Buying a House in Canada or Buying a House in Vietnam?

If you were born in an Asian country, you probably are familiar with the phrase “buy a house and build a life.” It was the advice our forefathers passed along. Over time and generations, it has become an expectation – you must have a home first, then your job or career will thrive. Vietnamese believe a house provides a solid foundation on which to build a successful career.

For Westerners, owning a house comes after they get a stable job and income. They are willing to move and change their accommodation to suit their work. When their workplace is settled, they think of buying a house. It is probably also the difference in the thinking of people from the West and the East.

If you have some cash and are wondering whether to buy a house in Vietnam or in Canada, do some research on housing regulations both countries in order to make the right choice.

In Vietnam:

  • To be able to purchase and own a house, foreigners first need a valid visa to enter Vietnam.
  • There is no limit on the maximum home value that foreigners are allowed to buy.
  • The right to land ownership is not granted to foreigners. They have the option to lease the land from the State for a maximum of 50 years.
  • The types of house that foreigners are permitted to buy include apartments and residences in a project.
  • At the same time, foreigners cannot buy more than 30 per cent of the number of rooms in an apartment building, not more than 10 per cent of the number of villas or individual houses in a construction investment project, or no more than 250 housing units in a ward.
  • The home ownership certificate issued to foreigners is valid for a maximum of 50 years from the date of issue and may be renewed. Before the expiry date, foreigners can also sell or gift the house. After the deadline, the government owns the property.

Taxes and fees:

  • Stamp duty: 0.5 per cent of the determined value of the property
  • Value added tax (VAT): 10 per cent of the property value
  • Notary fee: vary, depending on the property value
  • For leasing, foreigners pay two per cent tax on rental income and five per cent value-added tax
  • If the rental income exceeds 100 million VND (about CAD 5,800) per year, foreigners pay a licence tax of 1 million VND per year
  • When selling the house, foreigners pay capital gain tax valued at two per cent of the trading price.

What if you are an Overseas Vietnamese (Viet Kieu)?
What is the difference between ownership for overseas Vietnamese and foreigners?

Overseas Vietnamese are Vietnamese who live in other countries. Article 3, Vietnamese Nationality Law has defined overseas Vietnamese as Vietnamese citizens or people of Vietnamese origin residing permanently abroad. Persons of Vietnamese origin residing abroad are Vietnamese people who had Vietnamese nationality at the time of their birth and their offspring and grandchildren are permanently residing in foreign countries. Overseas Vietnamese are eligible to own a home in Vietnam according to Article 8 of the Vietnam Housing Law 2014. Viet Kieu are also entitled to transfer the rights of land use in a housing project, meaning they are allowed to buy land in the “allocating slot and selling land” projects for the purpose of building their own houses. However, a Viet Kieu needs to prove his Vietnamese origin and must be allowed to enter Vietnam.

Points about buying and selling houses and land in Vietnam to keep in mind:

  • Determine the purpose of purchasing a house and your financial ability. Is it to live in or an investment? Knowing how much money you have will help you decide which type of home is suitable.
  • Legality of the house. Get information about the house, such as the project’s plan from the District People’s Committee, and find out whether the house or plot is part of any other plan or scheme. Ask the local people and neighbors if there are ongoing disputes, no matter how big or small. Even minor problems such as conflicts about walkways, fences, or walls with the house next door will be unwanted headaches. Having a thorough understanding of the house before buying will help you avoid later troubles.

Vietnam’s economy is attracting more foreign investors. Big cities and tourist destinations are getting more crowded, and that leads to the demand becoming higher than the supply. Housing prices in Vietnam, especially in urban areas are continuously increasing. Besides Saigon and Hanoi, coastal towns with a strong focus on infrastructure and tourism such as Da Nang, Quang Nam, and Nha Trang, have seen a steady rise in housing prices in recent years.

Our forefathers used to say “there is profit in trading houses or land.” With no forecasted slowdown of the real estate market, Vietnam is a potential place for real estate investment.

In Canada:

Canada welcomes homebuyers regardless of their nationality and does notlimit the number or kind of real estate that foreigners can buy. The rules and regulations on real estate purchase and sale for foreigners in each province are different, so provincial law should be carefully reviewed when you know where you want to purchase property.

In Ontario, non-residents, including non-citizens or non-permanent residents of Canada, have to pay an additional 15 per cent of the value of the property for the Non-Resident Speculation Tax (NRST) when buying houses in the Greater Golden Horseshoe region (GGH), including Toronto, Brant, Dufferin, Durham, Haldimand, Halton, Hamilton, Kawartha Lakes, Niagara, Northumberland, Peel, Peterborough, Simcoe, Waterloo, Wellington, and York.

Canadian banks consider buyers who are Canadian citizens but have not lived in Canada for six months or more as foreigners and apply the same policies as foreigners.

Taxes and fees:

The fees involved when buying a house are about 1.5 per cent to 4 per cent of the total price of the house. These costs are usually paid in advance or at the same time of closing.

  • Lawyer fee: lawyers represent buyers and handle all transfer procedures, ensure the legality of house purchase contracts, and protect the legitimate rights of buyers. The fee is typically at least $500.
  • Home insurance: this is a necessary condition for buyers to get a mortgage loan.
  • Adjustments: The seller already paid for some fees such as property tax and monthly maintenance fee at the initial closing. This amount is calculated so that the buyer can refund the seller.
  • GST/HST tax: If the house is newly built, the buyer must pay GST or HST tax. This tax may be included or not included in the purchase price.
  • Property registration: This fee is also known as a land transfer tax, certificate registration fee, levy or asset purchase tax. It is calculated based on a percentage of the price of the house.
  • There are various other fees including those for home price evaluation, house inspection, and cleaning.
  • There is no stamp duty in Canada. This makes Canadian real estate attractive compared to many other countries in the world.

The process of buying a house in Canada:

Foreigners and citizens alike follow this sequence.

Step 1: After determining the financial capacity and value of the house, find yourself a reputable real estate broker. They will help you find homes on the market that suit your criteria and provide information about the home for sale. Whether you are a buyer or seller in Canada, working with a real estate broker is necessary. Real estate brokerage is an officially recognized profession and requires a practice certificate issued by the provincial government. Brokers have the knowledge and skills to help you complete the purchase. When signing a land and housing contract, buyers and sellers do not directly sign contracts with each other but through real estate brokers. In some cases, home buyers are offered money back by the brokers when the purchase is complete.

Step 2: Ask for a home loan. If you are a foreigner, you can ask to borrow money from a bank in Canada on the condition that you pay in advance, usually, 35 per cent of the price of the house and prove your financial ability. Or pay 50 per cent of the sale price of the house with no need to prove financial ability. The requirements for a home loan from Canadian banks frequently change, so you need to talk to your bank’s credit officer to get up-to-date information and find out the specific demands for your loan.

If you are Vietnamese and you want to buy a house in Canada, it is not easy to transfer money from Vietnam to Canada to pay the 35 per cent or 50 per cent of the price. This is something you need to consider and consult with your real estate broker to find a solution.

Step 3: Find a lawyer who specializes in real estate. Real estate attorneys help check the legal status of the home, carry out the property use transfer and calculate all the costs during the purchase.

Step 4: Make an offer. Once you’ve made sure you can get approved for a loan from a bank, and found a pleasant and affordable home, the next stage is to give the seller an offer to purchase. The real estate broker will help you complete all the procedures for this.

Before closing, you can make a conditional purchase agreement. This means you can hire a home inspector to assess the condition of the home you are about to buy. If the house is damaged, you can withdraw the purchase decision or ask the seller to reduce the price so you can repair the damage.

Sometimes in Canada, housing sales take place in the form of an auction. The seller might list the house at a price below market value, and then receive several offers to buy the house for a higher amount. The seller then choses the buyer who offers the highest price. The attractiveness of the offer is usually reflected not only in the high purchase price, but early payment, and abandonment of a home purchase condition, including waiving home inspection.

Step 5: Close the deal and sign a house purchase contract. This contract will show the purchase price of the house, the size of the house and land, the accompanying equipment, the date of payment and receipt (closing date), and conditional or unconditional purchase agreement.

Step 6: Make a deposit. The deposit amount is usually five per cent depending on the area where you buy.

Step 7: Complete the mortgage approval process and buy home insurance. You should send your mortgage professional a copy of the final Purchase Agreement and the proper information sheet (MLS – feature sheet) and wait for their response about topics such as interest rates and policies. Meanwhile, you can look for home insurance which includes the properties inside and/or outside the house. The price varies depending on the type and the value of your home. There are many insurance companies with different policies and insurance levels. Do the research to find the most reasonable and suitable insurance company for you.

Step 8: Understand closing date and get the key. Closing date is the day when you legally possess the house and get the key. One to two weeks prior to this day, your lawyer will call you to sign the necessary final papers and provide a money order for your down payment and other fees. The lawyer will help you combine your payment, your initial deposit and the mortgage fund from the lender to pay for the seller. Then you will get the key from the lawyer probably around the afternoon time.

No matter where you buy a house, in the East or in the West, determining the purpose of your home purchase is always the first thing to do. This is followed by determining your financial ability to pay for a home, so that the purchase will not be one of burdensome debt, but the beginning of a happy and prosperous life for you and your family.

This post is also available in: Tiếng Việt

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