Property abroad: Vietnam

The former French colony, known for its dense jungle and tropical beaches, is finally opening its doors to foreign buyers. Laura Latham reports

Hot on the heels of Thailand and Malaysia, Vietnam is positioning itself as the next big destination in Southeast Asia. The past decade has seen unprecedented growth in tourism and investment, however, a recent slump has seen property prices drop sharply and led the government to relax its laws on foreign ownership.

Vietnam's stunning coastline, historic sites and bustling cities attract around four million visitors annually. Many tourists opt to stay in luxury coastal resorts in areas such as Hoi An, Nha Trang and the famous China Beach near Danang, which is where much new residential property can also be found.

Until recently, buying property was difficult for foreigners, who had to set up a company first. But this year the rules are changing to allow ownership via renewable leases that allow usage rights for a minimum of 50 years.

While cities such as Hanoi and Ho Chi Minh City are drawing buy-to-let investors, second homeowners are looking to beach resorts for holiday homes with rental potential. Most of these are high-end, international brands with starting prices of around £200,000. Hyatt Regency, Banyan Tree and Six Senses all have projects in the planning stages, which will offer residential units alongside spas, bars and tennis courts.

Business is brisk, according to Rudy van Bork of La Perla International Living, which is developing Bai Tram, a luxury beachfront resort north of Nha Trang. "The first units have already been reserved," he says, "and we have a lot of interest from overseas buyers. Compared to other prime destinations, such as Bali, Vietnamese property is not expensive. Average prices of resort homes start at around £1,500 per square metre; that's very affordable for luxury property."

La Perla's properties start at £221,000 for a one-bedroom unit and go up to £2.9m for a villa of 900 square metres. Bai Tram will eventually offer 222 properties, and many will be leased through the resort's rental pool. Van Bork says this system suits overseas buyers who can rent out their home when they aren't using it.

Brett Ashton of Savills also feels Vietnam is only showing the tip of its potential. "Pricing is still significantly lower than in more mature residential resort locations such as Phuket or Bali," he says, "but coastal properties have limited supply and prices should rise over the short to medium term."

Savills is selling luxury villas in the Sanctuary Resort, Ho Tram, from £340,000 and in the Hyatt Regency, Danang, from £112,000 for one bedroom. More secluded locations command higher prices. Six Senses' stylish villas on the island retreat of Con Dao, for example, are selling well, despite costing from around £1.2m.

High-end homes will also soon be available from Banyan Tree, though prices at its Laguna Hue resort, near Danang, haven't yet been set. "Being relatively undeveloped as a tourist destination, Vietnam has room for growth," says Ariel Vera, Banyan Tree's group managing director. "We've always believed Vietnam holds the greatest potential of mirroring the success of Phuket within Asia."

La Perla International Living: www.laperlainternationalliving.com; +31 (0) 20 589 40 70; Banyan Tree: www.banyantree.com; Six Senses: www.sixsenses.com ; +84 8 910 4855; Savills: www.savills.com.vn ; +84 8 3823 9205.

Vietnam: Buyer's guide

* Non-Vietnamese can't own property freehold, only via an initial lease of 50 years with the option to renew indefinitely for a further 70-years.

* It's possible to lease land this way in order to build a home but you won't own title to the land only usage rights.

* The easiest way for foreigners to buy is via developments such as apartment blocks and residential resorts. Though they can only own one property at a time.

* Vietnamese property prices have reportedly slumped by up to 50 per cent in 2009 and are predicted to dip further this year.