Vietnam opened to foreign property buyers in 2015 and foreign buyers have poured in. However, you can only buy property as long as you meet the foreign property ownership quotas stipulated by the government.
In this article, I explain what foreign ownership quotas are, why they are imposed in Vietnam, in which Asian countries you can find them, what disadvantages it brings when buying property, and more.
Let’s start and review what it means practically for overseas buyers who want to invest in Vietnam property and have to meet local ownership quotas.
What is a foreign ownership quota?
Foreign ownership quotas can typically be found in developing Asian countries to protect the social and economic development. While there are no foreign ownership quotas in East Asian countries, like South Korea and Japan, you can find the quotas in:
- The Philippines
So why have governments introduced foreign ownership quotas in these developing countries?
With no foreign quotas, we would see a risk with an influx of foreign buyers that could lead to an unintended inflationary effect on real estate prices. Good examples of cities where we’ve seen this are Hong Kong, New York, and London.
As such, these developing countries take a careful approach to assure that locals are not priced out of the market and to assure that they have access to housing. Looking at property in Vietnam, prices are is still comparatively low and only Cambodia and Indonesia have lower prices on average in the region.
What are the foreign property ownership quotas in Southeast Asia?
Vietnam has some of the strictest foreign ownership quotas. Below you can see the percentages in different Southeast Asian countries:
- Vietnam: 30%
- The Philippines: 40%
- Thailand: 49%
- Cambodia: 70%
Note: Even if Malaysia hasn’t introduced any foreign ownership quotas you have to meet local minimum investment requirements.
Foreign Ownership Quotas for Vietnam Property
As mentioned, Vietnam has a foreign ownership quota of 30% for commercial (branded) condominiums. This means that foreigners are allowed to own 30% of the units in a given project.
Looking at landed property, foreigners are allowed to buy villas in commercial (branded) projects, but not the land on which the units are built on. Foreigners are restricted to buying a maximum of 10% of the properties in landed projects.
Price Differences for Vietnamese and Foreign Property Buyers
Since Vietnam opened to foreign investors in 2015 it has become one of the most popular investment destinations in Southeast Asia.
With the increased amount of foreign investors and a foreign ownership quota of 30%, we’ve also seen a disruption in the supply and demand for foreigners.
As foreigners can only get hold of 30% of the units in any new project, prices are sometimes higher for foreign buyers compared to locals.
The price difference can be great and foreigners sometimes have to pay as much as 20% ~ 40% extra compared to locals.
The Disadvantages of Foreign Property Ownership Quotas
Due to the foreign ownership quotas and the sometimes higher prices, foreigners face some risks that are worth bringing up in this article. Let’s review the most obvious ones.
1. Reduced Rental Yields
First of all, even if you pay 20% – 40% more than a local, you cannot increase the rent by the same rate. Thus, in a bad scenario, you’ll not be able to enjoy as high yields as locals.
Let’s review two examples for better clarity:
- Vietnamese buyer: Mr. Nguyen
- Unit price: USD 200,000
- Rents earned: USD 1,000 / month
Gross rental yield: USD 1,000 x 12 months / USD 200,000 = 6%
- Foreign buyer: Mr. Smith
- Unit price: USD 260,000 (30% higher due to lower supply for foreigners)
- Rents earned: USD 1,000 / month
Gross rental yield: USD 1,000 x 12 months / USD 260,000 = 4.6%
As you can see, the yield is lower for the foreign buyer in case he/she has to pay a higher price compared to locals and offering the same rent.
2. You’ve Found a Foreign Buyer, But the Foreign Quota is Filled
So, you want to sell your unit and have managed to find a foreigner who wants to buy the unit. But, you then realize that the foreign ownership quota is filled (30%) and you’re therefore not able to sell the unit to the foreigner.
Your only option here is to sell to a local.
3. You Paid a Higher Price from Start
The clear disadvantage of buying the unit for a higher price is that you have to sell the unit for a higher price too. And why would a buyer, local and foreigner alike, do that if they can buy a cheaper unit from a Vietnamese owner in the same building?
The only situation where you would have to buy the unit for a higher price from a foreigner is if the foreign quota is filled and you cannot buy from a Vietnamese owner.
Yet, many foreigners would probably look for other projects where they don’t have to buy from a foreigner.
Questions & Answers
Below you can find commonly asked questions and our replies.
How can I avoid paying a higher property price as a foreigner in Vietnam?
To avoid paying a higher property price as a foreigner, many decide to buy property with the help of their spouses. This allows them to compete on the same conditions as locals and you won’t have to meet the foreign quota of 30%.
If your marriage was registered in Vietnam before the ‘pink book’ was issued, you would automatically co-own the property with your wife (i.e. joint-ownership). If you register your marriage after you bought the property, you have to visit the lawyer to change the ownership into a joint-ownership.
Keep in mind that if you marry a local citizen you’ll get access to freehold ownership and be able to apply for local mortgages.
Do Viet Kieu’s have to abide by the foreign property ownership quotas in Vietnam?
No, Viet Kieu’s (overseas Vietnamese) have the same ownership rights as Vietnamese citizens.
Do I have to meet the foreign ownership quotas if I’m married to a Vietnamese?
No, if you’re married to a Vietnamese citizen and co-own the unit you’re not subject to the foreign ownership quotas.