, the scheme has worked very well, actively attracting foreign capital to Malaysia.

VIR

Housing Price in Hanoi so steep, few can afford

Housing prices are so steep in suburban Hanoi that few people will ever be able to buy a place of their own.


A worker at her rent house in Hanoi.
The average income in the national capital is between VND10 million and VND15 million, while the cheapest dwelling of 50 square meters costs VND300 million, according to the Hanoi Socioeconomic Research and Development Institute.

“That means a person would have to work for 25 to 30 years, and spend nothing in that time, to save up for a house,” the institute’s head, Nguyen Dinh Duong, said at a conference held by the Hanoi Construction Association on Friday.

“So a huge number of urban residents will never buy a home.”

The alternative, renting, is nearly as big a problem.

There are now 55 industrial zones in Hanoi, but almost none supply accommodation for their workers, Do Quoc Tuan, deputy director of Hanoi Construction Department, told the audience.

According to his department, only 30 percent of state workers have been provided with housing, and the college and university dormitories can barely accommodate 20 percent of the city’s 800,000 tertiary students.

Hanoi will need investment of VND43.5 trillion to build enough housing for 60 percent of the students, 50 percent of the workers and five percent of low-income earners in the built-up area by 2015, Tuan said.

His superior, Do Xuan Anh, said the task ahead was beset by “difficulties with policies to develop home funds and ensure investors get their money back.”

“Housing development efforts are yet to meet the demand of young laborers and young married couples,” he said.

In Hanoi so far this year, construction of 800 houses for low-income earners has begun in Long Bien District, and plans have been made to build housing for college students on nearly six hectares of land in two new satellite towns in Thanh Tri and Tu Liem districts.

Duong said housing could be made more affordable by reducing the average area to 30 square meters or less and using inexpensive building materials.

Nguyen Trong Ninh, deputy head of the Housing and Real Estate Management Department of the Ministry of Construction, suggested the government either invest directly to build housing for rent to low-income earners, or supply property developers with land to do the same.

Duong gave the idea his support and suggested the housing problem might be eased if low-income earners accepted the idea of renting and gave up all thought of ever owning a place of their own.

VietNamNet/TN

VietNamNet - Deputies question limits on overseas Vietnamese ownership of houses

How many houses overseas Vietnamese may purchase and with what rights were matters of considerable concern to National Assembly deputies at a debate on May 22.

Deputies Nguyen Dang Trung (standing) propsed to loosen some rights for overseas Vietnamese.

A proposed amendment to the Housing and Land Law would permit Overseas Vietnamese who live in Vietnam at least three months to buy a house or an apartment but would forbid them to mortgage the property, pledge it as security for a loan, or receive compensation if taken by the Government under eminent domain rules.

The amendments proposed by the Government to Article 126 of the Housing Law and Article 21 of the Land Law were discussed by National Assembly deputies on May 22.

The Government draft distinguishes between two kinds of overseas Vietnamese who have the rights to buy house in Vietnam. In the first group are those who have Vietnamese nationality, overseas Vietnamese who directly invest in Vietnam, people who have served the country, scientists, artists and other highly skilled people, and people whose spouses are Vietnamese citizens resident in Vietnam.

The second group includes all overseas Vietnamese who are granted visa exemption allowing them to live in Vietnam at least three months. People in this group cannot mortgage their houses.

Deputy Nguyen Ngoc Dao (Hanoi) argued that it is necessary to expand the group of overseas Vietnamese who have unfettered rights to buy homes in Vietnam because in the past three years, only 140 overseas Vietnamese have done so. Dao said that it is unnecessary to restrict overseas Vietnamese from mortgaging their houses.

Deputy Pham Thi Loan (also Hanoi) agreed with Dao, noting that the state’s purpose in allowing overseas Vietnamese to own a house here is to strengthen their attachment to their country of origin and to develop the real estate market. Overseas Vietnamese, therefore, should be provided the right to buy houses as though they were local residents and should be compensated in case the government condemns their houses. If they buy or sell or buy houses, of course they must pay tax.

Loan added that the government should not restrict the number of houses owned by overseas Vietnamese.

Deputy Nguyen Hong Son said that in the past, overseas Vietnamese didn’t have the right to buy houses but even so, they bought real estate in their relatives’ name, causing many lawsuits. Expanding the categories of overseas Vietnamese eligible to buy houses and lifting the limit on the number they may own will reduce complaints.

Economic Committee Chairman Ha Van Hien clarified that the amendment aims to ease the way for overseas Vietnamese to own a residence in Vietnam while deterring them from using said houses for business. The number of houses overseas Vietnamese may own and how they may use them, Hien said, ought to be restricted to prevent bad influence on the real estate market.

Supporting the Government position, Hien maintained that overseas Vietnamese who retain Vietnamese citizenship should have the same rights in real estate as Vietnamese living in Vietnam. Overseas Vietnamese who don’t keep their Vietnamese citizenship, on the other hand, shouldl be allowed to buy one house or one apartment only.

Some deputies raised questions about the definitions of who can buy a house in Vietnam. Hanoi Deputy Nguyen Dinh Quyen said that there are many terms that are unclear. What exactly, he asked, are ‘highly skilled people’ or the people who have served the country well? Quyen said these definitions should be clarified.

PV