Vietnam’s Immature Property Market

Vietnam’s immature property market is quite something of an anomaly – on the one hand it appears to offer unlimited potential to investors looking for a bleeding edge emerging market with at least as much desirability and opportunity as Thailand offered ten years ago, and yet on the other hand it seems to be a market wary of foreign control on any level that is potentially restricting itself unnecessarily as a result of investment source xenophobia – we take a closer look.

A new property law known as the ‘Real Estate Trading Law’ has been ratified in Vietnam and is due to come into effect from the 1st of January 2007; the law has been introduced in an effort to tighten control on property development and developers in Vietnam and to free up opportunity to non-resident Vietnamese and foreign property investors. 

However, critics of the law claim that it will add unnecessary bureaucratic burden to an already overburdened sector, do little to kick start a stagnant market, do nothing to help those in areas of Hanoi and Ho Chi Minh City where property prices have exploded beyond the reach of local citizens and hardly do anything to entice foreign investors to get involved in real estate trading in Vietnam.

It’s true that the law does little to ease the restrictions placed on the foreign freehold ownership of property in Vietnam - and for foreign investors this is a great shame.  The potential from both the local economy and the emerging tourism industry in Vietnam for foreign property investors is huge, and yet they are not afforded the right to own land or property anywhere in the country.  According to the terms of the new law they will now be permitted the right to trade in Vietnamese real estate however – this includes having the right or option to invest directly into property development projects.

It is hoped that the facilitating of this right from the 1st of January next year will be sufficient to shore up Vietnam’s immature property market.  To further entice investors the government have forced through various controls that will restrict the speculative and over-reaching activities that some property developers in Vietnam have been guilty of.  For example, developers will now have to take responsibility for the quality of their constructions and they will only be able to use a buyer’s deposit for the construction of a proposed property unit, should they fail to finish a given project on time they will have to pay the buyer interest on the advanced deposits for the entire period of the delay. 

It is hoped that the new law will bring more uniformity of construction quality control, that it will limit developers from rushing ahead and over producing over priced stock, that it will give foreign investors the confidence they need in both the Vietnamese government and the country’s property sector to make a financial commitment to the real estate market and that ultimately it will help secure the long term economic success of Vietnam’s immature property market.

It seems that the Vietnamese authorities are therefore not overly concerned with limiting foreign control in the market through a xenophobic fear of foreign investors – rather they are committed to growing a sustainable property market and learning from the mistakes of their neighbouring countries and nations around the world whose property markets have been forced too high by speculative foreign buyers who ultimately have no long term commitment to the given nation.  Hopefully Vietnam will be successful in taking its real estate sector from a state of immaturity and instability to one of sustainable growth and development. 

Special Reports: Property News for Vietnam

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