How to buy a home in Vietnam
Vietnam has quickly grown into one of the fastest growing economies over the last decade and draws a lot of international investments and with it expatriates. With this growth comes an increased demand in rental properties from expatriates, which has seen rental prices increase by an astounding 90% from 2017 to 2020 alone. This of course makes for an exciting investment opportunity, but how does the market really work? In this article we explain how foreigners can own property in Vietnam.
How can own property in Vietnam
As a very basic rule anyone with a valid tourist visa is eligible to buy property in Vietnam. But there are of course various restrictions as to what and how much of it can be bought. The two most popular residential properties for foreigners are condominiums and houses / villas. Both of them are regulated differently. But before anyone can buy a property, the first step is always to apply for a property ownership certificate, also commonly known as the “Pink Book”. This certificate of proprietorship is issued by the Ministry of Construction and will contain all properties owned by an individual.
Buying a Condominium
By law foreigners can own a total of 30% of the total salable area of a condominium, whereas 70% therefore needs to be owned by Vietnamese nationals. This allows foreign nationals to buy units in their name within the foreign quota and hold their own title deed. When buying a new or used condominium it is crucial for foreign nationals to understand if the unit is under foreign or local quota. If under foreign quota, there stands nothing in the way of a purchase. However, a single foreign owner is limited to ownership of maximum 250 units within one district.
Buying a House
Buying a house in most cases means buying a plot of land with a property sitting on it. In Vietnam this is not possible. Land in Vietnam belongs to the people of Vietnam who appoint the government to manage such land. In essence this means no one in Vietnam, including locals, can own land in their name. This means all land is leased by the government to the people. In July 2015 a new Housing Law was passed, making it easier for foreigners to own property. This includes a mandate where foreigners can lease land for 50 years and have it renewed thereafter. However, one major restriction is that foreigners cannot own more than 10% of real estate in one landed project.
What are the steps to buying property
Buying property in Vietnam can be exhausting and therefore the recommended first step is to appoint a well reputed real estate agent or agency to handle all matters and support you throughout the purchase process including due diligence, property search, legal review, negotiations, ownership transfer, tax responsibilities, etc. In most cases agent commissions are paid by the seller, albeit it becomes more common to see buyers pay agents anywhere between 1% to 2% to assure agents for them and bring off market properties to their attention.
Once a property has been selected, it is down to agreeing on the terms of the purchase agreement. A property can be purchased either in cash or with a mortgage (or a combination of both), on an installment plan or via bank transaction.
Once the real estate is paid for, the new owner can apply for the registration of the asset in the “Pink Book” after which the property is listed to the name of the new owner. It may take up to 50 days to receive the “Pink Book”.
Taxes & costs for home buyers
When buying property in Vietnam, as in most other parts of the World, it does not stop at the asking price. There are additional fees and taxes involved to be paid by the buyer. One major distinction is whether the property is purchased from the primary or secondary market :
A 10% VAT is applicable for all properties sold directly by the developer. On top of that for condominiums a 2% Maintenance Fee (sinking fund) is charged and to be used later by the condominium for repairs or maintenance work.
All resale units sold on the secondary market are subject to a 2% Sales Tax on the final agreed transfer price. This tax is normally paid by the seller but there are negotiated terms where buyer and seller share this tax on a 50/50 basis. On top of that a Registration of 0.5% is to be paid by transfer to the property. Usually this tax is paid by the buyer.
Also common in other parts of the World, Vietnam too often charges maintenance fees to unit owners for the upkeep and maintenance of a development including security, staffing and common utility costs. Such fees are based on a square meter price based on the size of the unit and may range somewhere between USD 0.5 and USD 1.5 per square meter per year.