I. Laws and Policies
The CPTPP officially entered into force for Vietnam on 14 January 2019
The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) is a free trade agreement between Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, Peru, New Zealand, Singapore and Vietnam. On 14 January 2019, The CPTPP came into force for Vietnam. A few changes arising from the CPTPP in relation to the real estate market are worth noting
One of the most important aspects for foreign investors created by this Agreement is the protection of investors through the Investor State Dispute Settlement (ISDS) mechanism, which applies to cross border investments in property development. The ISDS mechanism between foreign investors and a contracting state is a mechanism to promote investment, protect the interests of foreign investors, and at the same time, limit diplomatic tensions and conflicts escalating at the national level. Through this regime, unilateral administrative decisions of state agencies may become subject to lawsuits by investors, which makes it easier for investors to sue States directly, without going through their home government as under a traditional Bilateral Investment Treaty.
From the real estate market access perspective, the CPTPP allows for an enlargement of the real estate services in which foreign investors can participate in, including real estate brokerage services, real estate exchange floors, real estate consulting services and real estate management services, with respect to both residential and commercial properties.
Resolution No. 01/NQ-CP dated 01 January 2019 on key measures to implement socio-economic development plan and State budget estimate in 2019
On the first day of 2019, the Government issued Resolution No. 01/ND-CP on the execution of the socio-economic development plan for 2019, laying out the important targets and solutions to accomplish the 2019 development plan. Some notable policies below will impact the property and hospitality markets, aiming for a strategic breakthrough in the related fields.
- Real estate:
- To strengthen the current legal framework, develop the real estate market on the principle of transparency and efficiency, andencourage the growth of the residential leasing market.
- To achieve the national average residential area of 24.5 square meters per person.
- Land and natural resources:
- To strengthen the current land related policies and regulations, and harmonize inconsistencies between the current land laws and other relevant regulations.
- To tightly supervise the execution of land-use master planning, change of land-use purpose, land lease and allocation through land auction and project bidding.
- To sustainably protect and develop forests, and increase the forest cover ratio to 41.85%.
- To promptly complete the legal framework to effectively administrate new services (e.g. casinos and betting activities).
- To improve quality and diversity of tourism products, promote and develop tourism branding; increase the application of e-visas; strictly manage the quality of tourism services (especially travel and accommodation services).
- To achieve 18 million international tourists across the tourism sector.
II. Market News
Developers welcome BT movements
Vietnam's Government has issued Resolution No. 160/NQ-CP to resume the use of public assets to pay Build-Transfer (BT) investors. The payment process previously came to a standstill in March 2018 due to instructions from the Ministry of Finance to postpone the assessment and approval of using public assets to pay BT investors until the Government provide detailed guidance on the matter. This movement, according to experts, not only proves the motivations of the government to draw capital investment from the private sector, but also demonstrates an effort to solve issues on transparency and efficiency of BT projects. Developers are reportedly satisfied with the news as on-track projects can now be allowed to continue pursuant to the Resolution. Considering Vietnam's need to develop infrastructure and the current limited government budget, BT is a favoured method for improvement of infrastructure as well as other public facilities
(Vietnam Investment Review, 17 January 2019)
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JLL: Vietnam real estate market in 2019 marked by 5 key trends
The mid-end and affordable segment is predicted to lead the property market, as young buyers now prefer smaller apartments with full amenities in convenient locations as compared to larger apartments far from the city centre. Flexible workspaces are expected to receive attention from businesses looking to lower costs by renovating traditional offices into coworking models.
As for tenants, JLL predicts that with the growth of e-commerce in Vietnam, technology firms and foreign logistics providers will be the main tenant groups hunting for ideal office spaces. Moreover, the expansion of the ecommerce and manufacturing sectors will motivate the development of the logistics market, along with factory and warehouse networks.
Finally, in the hospitality sector, investors are targeting hotel lifestyle brands with an increased exposure to nature to capture the rising demand from millennials who travel frequently.
(Vietnam Economic Times, 21 January 2019)
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Bank proposes 4.8 percent interest for social housing loans
The Vietnam Bank for Social Policies (VBSP) has recently proposed an annual rate of 4.8 percent for preferential loans towards social housing; or to build, upgrade, and repair houses in 2019. The Government Office is currently gathering consensus from ministries and sectors to issue the aforementioned rate as soon as possible. For 2019, the proposed total capital for the social housing program is over VND 1.32 trillion (or USD 56.76 million), from which VND 663 billion will come from the State budget and the remaining 50% will be mobilised by the VBSP. The program to provide social housing loans follows the Government’s Decree No. 100/2015/ND-CP on the development and management of social housing.
(Vietnam Investment Review, 17 January 2019)
Vietnam revives USD 58 billion high-speed rail project, despite cost hurdle
Vietnam's Government is planning to resurrect the North-South express railway project with an expected completion date of 2045. As commercial aviation is currently the preferred direct means of transportation between the capital, Hanoi, and the commercial centre, Ho Chi Minh City, the railway line will when complete, link these two hubs and allows passengers to alight at various cities, along the 1,560 kilometre route. The express railway will provide a high-speed train travelling up to speeds of 350 km/h, cutting the existing north-south rail travel time from 30 hours to 5.5 hours, with estimated train ticket prices costing roughly half of that for flying
The Government expects this improvement in transportation infrastructure to boost the economies of cities along the line and to attract tourists to these locations. However, with its total estimated cost of USD 58 billion and the current national public debt nearing the 65% GDP safety threshold, the fiscal concerns remain a problem to the project's approval and completion.