An ownership cap is preventing foreigners from buying high-end apartments in Saigon, especially its eastern part.
Thien’s apartment was in a prime area with a view of the Saigon River in Ho Chi Minh City’s Thao Dien Ward, District 2.
He could have sold it for VND5.5 billion ($236,000) to a foreign buyer, but had to sell to a local investor for VND5 billion ($215,000) because the 30 percent cap of foreign ownership had already been reached.
Like Thien, Luong bought a high-end apartment on Ha Noi Highway, District 2, in 2017, and sold it to a foreigner early 2018. It was after the contract was signed that he learnt that the foreign ownership cap had been reached. It took him another month to find a Vietnamese buyer for lower profits.
The amended Housing Law 2014 expanded foreigners’ rights to buy housing in Vietnam but stipulates a foreign ownership cap of 30 percent in each project.
Savills Vietnam director Matthew Powell said that many apartment projects in HCMC have reached the 30 percent foreign ownership limit since last year, especially in expat dense areas.
Song Hai, an experienced real estate broker, said many foreigners find property in the east of the city, like District 2, especially in Thao Dien ward, more attractive as it has been an expatriate haunt for some time.
Earlier, in the third quarter of 2017, a property project located in a prime location in District 1, accessible via the Thu Thiem Tunnel, was so attractive to a group of individual Korean investors that they were willing to take 50-year leases if they could not buy apartments outright as a result of the foreign ownership limit.
Nguyen Xuan Quang, Chairman of Nam Long Investment Joint Stock Company, said the participation of such individual foreign investors was a positive sign for the market at a time when apartment sales were slowing.
“Foreign investors might see good market prospects here as returns from property in the city could be better compared to other countries,” he said.
Nguyen Loc Hanh, deputy general director of sales and marketing at Danh Khoi Real Estate Joint Stock Company (DKR), said quite a few apartment projects in the eastern part of the city have reached the 30 percent foreign ownership limit, especially high-end projects with fewer than 500 apartments typically preferred by foreigners.
Luxury apartments in the city are still much cheaper than in Hong Kong or Singapore, Hanh noted.
Alan Kan, committee member of the Hong Kong Business Association Vietnam (HKBAV), said that Hong Kong property prices have risen to unaffordable levels, and so many people there are looking to investing in cheaper places like Vietnam and Thailand.
According to data from Hong Kong-based Golden Emperor, gross rental yields are between 4.5 percent and 5 percent in Bangkok and much lower in Singapore, Kuala Lumpur and Hong Kong, and cannot compare with the yields of 6-8 percent in Vietnam.
Powell of Savills Vietnam added that conditions and legal procedures related to foreign ownership have been eased but should be improved further to attract more investors.
He agreed it was important to have ownership limits to ensure proper oversight and avoid negative impacts on the economy, but Vietnam could consider relaxing the regulations in certain areas to meet demand, especially in the luxury segment, he added.
According to property consulting firm Jones Lang LaSalle (JLL), Malaysia has a relaxed realty policy that encourages foreigners to buy various kinds of properties.
Thailand now allows foreigners to buy only 49 percent of a housing project, down from 100 percent earlier.
Indonesia only allows foreign individuals to hold a right of use title for 30 years extendable for another 20.