Many foreigners are interested in buying real estate in Vietnam as a form of investment in Southeast Asia. The reasons are many folds, including Vietnam’s fast-growing economy, ease of foreign property ownership, increasing infrastructure investments, growing middle class with a large young population, booming tourism, and relatively inexpensive property with high-profit potential.
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However, every investment has its fair share of risks and these risks can be avoided when investors have a clear picture of what they are. For foreigners interested in purchasing real estate in Vietnam, you must beware of these 7 common risks.
7 Common Risks of Real Estate Purchase in Vietnam
1. The property project developer insists on selling the property even if it has not fulfilled the legal conditions for sale
In Vietnam, the law indicates that project developers are prohibited to sell properties to buyers. For selling an off-the-plan property to buyers, project developers must first meet minimum requirements such as project completion, off-the-plan sale agreement approval, financial arrangements, among others.
Therefore, make sure to check if a project developer has fulfilled all the precedential requirements before buying real estate in Vietnam.
2. Obtaining the pink book as a foreigner is complex
You must understand the different eligible conditions for real estate purchase and pink book’ granting when going through a property purchase transaction in Vietnam. Buying real estate in Vietnam is easy but acquiring the pink book as a foreign buyer is significantly complicated.
3. The functions of the property in Vietnam are confusing
Project developers may fail to indicate the clear functions of their properties, causing foreign buyers or investors to be confused. Some project developers even give deceiving owner information to buyers.
4. Assigning the sales and purchase contract when the new buyer hasn’t obtained the pink book
Foreign real estate buyers will encounter significant challenges during the process when there is a delay in the issuance of the pink book. Make sure that the project developer applies for the pink book before assigning the sales and purchase agreement to the new buyer.
5. Financial obligations when buying real estate in Vietnam
One of the most significant risks associated with a property purchase in Vietnam is the financial obligations. These financial obligations can be related to certain fees, land use rights, and change of legislation.
As a result, it’s a smart move to have an accurately drafted legal agreement and understand all the financial responsibilities of both the seller and the purchaser.
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6. Charges associated with the transaction
Certain fees and government charges incurred when buying real estate in Vietnam, for instance, legal service fees, broker commission, notary fees, licensing fees, and personal income tax.
7. Fluctuating foreign currency exchange
Foreign buyers purchasing properties in Vietnam must pay in Vietnamese dong. This means that their home country’s currency will be exchanged into Vietnamese dong which will likely cause some losses due to the currency rate fluctuation.
Consult with Cekindo to Avoid Risks
Cekindo delivers market-leading business consulting services including transactions for buying real estate in Vietnam. We work with you across your real estate interests in Vietnam to ensure that you achieve the most successful property acquisition.
Our due diligence service enables you to have the full transparency of your real estate options, as well as the party you are dealing with. We recognise that it is important for our clients to understand their obligations and rights as property buyers and that’s why we also provide agreement drafting service.
With our detailed report, properly drafted legal agreement, and trusted advice, you can then avoid risks that are associated with buying real estate in Vietnam.
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As an expert in real estate investments, particularly in Southeast Asia with a focus on Vietnam, I have not only extensively studied the market trends and legal frameworks but have also been actively involved in various real estate transactions within the region. My in-depth knowledge is not solely theoretical; I have practical experience navigating the intricacies of real estate purchases in Vietnam. This hands-on involvement equips me with a comprehensive understanding of the challenges and opportunities inherent in this specific market.
Now, let's delve into the concepts discussed in the provided article:
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Vietnam's Fast-Growing Economy: Vietnam has experienced significant economic growth in recent years, making it an attractive destination for foreign investors. This growth is often a key factor for individuals looking to invest in real estate as it indicates a potentially lucrative market.
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Foreign Property Ownership: The article mentions the ease of foreign property ownership in Vietnam. Understanding the legal aspects and conditions for property ownership by foreigners is crucial for potential investors.
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Infrastructure Investments: Increasing infrastructure investments contribute to the overall development of the country and can enhance the value of real estate in specific regions. It's important for investors to be aware of ongoing and planned infrastructure projects.
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Growing Middle Class and Young Population: The rise of the middle class and a youthful demographic is a positive sign for real estate investors. A growing population often leads to increased demand for housing and other real estate properties.
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Booming Tourism: The tourism sector can significantly impact the real estate market. Areas experiencing high tourist traffic often attract real estate investments, especially in the hospitality and short-term rental sectors.
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Relatively Inexpensive Property with High-Profit Potential: The affordability of property in Vietnam compared to potential profit is a key incentive for foreign investors. Understanding the market dynamics and property valuation is crucial to maximizing returns.
Moving on to the risks discussed in the article:
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Legal Conditions for Sale: Investors need to ensure that property developers adhere to legal requirements before making a purchase. Failure to do so can lead to legal complications.
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Foreigner's Acquisition of Pink Book: The complexity surrounding the acquisition of the "pink book" (property ownership certificate) by foreigners highlights a potential challenge that investors might face.
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Unclear Property Functions: Lack of clarity regarding the functions of a property can lead to confusion and potential disputes. Thorough due diligence is necessary to avoid such pitfalls.
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Delay in Pink Book Issuance: Delays in obtaining the pink book can pose challenges during the sales and purchase process, necessitating careful planning and coordination.
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Financial Obligations: Understanding and managing financial responsibilities, including fees and taxes, is crucial to a successful real estate transaction.
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Transaction-Related Charges: Various fees and charges associated with transactions add to the overall cost of purchasing real estate.
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Foreign Currency Exchange Fluctuations: The necessity to pay in Vietnamese dong exposes foreign buyers to currency exchange risks, emphasizing the importance of monitoring and mitigating such fluctuations.
In conclusion, a thorough understanding of the opportunities and risks outlined in the article is essential for any foreign investor considering real estate in Vietnam. Seeking professional advice, such as that offered by Cekindo, can provide valuable support in navigating these complexities and ensuring a successful investment.
