October 21, 2019
What You Need to Know About Property in Vietnam
With rapid economic growth due to market reforms, Vietnam has emerged as a popular destination for both tourism, and as a place to do business. Whereas Western economies have struggled in recent times, South East Asian economies have seen unprecedented levels of growth, and Vietnam has been part of this. Because of this growth the property market has expanded greatly in the last decade. Property in Vietnam has become easier to purchase in the last few years for foreigners because of the government’s relaxation of ownership laws.
Vietnam has much to offer tourists, investors and people who want to conduct business. Vietnam is rich in history. Combine together this, its beaches, temples and it’s relatively low living costs, and it’s no surprise that Vietnam has emerged in the way it has.
Until the last few years the process of buying property in Vietnam for foreigners was a difficult one. It was required that would be buyers had to create a company before they were able to purchase a property in Vietnam. This law has now been changed, allowing foreigners to buy property through renewable leases that provide usage rights for at least fifty years.
Experts believe that the property market in Vietnam has far from reached its full potential. Property in Vietnam is still far cheaper than the property found in destinations such as Phuket and Pattaya in Thailand. In the coastal regions of Vietnam there is a limited supply of land so prices are expected to rise in the short to medium term.
The Vietnamese government has created a sturdy legal framework to deal with issues within the property development industry as previously many developers would take a casual attitude towards building time-scales and deadlines. Legal changes mean that if foreigners meet certain criteria they can purchase condos in Vietnam without having to form a company with a Vietnamese national.
Decree 153 states that developers can receive initial payments only when work has begun on the project at hand, when previously this was not the case. Funding for developments has to be transparent and upon request investors need to be able to see the details of this funding. One of the most important new decrees relating to property in Vietnam has been the introduction of penalties for developers who deliver projects behind schedule.
For foreigners to buy property in Vietnam investors have to meet one of five requirements. If people are already investing in Vietnam through a business they can buy. A person working in a specific sector, with a university degree, or somebody who has received a state reward can purchase. Businesses not operating within the real estate sector can buy properties for their staff and also foreigners who are married to a Vietnamese person can purchase property in Vietnam.
The Buying Process
The actual buying process is relatively simple and registering the relevant documents will take about nine to ten weeks. Borrowing money to finance the purchase of a property in Vietnam is still quite rare but as the market expands there are some finance options starting to become available.
When purchasing a property in Vietnam, the related costs are relatively low and these costs make up only 6.5% of the total value of the property. Most of this is paid in registration fees and VAT. Rental income is taxed on an ongoing basis by the Vietnamese government and foreigners who stay in Vietnam for not more than 183 days in a 12 month period pay a flat 25% rate of tax on the rental income they have received. Capital Gains tax is also 25%. When a property in Vietnam is sold by a foreigner a transfer tax needs to be paid, and this tax is 10% on any profit made from the transaction.
The prospect of buying a property in Vietnam might be quite daunting for many western people. In recent times though, the government has introduced measures to make the whole process both less complicated, and safer for investors. Vietnam’s stunning scenery and expanding economy make the country an attractive place to invest in property but potential buyers should always do their research to ensure they do not encounter any problems.