Demand for property has increased dramatically in Vietnam since the government issued new laws that allow the lease of land for 70 years and then extensions without any payments. Thai developers are looking to bid for land plots in Vietnam for development. The Hanoi government’s issue of Decree 84 earlier this year brought Vietnam one step closer to opening up its real-estate market to foreign ownership, effectively leveling the playing field for international developers.
Decree 84, issued in May, states that foreign investors can now lease land for 70 years, extendable without additional payment. This effectively creates a perpetual lease and means that overseas developers are effectively treated the same as Vietnamese developers. Previously the longest lease available to a foreign purchaser or investor was 50 years. Vietnam now has one of the most open property markets in Asia, on a par with China.
The effect of this has been a massive increase in interest from foreign developers, from Hong Kong, Singapore, Korea, Japan and Thailand. Thailand, by contrast, only offers foreigners 30-year leases with the possibility of one or maybe two 30-year extensions.
Preuksa, the country’s second-largest residential developer, said it planned to bid for land in Ho Chi Minh City in mid-December to develop medium-priced housing units in which it specializes.
Apart from the opening up of the residential property sector, Vietnam has also made significant moves in other sectors. On Jan 1, 2009, Vietnam will open up its retail markets to international retailers in compliance with its commitment to the World Trade Organization.
The boom in the property sector comes amid the growth of the Vietnamese economy, which is among the fastest-growing in the region. Grade-A office rents are now at US$40-45 per square meter in Ho Chi Minh City, roughly three times as expensive as their Bangkok equivalents.
Prices of good-quality residential projects are now hitting $3,500 per square meter, around the same price as an average grade-A condominium project in Bangkok.
Realtors say the pace is so hot that supply cannot match demand, sending prices skyrocketing. Prices have doubled in 12 months, nearly tripled in some cases over the past 18 months. According to local pundits, it will take two years in the country’s commercial center of Ho Chi Minh City and surrounding areas to match demand and cool down prices.
In another sign of the boom, hundreds of people in the city queued all night several weeks ago to try to buy flats on a site where the developer had not even broken ground yet. In just one year, some Ho Chi Minh City neighborhoods have seen apartment prices jump as much as 100%. The inflow of foreign investment and growing interest in the real-estate market by overseas Vietnamese are also helping to push prices up.
The French Notary has agreed to work directly with the Vietnamese government to modernize and improve real estate registration and regulation processes in Vietnam. Because the French land registration system is proven and so well regulated it is seen by the Vietnamese as the model to emulate and now the Honorary President of the Superior Council of French Notary has agreed to give full support and direct assistance to the Vietnamese Ministry of Natural Resources and Environment to get their real estate registration affairs in order which should make the whole process flow a little more smoothly than has been the case in the past.
It’s not all good news though. In a country where the average national yearly income is around $1500, these rapid price increases are putting much property beyond the reach of the local population and a recent survey by Mercer, a US human-resource consultancy, found Hanoi ranked 29th out of 144 global cities ranked on cost of living, directly following Berlin and ahead of other major cities such as Taipei, Guangzhou, Chicago and San Francisco.