VietNamNet Bridge – The Ministry of Construction’s idea of allowing foreigners to buy houses in Vietnam may not help warm up the frozen real estate market, because foreigners may not intend to buy houses once they are too expensive.

Chris Brown, CEO of Cushman & Wakefield Vietnam, thinks that the land price, which determines the profitability of real estate projects, is the decisive factor to which foreigners would refer when considering whether to buy houses in Vietnam. Meanwhile, the prices in Vietnam are still overly high.

Duong Thuy Dung, a senior executive of CBRE Vietnam, a real estate service provider, said Vietnam should not put a high hope on the demand from foreigners as a solution which can help ease the oversupply easily and quickly.

Since the day the Resolution No. 19/2008 on allowing foreigners to buy houses in Vietnam was implemented in a pilot program, only 89 people out of 80,000 foreigners, not including Viet Kieu (overseas Vietnamese), who live and work in Vietnam, have bought houses in the country.

Also according to Dung, most of them got married with Vietnamese citizens. Meanwhile, only 25 foreign businesses have bought apartments in Vietnam.

“The houses have always been very expensive, while the State has set up too many requirements on foreign buyers,” Dung explained.

She went on to say that since the houses prices are much higher than the house rents, most of the foreign institutions would rather lease than buying apartments.

Chris Brown of Cushman & Wakefield agreed, saying that this is one of the biggest obstacles to hinder foreigners to join the market.

Meanwhile, Tran Nhu Trung from Savills Vietnam, also a real estate service provider, pointed out that the currently applied administrative procedures remain too complicated, which would discourage foreign buyers.

Trung also said that foreigners may be reluctant to buy houses, once they are not allowed to sell the houses within 12 months since the day they get the land use right certificates. They would also not be allowed to lease to the third parties, use the houses as offices or for other purposes.

In the latest move, the Ministry of Construction has proposed to extend the duration foreigners can lease houses or apartments, loosen the leasing conditions, and extend the list of foreign subjects to be eligible for buying houses in Vietnam. Foreign investment funds, commercial banks, branches and representative offices of operational foreign invested enterprises would also be able to buy houses in Vietnam.

Regarding the ownership duration, two options have been suggested. With the first option, foreign individuals can possess houses for 50 years and have one 50-year extension. With the second option, they can own the houses for 70 years with no extension.

It’s still unclear how many houses foreigners can possess. The Ministry of Construction is considering either setting no limitation on the number of houses or allowing every foreign individual to have no more than 2 houses.

The investors from the Asian countries which make investments in Vietnam prove to have the biggest interests in the Vietnamese market, because they have deep knowledge about the market. They include Japan, Taiwan, Singapore and South Korea.

Cushman & Wakefield has also noted the high interest from the firms in the Middle East and Russia, but they mostly are interested in the Hanoi and HCM City markets.

TBNH