Vietnam could soon become the new property hotspot in the Asia Pacific region, challenging the likes of Bangkok and Singapore for investment dollars. Channel NewsAsia recently reported that the country’s growing middle-class, along with relaxed regulations on foreign ownership, could help the property market grow significantly in the near future.
At the moment, Vietnam’s economic outlook is healthy, which is one reason why prospective investors are starting to enter the market. The article stated that annual growth of six to seven percent is forecasted between now and 2020, driven by foreign investment and a slew of free trade deals such as the Trans-Pacific Partnership.
The real estate market has also seen quite a bit of action in recent years, with unsold real estate inventory in the entire country amounting to US$2.4 billion last month. The figure is nearly 50 percent lower than what it was in early 2013.
A new law introduced by the government in July 2015 has made it possible for foreigners to purchase property in Vietnam. However, the upturn in investors has yet to materialise. While local confidence in the property market is high, rental yields are still proving to be an issue, keeping foreign investors at bay. For instance, apartment yields in Hanoi average five percent and around three to four percent for villas.
“The problem we’ve got here is rental yield. The rents are too low – still too low compared with the purchase price of property. So we have to use special techniques to make it work,” said Welsh property investor and multi-millionaire Kevin Green.
This is just one issue facing Vietnam before it can start to seriously challenge countries like Thailand for foreign real estate investment. There are also some issues with taxes that need to be worked out before Vietnam’s property sector can truly take off.
“Like how you transfer money from other countries into Vietnam. For example, after a few years if you want to sell the property how do you take out the profits and money back to your country? We need some guidelines from the State Bank of Vietnam,” said Pham Thanh Hung of Cen Group Holdings.
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