How to Buy Property in Vietnam: Property Laws for Foreigners

July 11th, 2024
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Real Estate

Vietnam has been attracting a growing number of foreign real estate investors in recent years. With its rapidly expanding economy, vibrant cultural scene, and breathtaking natural beauty, the country has become an increasingly attractive destination for those looking to invest in property. 

However, purchasing real estate in Vietnam requires navigating a complex legal landscape that foreign investors must thoroughly understand to ensure successful transactions.

Familiarizing oneself with Vietnam’s property laws is essential for foreign investors. The legal framework governing real estate in the country differs significantly from that of Western nations. 

Being well-informed about these regulations can help prevent legal pitfalls, ensure compliance with all relevant laws and regulations, and facilitate a smooth and successful investment process.

Why Invest in Vietnam?

With a population of nearly 100 million people and one of the fastest economic growth rates globally, the country offers a large and expanding consumer market that is hard for savvy investors to ignore.

Vietnam’s strategic location in Southeast Asia is another major draw, providing easy access to other fast-growing regional markets. The country has also signed numerous free trade agreements, including the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the EU-Vietnam Free Trade Agreement (EVFTA), which together cover a combined market of over 500 million people. This connectivity and market access is a major advantage for investors looking to capitalize on Vietnam’s economic rise.

The Vietnamese government has made a concerted effort to improve the investment environment, introducing policies and laws that offer tax incentives and other supportive measures to attract foreign capital. The country’s political and economic stability, combined with ongoing infrastructure development projects like new highways, airports, and seaports, further enhance its appeal as an investment destination.

Whether your interests lie in commercial properties in bustling cities like Ho Chi Minh City or Hanoi, or you prefer the idea of a serene beachfront condo in Da Nang, Vietnam offers a diverse array of opportunities for property investors seeking to profit from the country’s rapid economic growth and development. 

Eligibility and Restrictions for Foreign Investors

Prior to the 2014 changes, foreign ownership of Vietnamese property was highly restricted. However, the new legislation has opened up the market, allowing foreigners to purchase a wider range of properties, including apartments, houses, and commercial spaces.

Land Use Rights vs. Ownership

In Vietnam, all land is ultimately owned by the state, with the people acting as collective owners. This means that foreigners cannot hold outright ownership of land in the same way they might in other countries. 

The Vietnamese government does not allow foreigners to directly acquire land use rights. However, foreigners may indirectly acquire land use rights through acquiring a Vietnamese company holding land use rights, with certain restrictions. 

These land use rights are evidenced by a Land Use Rights Certificate (LURC) issued by the government, and they confer upon the holder the right to use, lease, sublease, mortgage, and transfer the land, subject to applicable land’s type, use purpose and applicable land law. 

Who Can Buy Property in Vietnam?

Foreigners who hold a valid passport and visa are generally permitted to purchase certain types of property in Vietnam. The eligible visa types can include tourist visas, work permits, or residence cards.

It’s important to note that foreign individuals and entities are not permitted to own land outright in Vietnam, as all land is ultimately owned by the state. Foreigners may also not directly acquire land use rights as discussed above. However, foreigners may acquire housing property with certain restrictions under applicable housing law.

Types of Properties Foreigners Can Own

Foreigners can purchase apartments, houses, and villas in Vietnam. They can also invest in housing construction projects by obtaining an Investment Registration Certificate and building the houses into the project.

However, there are some limitations:

Foreign Ownership Cap

Vietnam imposes a cap on foreign ownership in condominium buildings and residential projects. Foreigners are limited to owning no more than 30% of the total units in a single condominium building or no more than 250 houses in a ward-level administrative area.

Property Use Duration

Foreigners can use a housing property for up to 50 years, with the possibility of renewal. The government may grant a one-time extension of another 50 years. 

Prohibited Zones

Certain areas are restricted for foreign property ownership, mainly due to national security concerns. These areas are typically related to national defense and security as prescribed in the Law on Housing. Always verify if the property lies within a prohibited zone before proceeding with a purchase.

The Property Buying Process in Vietnam

The process of buying property in Vietnam involves several steps, each requiring careful attention to detail to ensure a smooth transaction.

Step 1. Finding a Property

Start by researching the Vietnamese real estate market. Utilize real estate agents, property websites, and local networks to find suitable properties. It’s essential to work with reputable agents who have a good understanding of the market and legal requirements.

Step 2. Due Diligence

Before making an offer, conduct thorough due diligence:

  • Legal Status: Verify the legal status of the property, ensuring it has a proper land-use right certificate (LURC).
  • Ownership History: Check the property’s ownership history to avoid any legal disputes.
  • Building Regulations: Ensure the property complies with local building regulations and standards.

Step 3. Signing a Reservation Agreement

Once you’ve identified a property, sign a reservation agreement with the seller. This agreement typically requires a deposit, securing your interest in the property while the final sale terms are negotiated.

Step 4. Sales and Purchase Agreement (SPA)

The next step is signing the Sales and Purchase Agreement (SPA). This legally binding contract outlines the terms and conditions of the sale, including the purchase price, payment schedule, and transfer of ownership. Noting that the SPA is generally required to be notarized under Vietnamese law.

Step 5. Payment and Transfer of Ownership

Payments are usually made in installments, with the final payment due upon completion of the property transfer. The ownership transfer is completed when the LURC is updated to reflect the new owner’s name.

It’s important to note that the purchasing process can vary depending on the type of property, the location, and the specific requirements of the developer or seller. Working with a reputable Vietnamese law firm or real estate professional can help ensure a smooth and compliant transaction.

Necessary Documentation

To purchase property in Vietnam, you’ll need the following documents:

  • Passport: Valid and up-to-date.
  • Visa or Temporary Residency Card: Proof of your legal status in Vietnam.
  • Sales Agreement: A contract outlining the terms of the sale.
  • Bank Statements: Proof of financial capability.

Financial Considerations and Costs

Buying property in Vietnam involves several costs that foreign buyers should be aware of:

Purchase Price

The price you’ll pay for a property in Vietnam can vary significantly, depending on factors like the type of property, its location, and current market conditions. It’s crucial to do your research and negotiate a fair price based on an analysis of comparable properties in the area. 

Prices can range from just a few thousand dollars for a small apartment in a less desirable location to several hundred thousand dollars or more for a luxury villa or penthouse in a prime area.

Taxes and Fees

When purchasing property in Vietnam, foreign buyers must be aware of the various tax and legal obligations they may face. These include:

  • Property Transfer Tax: Buyers are typically required to pay a property transfer tax, which is generally around 2% of the property’s value. 
  • Stamp Duty: A stamp duty, typically around 0.5% of the property value, may also be applicable. 
  • Capital Gains Tax: If the foreign buy a property through acquiring capital of a company, and then sell such property through selling the company, the foreign owner may be liable for capital gains tax, which is typically around 20% of the capital gain. 

It is crucial for foreign buyers to consult with a Vietnamese law firm or tax professional to ensure compliance with all relevant laws and regulations, as well as to understand the potential tax implications of their property investment. 

Management Fees

If you purchase an apartment in a condominium development, you’ll need to pay monthly management fees to cover the upkeep of the building’s common areas and amenities. These fees can vary depending on the size of your unit and the specific services and facilities provided by the development.

Financing Options

Foreigners have several options when it comes to financing a property purchase in Vietnam. These include:

  • Cash Purchases: Many foreign buyers choose to pay for the property outright in cash, which can simplify the process.
  • Mortgage Financing: Some Vietnamese banks do offer mortgage loans to foreign buyers, although the terms may be more limited compared to local buyers.
  • Installment Plans: Developers sometimes allow buyers to pay the purchase price in multiple installments over an agreed period.

Carefully evaluating the financing alternatives and associated costs is important, as is ensuring compliance with any regulations around foreign currency transfers and remittances.

By understanding the full range of financial considerations upfront, foreign buyers can make more informed decisions and navigate the Vietnamese property market with confidence.

Role of Real Estate Agents

Engaging a reputable real estate agent can be incredibly helpful when purchasing property in Vietnam as a foreign investor. These professionals have an in-depth understanding of the local market and can provide valuable guidance throughout the buying process.

Real estate agents can assist you in identifying suitable properties that align with your investment goals and budget. They often have strong connections with developers and sellers, which can give you access to off-market opportunities. Additionally, they can handle the negotiations on your behalf, leveraging their expertise to secure the best possible deal.

By working with an experienced agent, you can benefit from their knowledge of local regulations, paperwork requirements, and the overall process of buying property in Vietnam. This can significantly streamline the transaction and help you avoid potential pitfalls. 

Note that according to the new Law on Real Estate Business, real estate agents are required to have a real estate brokerage practice certificate. Therefore it is important to choose a reputable real estate agent to assist you in the sale and purchase process.

The Importance of Legal Counsel

Navigating the complexities of real estate transactions in Vietnam requires more than just a real estate agent. Hiring a Vietnamese law firm to provide legal counsel is crucial to ensuring a smooth and secure process.

Firms like Russin & Vecchi have extensive experience in this area and can ensure all necessary paperwork and documentation are in order. Our team of skilled lawyers can review sales contracts, advise on compliance with relevant laws and regulations, and help minimize the risk of fraud, ownership disputes, or other legal complications.

This legal expertise is invaluable in protecting your interests throughout the entire property buying process. By working with a reputable law firm, foreign investors can have peace of mind knowing that their investment is being handled with the utmost care and attention to detail.

With the right legal support in your corner, you can proceed with your property purchase in Vietnam with confidence, knowing that your interests are safeguarded every step of the way.

Contact Russin & Vecchi today to learn more.

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