Much anticipated changes to property ownership laws for foreigners and overseas Vietnamese finally came into effect on July 1, but will it be enough to attract international investors? By Brett Davis. Photo by Jonny Edbrooke.

Taking in the Ho Chi Minh City skyline with its scattered cranes and mushrooming new developments, it would appear the appetite for real estate has never been stronger. However, since the global economic downturn in 2008, the market has been in something of the doldrums.

In 2001, the Vietnamese government loosened restrictions on foreigners and overseas Vietnamese buying apartments in certain designated developments. Yet uncertainty over ownership laws and difficulties with the purchasing process saw only a tepid response. According to the Ministry of Construction, less than 140 foreigners purchased property in Vietnam under the scheme.

New laws which came into effect on July 1, however, could see that number rise sharply and create a more attractive environment for international investors. The two specific pieces of legislation are the new Housing Law and the Real Estate Business Law, which radically change the circumstances for foreign purchasers. It is hoped the new rules will provide a shot in the arm for a sluggish market.

The new laws allow foreign organisations and individuals holding a valid passport and visa to buy apartments or houses. There is an ownership cap of 30 percent of units in any single building, and a limit of 250 houses in the equivalent of a ward-level administrative area. This rather generous ownership cap would indicate that the changes are targeting large institutional investors as well as individuals.

Overseas Vietnamese, or Viet Kieu, can own unlimited property as long as they have maintained their Vietnamese citizenship.

These properties are still lease-hold, but at the end of the 50-year time period a mechanism has been added to allow for the extension of ownership rights for an additional 50 years.

Analysts have predicted a cautious response from international investors. Managing director of realty consulting firm CBRE Marc Townsend said the second half of the year would start to show the effectiveness of the new regulations.

“Foreign investors have complained in the past about how unfair the market has been for the past 15 years,” he says. “Now we will see whether they will really embrace it, whether they are actually happy with the new laws or whether they are still looking at how to get money in and out of Vietnam.

“To win over this group, in addition to clearer legislation and a better banking system, the key word must be ‘focus’ in people, products and timing.”

Townsend says the property market in Vietnam in general had seen improved price levels in the first half of 2015, but doubted there would be a surge in gains. “It is unlikely that we will see the same fancy as in 2007 when buyers were queuing to buy units and reselling almost overnight,” he says.

Deputy Minister of Construction Nguyen Tran Nam told Vietnam News last month that while the new regulations were aimed at stimulating the real estate market, he did not think it would lead to property speculation and a potential bubble.

“In fact, property prices in Vietnam are comparatively high and the housing market is not that attractive,” he said.

Yet while experts and authorities are skeptical about the effect the new regulations will have on the demand for property from foreign-based investors, early indications are that others are more optimistic about the country’s potential for good returns.

Leading property developer Vingroup announced only a day after the new laws came into effect that 112 foreigners and overseas-based Vietnamese had registered to buy apartments in its exclusive Vinhomes Central Park project in Ho Chi Minh City.

An Australian couple were reportedly the first foreigners to take advantage of the new laws, inking a deal for a three-bedroom, two-bathroom apartment in the City Garden complex at just one minute after midnight on July 1.

Sydney-based Haig and Katrin Conolly purchased the 135-square-metre apartment in Binh Thanh District with sweeping views of the Saigon skyline for USD$320,000.

Conolly, the founder of marketing consultancy firm Lloyd’s Property, told property website that he believed the investment was a great opportunity, and that the potential growth in the Vietnam market could mirror that of some of its Southeast Asian neighbours.

“Many Southeast Asian countries have reached a point in recent decades where the general level of affluence rises, the economy is freed up and begins to grow. And now it is Vietnam’s time,” he says.

“This is not an investment for everyone, but those who have said ‘I wish I’d invested in Thailand, Singapore or Jakarta all those years ago’ will jump at the chance of getting in at the start.”

With the new property ownership laws, in addition to several trade deals, including the Trans Pacific Partnership and an EU-Vietnam Free Trade Agreement expected to be sealed in coming months, there could indeed be a new dawn for the local real estate market.