50-70 year apartment ownership certificates 'good for the market'

David Jackson*
By David Jackson*
Sat, June 11, 2022 | 7:00 am GMT+7

The Ministry of Construction’s proposal on granting apartment owners a certificate of property use with a definitive term of 50-70 years, instead of the current permanent ownership, is good for the market in the long run.

The idea is proposed for new apartment projects and does not touch on the existing freehold apartments that owners secure indefinitely.

If the proposal is approved and the amendment of the Law on Housing is made with a reasonable roadmap, adequate alternatives for homeowners when the lease expires, clear laws and regulations, plus proper communication, it would diversify the residential market and open more investment opportunities for homeowners, investors, and developers.

Market prices for leasehold apartments are generally lower than that of a freehold unit in the same areas, though this may not hold true in all cases. Those looking for freehold properties they can pass on to future generations may accept higher prices.

Young people, families with a limited financial budget, or investors interested in rental yields can opt for leasehold apartments at more affordable prices, then move elsewhere later when their needs change. So, offering diversified housing options should be good for the long-term health of the market.

It shall be noted that there are provisions that allow the government to reclaim the land (including land with apartment blocks built on it) for vital infrastructure or security purposes, and this is a fact not only in Vietnam but in other countries too. So, whether an apartment involves a freehold or leasehold would make little difference.

Culturally, for the majority of Vietnamese, house ownership is intrinsically linked to inheritance value. Therefore, a tactful approach in this aspect is key, together with a reasonable roadmap, clear laws and regulations as well as proper communication, as mentioned above.

For homeowners, it should be considered that perception changes over time. People tend to think of a long-term stay and hence prefer freeholds. However, family structures in Vietnam, especially in urban areas have changed in the past decades, and there are now more young people living in apartments.

Across the world, land is a limited resource, and the use of land should aim for not only economic development but also the improvement of people’s wellbeing. Having leasehold apartments means that there are opportunities for re-development or repurposing of the land when the lease expires, to better serve the social needs of the future.

In terms of property value, the perceived value of freehold apartments tends to be higher than leasehold apartments. Yet, value is not only about price but also counts other factors like amenities, accessibility to essential services (schools, hospitals, malls, F&B options, sports and recreational facilities, drainage, etc.), connectivity to fundamental infrastructure like roads, bus, metro line stations, etc., and proximity to the workplace. For example, if one looks at the annual rental yields, a leasehold unit with less than 20 years left on its lease, located close to central business districts (CBD) can be of higher value than a freehold one in the outlying areas with limited amenities and low accessibility to essential services.

When it comes to the expiry of the lease, leasehold apartment owners should have a variety of options to choose from. For example, they can pay a lease top-up premium to renew the lease or join a collective sale to a third-party developer for reasonable compensation. Of course, as the proposal is new to Vietnam, more thorough discussions are needed, keeping a long-term view in mind.

If the proposal is approved, it will not come into full effect in day one as there are always roadmaps and concrete timelines for implementation.

What I would see is a more stabilized, healthy, and diversified market with more affordable choices for homeowners who are end-users, not to mention more opportunities for investors and developers.

*David Jackson is CEO of Colliers Vietnam.

Comments (0)
  • Read More
Vietnam a key market of Airbus Helicopters: exec

Vietnam a key market of Airbus Helicopters: exec

Vietnam is a key market for civil and specialized helicopters of Airbus, Olivier Michalon, executive vice president in charge of global business for Airbus Helicopters told Deputy Prime Minister Tran Hong Ha at a meeting in Hanoi Wednesday.

Industries - Thu, March 21, 2024 | 4:43 pm GMT+7

VILAF law firm wins three awards at IFLR Asia Pacific Awards 2024

VILAF law firm wins three awards at IFLR Asia Pacific Awards 2024

Vietnamese law firm VILAF has won three awards at the IFLR Asia Pacific Awards 2024 held on Wednesday at the St. Regis Hong Kong.

Companies - Thu, March 21, 2024 | 4:24 pm GMT+7

Vietnam policies to remain the same despite president’s resignation: VinaCapital

Vietnam policies to remain the same despite president’s resignation: VinaCapital

The surprise resignation of Vietnamese President Vo Van Thuong on Wednesday after being in office for only a year will have no bearing on Vietnam’s economic development or other policies, asset management firm VinaCapital has commented.

Economy - Thu, March 21, 2024 | 3:56 pm GMT+7

Public companies to disclose information in English from 2025

Public companies to disclose information in English from 2025

Public companies will have to disclose information in English, starting 2025, according to a draft circular issued by the Ministry of Finance in line with a request from the State Securities Commission (SSC) of Vietnam.

Finance - Thu, March 21, 2024 | 3:34 pm GMT+7

Multi-sector firm REE hopes to win big from real estate

Multi-sector firm REE hopes to win big from real estate

The real estate segment is expected to be a profit savior for Vietnam's leading multi-sector corporation REE this year when the first phase of The Light Square project is handed over and its revenue is recorded.

Real Estate - Thu, March 21, 2024 | 3:16 pm GMT+7

Moody's upgrades outlook of Techcombank in 2024 to 'stable'

Moody's upgrades outlook of Techcombank in 2024 to 'stable'

Moody's Ratings has revised the outlook of Techcombank from negative to stable, the U.S. credit rating agency said Wednesday.

Banking - Thu, March 21, 2024 | 2:24 pm GMT+7

Vo Thi Anh Xuan appointed acting President of Vietnam

Vo Thi Anh Xuan appointed acting President of Vietnam

Vietnamese Vice President Vo Thi Anh Xuan has been appointed acting President again starting Thursday, as the parliament endorsed President Vo Van Thuong's resignation.

Politics - Thu, March 21, 2024 | 1:48 pm GMT+7

Prabowo Subianto elected new president of Indonesia

Prabowo Subianto elected new president of Indonesia

Indonesia’s General Elections Commission (KPU) on Wednesday officially declared Defense Minister Prabowo Subianto the winner of the 2024 presidential election.

Southeast Asia - Thu, March 21, 2024 | 11:30 am GMT+7

US chip tool maker Lam Research eyes $1-2 billion investment in Vietnam

US chip tool maker Lam Research eyes $1-2 billion investment in Vietnam

California-based chip manufacturing equipment supplier Lam Research has plans to partner with Korea’s Seojin Company to develop factories and establish a supply chain with an investment of $1-2 billion in the first phase as it seeks to expand in Asia.

Industries - Thu, March 21, 2024 | 11:09 am GMT+7

Foreign investors to be allowed to trade stocks in Vietnam without pre-funding: draft circular

Foreign investors to be allowed to trade stocks in Vietnam without pre-funding: draft circular

Foreign institutional investors will not have to deposit 100% of the transaction value before trading stocks in Vietnam, according to a draft circular.

Finance - Thu, March 21, 2024 | 10:54 am GMT+7

Dutch high-tech manufacturer VDL ETG to build Vietnam facility

Dutch high-tech manufacturer VDL ETG to build Vietnam facility

VDL Enabling Technologies Group (VDL ETG), the high-tech manufacturer under Dutch group VDL, will build a facility in Vietnam, targeting delivery of its first products by the end of Q1/2025 or the beginning of Q2.

Industries - Thu, March 21, 2024 | 10:45 am GMT+7

Indonesia emphasises three important steps to manage AI better

Indonesia emphasises three important steps to manage AI better

Indonesian Foreign Minister Retno Marsudi has emphasised three important steps that her country is following to better manage and apply Artificial Intelligence (AI) to make democracy better and deliver more benefits to the people.

Southeast Asia - Thu, March 21, 2024 | 8:54 am GMT+7

Malaysia leads global Halal food market

Malaysia leads global Halal food market

Malaysian Deputy Prime Minister Ahmad Zahid Hamidi has said that the global demand for halal products is steadily increasing, with forecasts estimating a market worth $5 trillion by 2030.

Southeast Asia - Thu, March 21, 2024 | 8:51 am GMT+7

Private lender Eximbank asked to clarify inflated 11-year credit card debt

Private lender Eximbank asked to clarify inflated 11-year credit card debt

State Bank of Vietnam (SBV) Governor Nguyen Thi Hong has requested private lender Eximbank to urgently handle a controversial case regarding an 11-year credit card debt to protect a customer's legitimate interests.

Banking - Thu, March 21, 2024 | 8:28 am GMT+7

Vinh Phuc province's former Party chief expelled from Communist Party

Vinh Phuc province's former Party chief expelled from Communist Party

Vinh Phuc province's former Party chief Hoang Thi Thuy Lan has been removed from Vietnam's Communist Party for accepting bribes.

Politics - Wed, March 20, 2024 | 10:40 pm GMT+7

Foreign firms in Vietnam want clarity, more incentives  to offset GMT impacts

Foreign firms in Vietnam want clarity, more incentives to offset GMT impacts

Foreign businesses operating in Vietnam have called on the Vietnamese authorities to issue clearer policies and consider further incentives to offset negative effects of the Global Minimum Tax (GMT) that was enacted in January.

Economy - Wed, March 20, 2024 | 9:38 pm GMT+7