Why You Shouldn’t Buy Vietnam Real Estate

Last updated April 16th, 2024.

Imagine this: you buy the beautiful house in Vietnam of your dreams, where you plan to spend the rest of your life with your loved ones and hand it over to your children.

But a few decades later, somebody comes up to your property and says that the time’s up: your dream house is no longer yours.

Welcome to the reality of buying real estate in Vietnam!

You may think this is an exaggeration, and we wish we could say it was a joke, but that’s the reality in Vietnam’s property market.

Despite the country’s generally strong development, along with the prospects of trading stocks or starting a business here, we regretfully don’t recommend buying Vietnam real estate.

On paper, it doesn’t look so bad. After all, people who have been bullish on Vietnam will point to the Vietnamese Law on Residential Housing, which supposedly has made it easier for foreigners to own property here on a long-term basis.

Yet once you’re on the hook, and interested, realtors and developers will then try to ease you into the bad news.

Realtors in Vietnam say there are still some “minor” issues with purchasing real estate, like the fact that you’ll be restricted as to what properties you can own depending on the number of foreign investors already in the area.

For example, non-citizens are collectively limited to purchasing a maximum of 30% of space in apartments and condos. They cannot own more than 10% of the properties in landed projects either.

If that weren’t enough, they also limit the total number of houses that foreigners can buy, which is a problem given that Vietnam is home to some of the world’s densest areas.

You may often find yourself blocked from investing in important regions before there is any sizable expat presence.

Vietnam house prices will surely rise due to a rising middle class, population growth, urbanization rate, and overall strong economy. Unfortunately, you can’t truly buy land in Vietnam – even if you’re a local.

The Difficult Vietnam Foreign Property Ownership

The cherry on top is that you don’t, in a literal sense of the word, “own” the whole real estate that you’re supposedly buying.

Many in the western world are used to the idea that when you purchase a house, you also own the land underneath the building. But in other countries, Vietnam among them, it doesn’t necessarily work like that.

In law school, it’s often taught that real estate ownership is “a bundle of rights” to illustrate the complexities of property holding.

For instance, you might own a plot of land, but you might not have the right to build a skyscraper on it or open a shop there. These rights can be packaged into a contract or may not even be on offer.

In Vietnam’s real estate market, the bundle of rights that westerners typically enjoy in less exotic locales are separated from each other. There’s no way of getting the whole package of land, structure, and everything else.

You can’t truly buy property in Vietnam as a foreigner. Instead, every single plot of land is on a long-term leasehold.

Typically, it’s understood that the government will renew these leaseholds when they expire. Whether this is actually the case is up for debate.

As a foreigner, you can purchase a structure on a plot of land in Vietnam. But you’re, in effect, renting any land from the government for a period of 50 to 70 years, depending on location.

So, can foreigners buy property in Vietnam? Sort of, but only if you consider a long-term leasehold as actually “buying”.

Vietnam’s real estate market is complicated, needless to say. You’ll have an easier time elsewhere in Southeast Asia.

Buying a House in Vietnam? Meet The Landlord

It’s crucial to remember that less than 50 years ago, Vietnam was a communist country, slowly transitioning to a free market.

The Socialist Republic of Vietnam, as it’s officially known, is still controlled by a one-party state that claims to be communist to this day.

As such, it’s not adverse to expropriation or occasionally putting aside the concept of property rights, especially if they’re not particularly convenient.

Caution is advised in the Vietnam real estate market, although we’re generally optimistic that foreign land ownership will be more straightforward in Vietnam over the next fifty years.

Yet as it stands, you’d be bending to the whims of random ill-thought-out policies with no means of appealing them.

Take the so-called “tube” houses in Hanoi, where somebody had the bright idea of taxing you based on the width of your home.

As such, the invisible hand of the Vietnam property market directed architects to build longer houses that go deep into a building but have a short width (often no more than two people standing side by side).

This type of madness may remind you of the “window tax” in seventeenth-century Britain, where people were charged by the number of windows they had. As such, people started to brick their windows to reduce taxes.

Such a policy didn’t work back then in Britain, and it doesn’t work now in Vietnam. But, like all things government-related, it will take a while for them to learn the historical lessons.

The lack of financial historical experience shows in many other aspects, like a weak local currency. The Vietnamese Dong has consistently dropped in value against the U.S. Dollar and most other major currencies over the past two decades.

Who’s to say that this worrying trend in the Vietnam real estate market won’t continue to be the case for the next two?

You Have Better Options Than Vietnam Real Estate

While you can gamble on property in Vietnam and make out rather well if you get all the right cards in the correct order, let’s ask a simple question: why bother?

In terms of overall value, housing in Vietnam pales in comparison to the likes of Cambodia within the scope of Southeast Asian property markets.

We’ve previously written about Cambodian real estate. But to give you an idea of the numbers, the cost per sqm is $1,000 in Phnom Penh compared to $3,000+ in Ho Chi Minh City, Vietnam.

Furthermore, you’ll own the real estate on a freehold basis instead of a pseudo-perpetual tenant relationship with the state. That’s basically the deal you’re making when buying a house in Vietnam.

Perhaps it is worth mentioning that Cambodia skipped all the financial crises and recessions in the past few decades, whether it was 2020, the Dot-Com bubble, or the Asian Financial Crisis of the late ’90s entirely.

On the other hand, Vietnam has maintained a respectable sub-7% annualized growth, but it’s no big secret that a lot of this success has been entirely dependent on China.

Vietnam is, after all, benefiting from the US-China Trade War and is gaining favors among foreign investors and big international manufacturers looking for China.

Still, some economists think Vietnam might be stopped by a glass ceiling – the so-called “middle-income trap”. If they’re too expensive for their global superpower neighbor and don’t create value, capital could move to less developed countries like Cambodia.

Vietnam’s state-owned enterprises are already straining under international competition, and the government has had its work cut out for it in attempting to privatize them all without having to deal with a crisis of existential proportions at the same time.

Other countries in Southeast Asia like Cambodia, Malaysia, and the Philippines are far less bureaucratic when compared to buying real estate in Vietnam as a foreigner.

At its core, the reason you shouldn’t buy Vietnam property is that the opportunity cost of investing here is just too great considering what other emerging markets in Asia have on the table.

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