Foreigners should face no barriers to house hunting

July 11, 2023 | 03:21 pm PT
Hoang Van Phuong Economist
As a professional in the Australian property sector, I'm seeing a growing trend of high-net-worth individuals relocating to Australia, as well as the increasing number of international homebuyers.

These numbers reveal a key aspect of the market outlook and are a reflection of the vitality, transparency, and potential of Australia's economic climate.

There is a growing level of integration between economies around the world, as evidenced by bilateral, multilateral trade and investment agreements. Within these are provisions on foreign investment in the real estate sector, all of which are based on the principle of reciprocity. The U.S., Europe and Australia, three of the world's largest economies, have long had policies in place to assist and encourage international investors in the real estate market, with the overarching goal of optimizing the use of society's resources.

In Australia, foreign organizations and individuals can buy commercial real estate with the same tax and ownership rates as locals, and can apply for a permit to buy a house to live in or rent out. The Vietnamese invested AU$400 million (equivalent to US$268 million) in residential real estate in Australia during the fiscal year 2021-2022, ranking third behind mainland China (AU$2.4 billion) and Hong Kong (AU$600 million). According to data from the Australian Foreign Investment Regulatory Authority (FIRB), Vietnam has consistently ranked among the top five investors in Australia's residential real estate market in recent years.

With an average annual investment value of three billion U.S. dollars, Vietnamese investors are also among the world's top investors in U.S. real estate. In the U.S., the government is currently running investment programs to develop real estate projects that create certain new jobs as a condition of being granted a green card (such as the EB-5 investment program). This helps incentivize the contribution of foreign investors and creates jobs for the U.S. economy.

This is a topic of concern and debate in Vietnam as well. In a report sent to the National Assembly to explain and receive the amended draft Law on Housing dated June 16, the Ministry of Construction said that it is not necessary to stipulate that foreigners must have Vietnamese nationality to purchase houses and property. This viewpoint is in line with international trends, given the country's continued rapid economic development and extensive integration into the world economy.

To create favorable conditions for foreign investment resources in the real estate sector while minimizing the impact on real estate prices and domestic demand, especially among low-income individuals, I propose the following solutions.

The primary objective is to increase housing supply. Many real estate development projects have stalled over the years, primarily due to administrative and legal obstacles. Therefore, unlocking the supply continuously, with a variety of prices, segments, and utilities will be an essential requirement for supporting the growth of the Vietnam real estate market, a crucial sector of the country's economy.

Second, in order to create products that meet the demands of both the Vietnamese market and the international community, it is essential to conduct thorough research into the housing and investment requirements of foreigners in Vietnam. Once the national housing database is complete, understanding foreigners' real estate investment trends in Vietnam will be crucial information for efficient state management, allowing for the formulation of appropriate recommendations at each phase of the market's evolution.

The third issue is that foreign investors are able to acquire and speculate on the domestic real estate market due to Vietnam's abundant capital resources and relatively low prices relative to foreigners' incomes. In addition to the policy of limiting the percentage of ownership in each project, there should also be policies in place to prevent speculation. Taxes, such as a vacancy tax, must be proposed to ensure that invested real estate is continuously utilized, thereby increasing market supply.

Vietnam is emerging as a fast-growing and dynamic economy, hailed by prestigious international organizations as a bright spot in Asia, with a high degree of openness to foreign capital flows and international trade. According to data from the Foreign Investment Agency, Ministry of Planning and Investment, the country had 36,881 valid projects with a total registered capital of nearly $444 billion as of March 20. In recent years, numerous major investors, including Intel, Apple and Samsung, have selected Vietnam as one of the focal points of their global business strategy.

Each year, the number of permanent foreign residents and workers in Vietnam increases in tandem with the trend of increasing foreign investment in Vietnam. The General Statistics Office reported that the number of foreign workers in Vietnam was 12,000 in 2005, 55,000 in 2010, 83,600 in 2015, and 117,800 in 2019. In just 15 years, the number of people hired from outside the country increased by almost a factor of 10.

The rising demand from foreigners for investment and property ownership in Vietnam is a positive indicator of the economy's potential and dynamism.

*Hoang Van Phuong is an economist and director of real estate and investment market analysis firm HousingMarketAustralia.

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