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This highly anticipated and long discussed amendment has had support from all levels of the government and throughout the Vietnamese property industry. Once adopted in July 2015, it

will allow foreigners to lease and own a maximum of 30% of an apartment building or up to a maximum of 250 villas or townhouses. This effectively provides a registered 50 year leasehold title and gives foreigners the same rights as Vietnamese as they can now sub lease, mortgage, trade and inherit. These amendments follow wholesale legal reform influencing many sectors and come at atime when foreign investors are showing increasing interest of particularly Vietnamese development assets. Vietnam’s rapidly changing legal landscape is creating greater business certainty and a healthier and more competitive financial environment.

In 2008 a foreign ownership pilot program was passed, however this was largely unsuccessful. Up until Q2 2013 only 126 foreigners of which 108 were individuals, had purchased under this program. As at 2013 there were officially 74,000 foreigners

resident in Vietnam. The recent amendment follows the relaxation of property rights for Overseas Vietnamese (Viet Kieu) who now have access to full and unfettered ownership.

Vietnam is one of the world’s top 10 recipients of overseas remittances. In 2013 overseas remittances were up 10% year on year to US$11B, much of this can now effectively and confidently be held in real estate. A recent report (CIEM & Western Union, 2014) indicated that up to 17% of these remittances or nearly US$2B, will be held in property. CIEM notes that at around 8% of GDP this is a significant contribution to the economy.

Foreigners will have a more enforceable and ‘useable’ title now being able to; sub lease, mortgage, trade and inherit, thereby opening up a far deeper domestic purchaser pool. This will add greater liquidity to the residential market that is now showing signs of a modest recovery across the nation. Why  is the residential market so important? The residential housing market is effectively the ‘engine room’ of the economy. It provides a large store of the nation’s weal thand drives labor markets and consumption. Through monetary policy acting on interest rates the government can directly influence the economy. In turn foreign investment is important as it enables greater supply to be bought on to satisfy thein creased foreign demand. Itis highly competitive within the region so any policy that assists sourcing capital is helpful.

Regional Competition

Importantly the amendment helps the Vietnamese property market become more competitive within the region. The table below summarizes the key ownership rights within the region; The amendment will also allow investors with ‘valid entry’ to have exposure to a very attractive asset class within an emerging market that has excellent structural characteristics and strong growth potential.

Rental yields from selected cities are shown below, Vietnam is a relatively high return location. Factoring in potential capital growth then total returns are attractive.