NEW LEGISLATION SPARKS HOPES IN VIETNAM’S REAL ESTATE MARKET
On August 01, 2024, Vietnam reached a pivotal moment in its real estate sector with the enactment of three transformative laws: the Land Law 2024, the Housing Law 2023, and the Real Estate Business Law 2023. These laws are designed to address critical issues, enhance market transparency, and promote sustainable growth. As the market adjusts to these changes, investors can anticipate a more robust, dynamic, and resilient real estate landscape.
According to the Ministry of Construction, over 253,000 real estate transactions were successfully completed in the first half of 2024—an impressive 110.26% increase compared to the latter half of 2023. This surge was predominantly driven by the land plot segment. Additionally, the average selling prices of apartments have been on an upward trajectory since late 2023, particularly in major urban centers such as Ho Chi Minh City and Hanoi Capital City.
KEY LEGISLATIVE CHANGES IMPACTING THE MARKET
Mandatory Non-Cash Transactions: One of the most impactful changes introduced by the new Real Estate Business Law is the requirement for homebuyers to make payments via bank transfer for transactions involving real estate projects. Previously, the Real Estate Business Law 2014 did not mandate non-cash transactions.
This shift to non-cash payments marks a significant step towards enhancing transparency and security in the real estate market. By eliminating cash transactions, the law reduces the risk of theft and fraud, ensures clear transaction records, and simplifies tax and fee collection processes. This move is expected to foster a more transparent and accountable real estate market, making it more attractive to both domestic and international investors.
Regulation on Deposits and Payment Schedules: The new Real Estate Business Law also revises regulations concerning deposits and payment schedules for off-plan projects. Developers are now limited to collecting a maximum of 5% of the selling price as a deposit for properties that are still under construction. Furthermore, properties can only be sold once the project meets the stipulated conditions for sale.
The initial payment made by buyers must not exceed 30% of the total contract value, including the deposit. Subsequent payments must align with the construction progress, but the total amount collected before handing over the property cannot exceed 70% of the contract value. This regulation assures that developers remain committed to project completion and provides buyers with greater security and assurance regarding their investment.
DETAILED PROVISIONS FOR REAL ESTATE PROJECTS
To warrant robust governance, the government issued Decree 94/2024/ND-CP, which provides detailed guidelines for the Real Estate Business Law concerning the establishment and management of housing and real estate market information systems and databases. This decree mandates that the housing and real estate market database align with the national digital architecture framework and local e-government architectures. Data sharing between ministries, sectors, and localities for state management and administrative purposes is governed by stringent regulations on digital data management, connection, and sharing.
This comprehensive database will be constructed following stringent protocols on information collection, sharing, storage, and timelines for data provision. Sources include periodic reports, specialized databases, housing development program data, and digitized existing real estate market information. Provincial and municipal People’s Committees are tasked with collecting and updating local data to support economic and social management.
MANDATORY CERTIFICATION FOR REAL ESTATE BROKERS
Under Article 9 of the Real Estate Business Law, individuals and organizations engaged in real estate transactions must establish enterprises or cooperatives. Small-scale individual businesses are exempt from forming enterprises but must comply with tax regulations. Article 61 requires real estate brokers to hold practicing certificates and operate within licensed brokerage or trading service enterprises, effectively ending the practice of independent brokerage.
REDEFINING CONDOMINIUM OWNERSHIP
The Housing Law 2023, particularly Article 58, redefines condominium usage terms. Rather than stipulating an ownership term, the law specifies that the usage term is based on design documentation and actual usage, as determined by competent authorities. This term is documented in the appraisal process and begins upon acceptance of the building for use.
When a condominium reaches the end of its design lifespan or is deemed unsafe, provincial authorities are responsible for conducting quality assessments. While the housing value may cease, the land use value remains intact, ensuring residents receive appropriate compensation. This shift underscores a commitment to maintaining the long-term stability and safety of housing infrastructure.
ROBUST CREDIT GROWTH IN REAL ESTATE
The real estate sector has consistently outpaced overall credit growth in Vietnam. As reported by the State Bank of Vietnam, in 2019, while system-wide credit growth was 13.5%, real estate credit grew by 23.3%. Similarly, in 2022, the sector saw a 23.9% increase against an overall growth of 14.2%. This trend persisted through periods when corporate bond issuance compensated for slower credit growth.
As of late June 2024, real estate credit stood at over VND 3,083 trillion, representing 21.4% of total system credit—a 6.8% increase from the end of 2023. This sector contributed 1.3% to overall system growth. The anticipated effect of the new laws is a further acceleration of real estate growth, which in turn is expected to drive faster credit expansion across the economy.
Get professional insights in Vietnam properties, residential leasing and asset management services by Arcadia Consulting in Vietnam, reach our Residential Services team at rs@arcadia-consult.com.vn.
