At the end of July we briefly mentioned Vietnam as an example of industrial development as an indicator to spotlight possible real estate opportunities, noting that the government were relaxing the rules on foreign direct investment in property to a limited extent. While there certainly seems to be a lot of opportunities in investing in Vietnho+chiam generally, the picture regarding real estate investment remains relatively obscure. Vietnam has been liberalising it economic system since the mid 1980s when the government embarked on its programme of ‘renovation’. Growth in recent years has been rapid and compared to India, China or the Philippines there has been greater success in removing extreme poverty measured by the numbers of people living on less a dollar a day. However, investors need to remember that Vietnam is a one-party state and the country’s rulers seem to be taking a cautious attitude to opening property investment to foreigners, in the interests of maintaining their own ability to influence economic development.

^{Ho Chi Minh City landscape [photo credits to waa [1] on flickr]}

The scope for investors in Vietnamese property needs to be monitored carefully. The announcement ^[2] that non-nationals were to be allowed to own residential property on 50-year leases was hedged about with numerous qualifications, particularly relating to the categories of foreigners who were to enjoy the new privileges ^[3]. Among these the two most promising appear to be those engaged in investment activities in the country and ‘licensed foreign businesses operating in real estate (in Vietnam)’; the number of foreigners that can expect to benefit from the changes is estimated by the authorities to be about 20,000 out of the 81,000 expatriates currently living in the country. The first category is presumably included to give some reward or incentive to welcome foreign capital while the latter suggests that the authorities would welcome foreign professional involvement in the property sector. What seems to be missing is any encouragement to believe that foreign direct investment by private investors will find favour any time soon. Specifically, no buy-to-let will be allowed.

It has been suggested that the new regulations may lead to a spike in residential property prices and Vietnamese living abroad are thought especially likely to take advantage of the opportunity.

The government’s caution towards the whole subject is further confirmed in that the National Assembly were originally supposed to have begun legislating for the changes two years ago. Currently, the new legislation is expected some time next year. Factors in Vietnam’s favour despite the ambivalent attitude towards foreign inward property investments include the continuing high rate of growth (the second highest in the world over the five years to 2005). This makes Vietnam more akin to mainland China than its Southeast Asian neighbours such as Thailand and Malaysia and, to a lesser extent, the Philippines. A second factor is the scope for the development of tourism which may seem surprising, given the country’s high population. However, this tends to be concentrated along Vietnam’s two main river systems ^[4], leaving lots of unspoiled coastline ^[5] with a mountainous hinterland. Last year there were 3.56 million tourist visitors. Currently, a US/Vietnamese joint venture is developing luxury resorts in the vicinity of Nha Trang and this kind of investment would appear to be one of the best ways for the time being. This kind of investment would require careful research and although Vietnam’s accession to the World Trade Organisation should guarantee that acquiring real estate for business purposes is allowed to continue, the benefits of entering into joint ventures ^[4] with local firms of good provenance will continue. Similarly, there may be opportunities for investing in residential accommodation in the main centres – especially Ho Chi Minh City – where demand seems to be outstripping supply.

For keeping abreast of property developments in Vietnam, we would recommend Vietrees ^[6] but there appears to be a problem with the English version of their site currently. CB Richard Ellis have a Hanoi office and their new newsletter on Vietnam ^[7] property should definitely be worth keeping an eye on.