The amendment to Vietnam’s Housing Law which took effect earlier this month now permits unlimited foreign ownership of properties for various purposes such as sub-leasing, mortgage and for bequest.
This covers foreign individuals as well, as entities such as investment funds, banks and companies, and is widely seen as a boost for the residential sector – in particular the high-end property segment – of which up to 10 percent is now predicted to come from foreign investment.
Marc Townsend, Managing Director for real estate firm in CBRE Vietnam, noted that much of the focus has been on residential ownership, but what implications do the new laws have for foreign commercial investment?
The less publicised but equally significant new Law on Real Estate Business, which also took effect on July 1, now allows for foreign acquisitions of offices, manufacturing hubs, or other properties for business purposes, and also permits the transfer of yet-to-be-completed real estate projects to investors for continued development.
Townsend said that in practical terms, the new law opens the door for foreign manufacturers to have full ownership of production bases in Vietnam, which require lesser capital outlay and has low labour costs relative to its regional neighbours, and would boost transactions of factories, warehouses, logistics facilities and industrial parks.
International companies looking to leverage Vietnam’s rapid urbanisation and growing middle-class can likewise wholly acquire commercial and mixed-use properties in prime cities like Ho Chi Minh and Hanoi to set up domestic and regional corporate bases and to establish commercial and retail operations.
Already, foreign sentiment in the commercial property market is upbeat. South Korea’s Lotte recently acquired a controlling stake in the prime mixed-use property Diamond Plaza in downtown Ho Chi Minh, while the 72-story Keangnam Hanoi Landmark Tower, Vietnam’s tallest building and valued at US$ 770 million, is also in the market with reported interest from Goldman Sachs and the Qatar Investment Authority.
Furthermore, 100 percent foreign ownership of publicly-listed companies in non-sensitive sectors will be permitted starting from September 1, 2015, which will only serve to boost property acquisitions by international investors to meet strategic business needs, Townsend said.
To date, capital from Japan, Singapore, South Korea and Hong Kong have been the most active in the real estate sector, and investment sentiment will only increase in light of the new regulations.
He said that the long-term economic potential of Vietnam is undeniable given its rapid urbanisation, emerging middle-class, and new regulations facilitating safer and more transparent foreign direct investment.
These strong fundamentals, together with the relatively lower cost of real estate and strong rental yields, make Vietnam’s changing landscape an attractive one for international property investors.
Image: A 2,700 sqm industrial factory for sale in Binh Duong, Vietnam, through CBRE.
