Foreign investors bet on Vietnam apartment market

Deeming housing prices in Vietnam to be significantly lower than in his home country and recognizing the investment potential, the 54-year-old business director, along with many of his friends, has been buying two or three apartments in Vietnam every year.

"If a 100-square-meter apartment costs US$1 million in South Korea, a similar unit only costs $300,000 in Vietnam," he says.

"It will also be in a good location such as HCMC’s District 2 or 7 or Hanoi’s Cau Giay District.

"Many South Koreans are buying apartments in Vietnam. Ten to 20 of my acquaintances have done so, with some buying even before the Covid-19 pandemic. I too come back to Vietnam every year to buy apartments."

His plan is to sell the apartments once housing prices grow significantly, which he expects in 10 years’ time.

"Buying [an apartment] in Vietnam is just an investment. I will leave it there for, let’s say, 10 years. By then, if the country’s economy grows well and housing becomes more expensive, apartment prices will be much higher. Selling it then will yield huge profits."

Wong, 56, the director of a construction company in Hong Kong, started eyeing Vietnam’s real estate market after a business trip to Da Nang.

Seeing his friends buying several apartments in Vietnam and thinking of his accommodation there, he also bought himself an apartment in the coastal city.

He explains: "If I rented an apartment, I might have to pay $1,500 a month. So I thought why not just buy it? And I did just that for around $150,000."

Confident that apartment prices will rise sharply, Wong bought another two years later and rented both out while waiting for them to appreciate.

"Vietnam is a developing country, so the economy will continue to grow. Real estate is one of the pillars of the economy, so it will definitely develop too. Business performances and GDP per capita in Vietnam are increasing, which is a good sign.

"And for apartments, you can rent it out at a reasonable profit margin while you wait for their prices to increase. I can rent out a one-bedroom unit for $1,000-1,200 a month."

Kang and Wong are two of many foreigners to invest in Vietnam’s apartment market since 2015 when the government removed barriers to their acquisition of real estate.

Any foreigner can enter Vietnam and buy residential properties.

Between 2015 and the third quarter of last year, there have been over 3,000 foreign buyers in Vietnam’s housing market, according to a recent report by property consultancy CBRE Vietnam.

Of them 75% are from places like China, Hong Kong, South Korea, Taiwan, and Singapore due to their proximity to Vietnam, it says.

They also deem Vietnam’s apartment market to have better growth potential than their home countries’, it says.

Most bought apartments expecting to sell them at a profit and only a few are renting them out, it says.

Few non-Vietnamese plan to live long-term in the country and buy residential real estate for their own use, it adds.

The law only allows them to own an apartment for 50 years, though it can be extended by a maximum of 49 years or converted into a freehold property if they marry a Vietnamese citizen.

But this has done little to deter foreign investors from buying apartments in the country.

Brandon, an American who often assists foreigners looking to buy properties in Vietnam but claims not to be an agent, says despite reservations about the 50-year leasehold tenure, many still opt to buy apartments.

"Many people I know have complained about the ownership restriction, but they still decide to invest.

"They usually choose emerging areas that will likely become popular, such as HCMC’s Thu Thiem area. I have talked to many of my acquaintances from the U.S., Spain and France, and most of them have plans to buy [apartments in Vietnam] soon and sell them in the future."

Vietnam is an emerging market and so an increasing number of foreign investors are targeting this market, Vo Huynh Tuan Kiet, senior manager of residential project marketing at CBRE Vietnam, says.

"If we look at the best-performing emerging markets [in Southeast Asia] this year, Vietnam will be ranked second.

"Besides, investing in developed countries does not yield as much as investing in developing ones like Vietnam."

Experts point out that buying by foreigners helps expand the scale of the housing market.

Kiet says: "The apartment markets for foreigners and Vietnamese are relatively independent of each other. In most projects, units are usually separated into two distinct segments for the two customer groups. Developers also manage this issue very closely."

Finance expert Ngo Thanh Huan says the increased interest in apartments among foreigners has a positive impact on the economy.

"When someone invests in a country, more capital will flow into that country.

"Attracting foreign capital helps increase the scale of the market."

Looking to the future, as new laws are implemented to make information about the real estate market more transparent, more foreign investors will flock to Vietnam, according to real estate consultancy Savills Vietnam.

Foreigners are also optimistic about Vietnam's economic growth and the potential for growth in apartment prices.

Kang says: "Vietnam's GDP per capita is currently around $5,000, but it will soon rise to $15,000. When that happens, apartment prices will rise significantly.

"That's why many South Koreans and foreigners will continue to choose to buy apartments here."