7 reasons to invest in Vietnam Real Estate right now

1) Properties are expensive*everywhere in Vietnam globally. If your basis for a property crash is imply how unaffordable it is for the working class, then there are probably 10-20 cities that will crash in much more spectacular fashion way before HCMC. Hong Kong, Vancouver, NYC, London, Sydney, Melbourne, Toronto, Bangkok, Lisbon, etc etc. are way more expensive than HCMC is on a price / income basis.

Global QE policies means that the 0.1% owns properties beyond what the working class can afford. This is nothing new and not specific to Vietnam.

2) From a macro economic perspective, Vietnam has one of the best, if not THE best, demographics and growth potential in ASEAN. This is almost undeniable and widely accepted view in the investment world. Outside of a war / global crisis (in which everywhere is in trouble) with China, the next 20 years look relatively much better for Vietnam than for many other developed economies. The biggest reason for international funds and investors to not pile in anymore is due to dodgy regulations, lack of scale, and unavailability of leverage.

3) We are well aware of the dodgy government regulations and weak rule of law. Humanitarian concerns notwithstanding, and speaking strictly from an investment perspective, authoritative countries grow MUCH faster than democratic economies in their early age. Just look at India vs China. Look at Singapore. Look at Thailand. And look at the USA / UK now - they can barely build a bridge to save their lives through the democratic process, whereas China can raze cities and rebuild new metro in the blink of an eye. Chinese properties have gone up 10-fold in the past decade and many of us have profitably handsomely from it.

For HCMC specifically, the key is to buy with a reputable foreign developer with a long history and pink-book status. Let the foreigner developer negotiate on the annoying aspects of procuring the pink book and other documents on your behalf. You’ll probably be paying 10-20% more than a local developer, but given how *AFFORDABLE* properties are in Ho Chi Minh, an extra 10-20% doesn’t really matter in the long run given all the protection you have.

Remember, 200-300K USD in Vietnam buys you what 2-3 million USD buys you in the cities we are used to investing in. Vietnam home prices aren’t even half of what Bangkok is right now, and who knows how far the gap will close within 20 years time.

4) Infrastructure and subway. Delays and all, the arrival of a metro often transforms a city way beyond anyone can imagine. Just look at Taipei pre subway and post subway. They were every bit as bike and scooter-heavy as Vietnam back in the days. Look at how their RE markets have gone over the past 20-30 years.

5) Lack of leverage. Currently for foreigners, you cannot get a domestic mortgage, so we have to pay in cash. If the investment decision is wrong and the foreigners lose $, while it’s uncomfortable, there is not going to be a credit squeeze and most foreigners are going to just “sit on it” until the market recovers as long as the property is rentable and generates cash flow. Hence the focus to buy from high-end developers and in the best locations only.

6) Government needs FDI and foreign real estate investments to come in. It’s no mystery that the govt is corrupt and wastes away insane amounts of cash with project delays. But the point is, they also understand how important FDI is to the country, as they are basically getting a free lunch out of foreigners buying into their dream. Thus, it is not in incentive (nor for their own country’s survival) to be screwing over the foreign investments. Expect to see more foreigner friendly policies to come from them over the next 5 years.

7) Finally, overseas buyers who (should) do their research are well aware of the drawbacks and problems with the Vietnamese economy, political, and regulatory systems. Most of these investments are “excess savings” that have come from profitable investments that were made abroad, or from investors that have been priced out of their home countries (such as HK and Singapore) and thus spreading over to Bangkok/Manila/HCMC etc. No different than now Asian money was spilling over to Canada the past 15 years (look at Vancouver home prices now, 10:1 to HCMC) so it’s a spill down effect that will keep happening as long as the world’s income disparity keeps growing (and it will).
21.09.2018
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