Land in Vietnam

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I started thinking about land recently, probably because I have real estate on the brain, and I thought I would see what I could find about land in Vietnam. Basically, how does land work in Vietnam. I found out some interesting facts:

  • Land is collectively owned. No surprise for a Socialist Republic. The government can assign land use rights to people, or lease them. These leases can be paid annually or in a chunk at the beginning. If you pay at the beginning, you have more rights, if I read things correctly.

  • While land leases may be strange to some investors, they are actually quite normal in the UK. It works fine there (look at property prices in London!), although most leases run for 125 years or longer. I guess it helps to have royalty.

  • Land fees are a big part of city budgets, according to this story about land fees. Last year, Ho Chi Minh City (HCMC) collected VND16.5tr for land-use purpose changes, VND5.38tr in leasing land and VND6.34tr in land-use fees. In total, it collected VND28.2tr in all types of land fees. This represents 11.5% of all domestic revenues and 7.5% of all revenues collected by the city. It was more than the city got in crude oil revenue, which is falling.

  • This reminds me of stories (here, here, here, and here) about Chinese local governments’ addition to real estate sales. They can make up as much as 35% of government revenues. First, it is/was unsustainable (although these articles go back to 2012) because the sale can only happen once. Second, if there is a downturn, revenues from taxes and fees are probably already going to fall, and this is going to be a double whammy. Third, it really pushes cities to develop profitable real estate rather than parks, schools, government buildings, even if it is necessary.

  • However, looking at Vietnam in comparison, the real estate market, and revenue from it to the government is much less of a worry. As mentioned above, it is only 7.5% of revenues in HCMC. In the US, it can be significantly more. Overall in 2015, it made up 30% of local government budgets, and 17% of total state and local budgets.

  • Foreigners can only lease land, and that is for 50 years (70 years in certain exceptions) and renewable. And they still have the ability to sell the property. At least in late 2017, foreign sales were minimal, according to this article. But these numbers appear to be increasing.