Vietnam is the Most Attractive Real Estate Market in ASEAN: Duane Morris

Xuan Ha

15:08 11/08/2016


Oliver Massmann, general director of Duane Morris Vietnam LLC discusses opportunities and challenges when investing in the Vietnamese property market.

Vietnam is the Most Attractive Real Estate Market in ASEAN: Duane Morris

Oliver Massmann, general director of Duane Morris Vietnam LLC.

Regarding the big picture of the market, Mr. Massmann told Vietnam Business TV that Vietnamese market has a very special liberal sense like no others in ASEAN.

If a foreigner married a Vietnamese citizen, that person can own a house or a land in a “freehold” basis; that is the ownership of real property, and all immovable structures attached to such land, as opposed to a leasehold.

Vietnam’s property market is growing due to the rise of the middle class, liberalization of trade, and rapid urbanization. According to Mr. Massmann, Vietnam is considered to be one of the prime locations for property investment in the world. With just a tourist visa, a foreigner can own properties with a lease up to 50 years.

Given that engine of growth, Mr. Massmann pointed out that we cannot avoid the fact that the real estate market in Vietnam went through some bubbles in the 2007-2008 and 2011-2012 period. However, Vietnamese gained a learning curve and became more realistic of the real estate market over time.

The reason why Vietnam is more attractive than other markets in developing countries is legal certainty. As a result of global integration, Vietnam has to develop legal certainty to be member of international trade organizations. This is good news for foreign investors. Mr. Massmann tipped off that when the Trans-Pacific Partnership (TPP) and the EU-Vietnam Free Trade Agreement (EVFTA) are ratified, Vietnam will have more legal certainty than even Germany.

Furthermore, as part of these trade agreements, disputes over land and properties can resolved overseas. Thus, there is no need for investors to come all the way to Vietnam if disputes arise, and they are not restricted to Vietnamese jurisdiction system to resolve these problems. “This is an unprecedented level of legal certainty in Vietnam”, added Mr. Massmann.

The key takeaway for foreign investors is to invest in Vietnam real estate before 2018; that is when both the TPP and EVFTA are very much likely to be ratified. Investors who take this opportunity to invest now are one step ahead others before competition becomes fierce for Vietnam’s real estate market.

Of course, no market is perfect and there are underlying risks regardless. Thus, Mr. Massmann advised investors to do their due diligence well before making any investment to minimize risks. In addition, investors should consider hiring international legal professionals because only they can provide a liabilities insurance investors can rely on.

The legal procedures to purchase residential or commercial properties are very similar. However, investors must keep in mind the rights to their properties, as defined in the “Red Book” which states the rights entitled to the building or land of the owner.

Also, make sure the “Purpose of use” is defined clearly in the Red Book as “Commercial” or “Residential”, as switching between these are very complicated and time-consuming.

When choosing local or foreign developers for real estate projects, Mr. Massmann highlighted the greatest difference is the quality of construction. Local developers have lower entry costs than foreign ones at first. However, 80% of operation costs of a building over the course of use, say 50 years, are accounted to energy use.

Therefore, using foreign developers may cost more initially, but their buildings are more energy efficient and reduce energy costs substantially more than local developers.