Investing in Vietnam Property: The Ultimate Guide

Vietnam has come a long way over the past few decades, averaging over 7% annual GDP growth throughout the 1990s. The country remains one of Asia’s more promising markets as it opens to foreign investment – and Vietnam property is arguably the best way to gain from their economic rise.

One area which Vietnam has become competitive in is manufacturing. This is especially true since China has become less popular for international firms. Businesses now prefer setting up shop in Southeast Asia.

This is probably caused by rising costs, more regulations, weaker growth, and a strong “home-bias” in the Chinese market. But whatever the case may be, East Asia is experiencing a downturn and Southeast Asia is on the rise.

As such, many investors are looking toward Vietnam – Southeast Asia’s third most populous nation and one of the fastest growing ones in the region. But foreigners have, at least up until recently, had few options when investing in Vietnam.

This is quickly changing. During the summer of 2015, the Vietnamese government relaxed property ownership rules for foreign investors.

Anyone with either a 3-month tourist or residence visa may now own land on a renewable, 50-year lease. Foreign companies have even less restrictions when buying property. It’s not quite as easy as that and there are other rules (which are discussed further below) to consider.

However, there’s no doubt Vietnam is going in the right direction. Places like Cambodia and Malaysia still make it easier to buy real estate as a foreigner. But with that said, the government has made clear which way they’re moving toward by gradually lifting restrictions on both foreign ownership of companies and properties.

Until things are made easy for investors, there’s still a few ways to get your feet wet and begin investing in Vietnam property. It’s bureaucratic – but once you’ve figured everything out, it’s possible to (at least de-facto) own both apartments and houses in Vietnam.

 

Ho Chi Minh City, often referred to as Saigon by the locals, is Vietnam’s largest city and one of Asia’s fastest-growing.

There are a few reasons to invest in Vietnam now rather than waiting until it’s easy – apart from the fact that the barriers to entry are keeping prices low at the moment.

First off, demographics are in Vietnam’s favor. While nearby countries such China and Thailand are about to suffer from population decline, Vietnam is expected to grow from its current population of around 95 million today to almost 120 million by 2040.

Because of this, property prices in the center of all major cities should be driven up by urbanization.

Second, Vietnam is one of the fastest growing countries in the world. Its economy expanded by over 6% in 2016 – and even from there, the current trends are pointing upward as the government makes things easier for businesses.

Pioneers reap the greatest rewards. Vietnam is not easy or straightforward to invest in, but that’s not necessarily a bad thing.

Can Foreigners Invest in Vietnam Real Estate?

In a word, yes. But it’s more complicated than that. Vietnam’s foreign property ownership laws limit the number of foreign owners there can be in any particular neighborhood. Also, freehold ownership of land is not permitted.

For starters, land may only be leased in Vietnam. Whether you’re a local or a foreigner, all plots are collectively owned by the state and can only be leased on a 50 year basis. It’s possible to own houses and structures. Just not the land which they are built on.

With that said, there’s an option to extend these leases once they expire. Not many people expect the government to decline those who wish to renew – if anything, real estate ownership should be easier in 50 years.

The other two restrictions are that foreign buyers may only own up to 30% of units in a single condominium building. Furthermore, only up to 250 houses in any one administrative ward may be owned by foreigners. Neither of these limits apply to overseas Vietnamese.

Obviously, these two rules are more of a concern in dense cities such as Hanoi and Saigon than out in the country.

These current laws are relatively new and there used to be more restrictions. Until foreign ownership was liberalized back in July of 2015, you needed to have a residence visa before buying property.

I mention this not to dwell on the past but to show the positive direction Vietnam is, slowly but surely, moving toward.

How Much Are Property Taxes in Vietnam?

When transferring real estate in Vietnam, fees are payable by the buyer. There’s a 5% VAT (Value Added Tax) in addition to a registration fee worth 0.05% of the property’s value.

If any profit is made, there’s also a small capital gains tax of 0.15% on that amount.

Rental income is paid at Vietnam’s normal flat income tax rate of 20%. However, if you ask local landlords, you’ll find that few people ever bother to pay it and are left alone.

Technically, there’s also a land tax paid at 0.03% to 0.15% of its value with the exact rate depending on the land’s size. But this tax is also rarely paid by anyone in practice.

Is Buying Property in Vietnam Safe?

Vietnam has a well-documented land registry and the government keeps good track of plots in all major cities. So unless you’re buying land in a very rural area, you’re unlikely to have any problems on that end.

Any issues when buying property in Vietnam will come from the sellers rather than the government. Just like most other countries in Southeast Asia, it’s worth looking into the reputation of any developer you buy from.

There are some well-established companies with lots of projects to show. But if you buy from a small firm with few (if any) complete developments, you have a larger risk of construction either not moving ahead on schedule… or stopping altogether in the worst case.

For those buying from a reseller rather than a developer, it’s just as important to have an inspection done instead. Sellers have been known to hide structural issues and other problems such as water damage. Make sure you know what you’re getting into.

Places to Invest in Vietnam

Vietnam is the third most populous country in Southeast Asia with over 95 million people. Despite regulations, this means foreign buyers are able to consider towns, cities, and neighborhoods of all different sizes and flavors.

Many investors choose property in Ho Chi Minh City (Saigon) or Hanoi. Most of the rest choose beachfront cities and resorts such as Nha Trang or Da Nang.

Foreigners can often buy in smaller, less populous areas – at least in some form. But Vietnam has dozens of cities with at least a few hundred thousand people living in them.

As such, we’ll focus on the larger cities and resort areas for the purposes of this guide.

Ho Chi Minh City

Vietnam’s largest urban area and commercial hub is one of Asia’s fastest growing cities. New shops and businesses open by the month, while practically every street is filled with construction and people at work.

Referred to by the locals as Saigon, most things of any business importance in Vietnam has to go through Ho Chi Minh City. This makes its real estate market popular with expats, entrepreneurs, investors and retirees alike.

Unlike some major cities in the region, such as Bangkok or Jakarta, Ho Chi Minh City has a well-defined core. Usually people consider this to be District 1 and District 3 on the west side of the river.

Saigon officially has 19 inner-districts and 4 suburban districts. But for all intents and purposes, districts 1 and 3 are the city center and the corporate hub of Vietnam.

With that said, Saigon is going through rapid urbanization. District 2 on the east side of the river is being heavily developed. Suburbs to the west and north of the city center are continuously expanding.

The Bitexco Financial Tower is Vietnam’s tallest building and can be seen from practically all of central Saigon.

District 1

The very center of Ho Chi Minh City, District 1 is Vietnam’s focal point for business, commerce, and finance. It follows that rent and property values are the highest in the city.

Hotels, offices and other skyscrapers take up some of the country’s most prime real estate. Of course, several apartment buildings and condominiums are sitting not far from them.

None of that means that the entirety of District 1 is glitzy, or that there’s no apartment buildings in need of renovation. There’s actually plenty of fixer-uppers.

But keep in mind that you’re going to be paying way more for property in District 1 than you would elsewhere. In fact, prices are higher than even those in some other, more developed Asian capitals like Kuala Lumpur.

As you move westward, away from the Bitexco Tower and the river, more property is available and prices become manageable. There’s some investment potential on the west side of District 1 for those with a larger-than-average budget.

District 2

Located on the other side of the river from downtown Saigon, District 2 is geographically close to the city center yet separated by a large bridge – and often tons of traffic.

However, District 2 also provides a high-standard of living. Owning a large house in a gated community is possible here which makes the neighborhood ideal for those with families and some spare cash.

Some of Vietnam’s best international facilities are also in District 2. That combined with a plethora of top restaurants and stores make this area one of Ho Chi Minh City’s most desirable for expats and upper-class locals.

District 5, while not being different enough to warrant its own section, has a similar vibe to District 2. But instead of being located across a river from central Saigon, it’s several kilometers south of it.

District 3

Still in the center of Saigon but outside its main commercial area, District 3 is considered to be the city’s “hippest” and most upscale residential neighborhood.

Many expats prefer living in District 3 because it’s near the restaurants, bars, and other amenities of District 1 – yet further away from all of its chaos.

For comparison, it’s similar to Thong Lor in Bangkok. If you’re less familiar with Southeast Asia, it’s Ho Chi Minh City’s answer to Fifth Avenue if District 1 were Times Square.

Prices are still high in this area – but not quite as much as in District 1. There’s also more options for property investors since District 3 isn’t as packed with skyscrapers.

Districts 5 & 10

Both Districts 5 & 10 share many things. These two neighborhoods are small compared to most other districts and are located within walking distance of one another.

While not far from District 1, these two areas replace the pricey restaurants and stores found in the city center. Plenty of street-food can be found instead, while traffic clogs the road throughout most of the day.

This isn’t to say that Districts 5 & 10 are dumps. In fact, some of Saigon’s best universities and most famous temples can be found here. But we’re no longer looking at expat areas.

That’s probably a good thing. I personally expect these two areas, as dense as they already are, to benefit from urbanization and see a respectable rise in property values.

Construction is booming in Hanoi with an elevated railway even in the works.

Hanoi

The nation’s capital and second largest city, Hanoi provides a very different feel than Ho Chi Minh City. There shouldn’t be a surprise that it also has a very different property market.

Hanoi is much more low-rise than its larger neighbor to the south. Because it’s Vietnam’s political center rather than its financial hub, they lose out to many expats and businessmen who are sent to Ho Chi Minh City instead.

As such, a strategy of focusing on the high-end expat market is not quite as viable in Hanoi. The numerous embassies, NGOs, and start-ups do help though – so there’s still some potential.

But if you’re coming to Hanoi rather than Saigon in the first place, it may be better to target the local market instead.

Tay Ho

Translated into English as “West Lake”, Tay Ho is perhaps Hanoi’s most desirable residential area. Many of Vietnam’s political elite and foreign ambassadors choose to live here while large, guarded houses line the streets.

Built around a large lake with the same name, Tay Ho district is peaceful and serene. Yet it’s just a short drive away from Hanoi’s downtown and the nation’s political center.

With all of these things said, it should be no surprise that land prices in Tay Ho are among the most expensive in Hanoi. The sheer size of the district is probably the only reason why plots of land in the district are even still available.

Just to the south of here, Ba Ding district is where most of Vietnam’s embassies and government buildings are. There’s also property available in Ba Ding, but it’s different enough from Tay Ho to not warrant its own section.

Hoan Kiem

Also named after a lake which the district is built around, Hoan Kiem is best known as Hanoi’s old quarter. It’s also one of Vietnam’s most popular tourist neighborhoods.

People often love Hoan Kiem’s vibe, but properties in this small and centrally-located area are owned by local Hanoians who have lived here for generations. As such, real estate isn’t usually for sale here – and it’s prohibitively expensive when it is.

Hai Ba Trung

Hai Ba Trung’s location just to the south of Hoan Kiem gives it easy access to Hanoi’s commercial core, along with its restaurants, shopping and other facilities.

But property in Ha Ba Trung, sometimes referred to as HBT by the locals, is much more readily available. Prices are still more expensive here than in most of Vietnam’s capital – but not prohibitively so.

Meanwhile, new cafes and restaurants are opening up every month. Hai Ba Trung is one of Hanoi’s fastest growing areas in its central core and investors may wish to take note.

Dong Da

This is the densest area in Hanoi and one of the most crowded in all of Vietnam. You won’t find many expats in Dong Da which is almost purely a local neighborhood.

With that said, things are truly happening in Dong Da. The mere fact that there’s practically a total absence of foreigners could mean it’s worth a closer look for property buyers.

More development is happening in this working-class neighborhood than anywhere else in Hanoi and construction can be seen on every corner.

I wouldn’t recommend living in Dong Da, but as is the case in most of Asia, higher returns come from going to the “gritty” areas where most foreign investors don’t go.