Real Estate Remains Unattractive to Overseas Vietnamese: Prices or Polices?

 

Up to 90 per cent of foreign companies have invested in the real estate sector such as marketing, distribution, appraisal, investment consultancy and project management, while most domestic realty firms are newly set up. Currently three companies, namely Savills Vietnam, Colliers and CBRE, hold 90 per cent of the Vietnamese realty market share. They have much experience in realty business. Savills has 15 years experience in Vietnam and tops the country in managing Vietnamese service apartments.

 

Meanwhile, CBRE also has advantages in evaluation and office-for-rent office management with nine years experience. With 14 years of operation in Vietnam, Colliers specializes in luxury apartment management. Meanwhile, the number of local realty firms remains limited, with several outstanding names such as Megagroup, Viet Rees, Eden and Him Lam. Despite a great number of realty consulting and brokering companies established in recent years, their operation scale is very limited and disparate.

 

According to the General Statistics Office of Vietnam, 2008 was considered a successful year of foreign investment in the realty sector in Vietnam, which accounted for up to 88 per cent of the country’s total FDI. The biggest projects included Ho Tram worth US$4.2 billion by Asian Coast Development; golf course and sea tourism projects totalling US$130 million by VinaCapital and its other projects capitalized at US$350 million in total near the Han River.

 

Despite the global economic downturn, South Korean, Singaporean, Japanese and Taiwanese companies have continued invested in big tourism property projects in Vietnam. Meanwhile, investors from the US, China, Switzerland and the Middle East did not miss opportunities to invest in this sector. The US’s Oak Tree Group has recently said that it plans to pour US$5 billion into Sunrise Danang tourism resort.

 

Currently, around four million Vietnamese people are living in foreign countries and territories. Meanwhile, only 140 among those were allowed to buy houses in Vietnam by the end of last year. What is the barrier for them to invest in the country’s realty sector? Jim Hoang Nguyen, an American Vietnamese living in California, said realty prices in Vietnam are very high and its administrative procedures remain complicated, which discourages him from investing in the sector. He added that, with US$100,000, he can buy a villa of between 250-300 m2 in the US, while, the money is only enough to buy several dozen square metres of land in Vietnam. The money is not even enough to buy a 100-square metre apartment in Vietnam.

 

A legal document on allowing overseas Vietnamese to buy houses and land in Vietnam took effect from July 1, 2009, realty price hikes lessen foreign investment in the realty sector, which was attributed to an on-year fall of 12.8 per cent in overseas remittance at US$6.283 billion. Ho Chi Minh City, which has the biggest number of people living abroad, received US$3.2 billion of overseas remittances, lower than the nearly US$5 billion in 2008. Last year, only 10 overseas Vietnamese bought houses in Vietnam and all in Ho Chi Minh City. According to the Committee for Overseas Vietnamese’s Ho Chi Minh City office, since 2006, just 140 overseas Vietnamese invested in realty in Vietnam, including 100 in Ho Chi Minh City. Real estate prices in Hanoi are much higher than those of Ho Chi Minh City, which explain why Ho Chi Minh City’s investment rate is higher than Hanoi’s.

 

However, realty experts said, the document took effect but its guiding circulars have not yet been passed, which affects foreign investment in the realty sector. Under the law, “Overseas Vietnamese have rights to own houses attached to land ownership”, which many people misunderstand to mean they are only allowed to buy houses, not land. Thus, the law should be clarified to ease overseas Vietnamese concerns.

 

Nguyen Manh Ha, Head of the Construction Ministry's Housing and Real Estate Market Management Department, said the Ministry is compiling regulations on administrative procedure reforms enabling overseas Vietnamese who live in Vietnam for three months to buy houses. The Ministry is also proposing the government add two groups which can buy many houses in Vietnam, comprising of people with special skills that the state needs and people whose spouse lives in the country.

Legal improvements will hopefully boost overseas Vietnamese investment in the domestic real estate sector.