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Real estate investment versus stock performance in Vietnam

The first thing to say is that it is not as easy as it may sound to compare these two types of investment. This comparison could be done by different people with all the data available and the conclusion could still be totally different. Why? Simply because it is a complex calculation and that many hypothesis have to be made. Let's start with real estate returns. The first thing to understand here is that real estate investors do not buy the exact same property; location will be different, price will be different etc... This means that each real estate investor will end up with his or her own return. If your investment is a rental property, your returns will be a combination of the gains or losses made on your property when you sell it and the incomes you will make over time through the rents. While it is impossible to know your gains or losses on your property price in the future it is easier to have an idea of your rental income. In fact, rents tend to be much more stable than property prices over time. The best example to show this is the Japanese real estate crisis of the 90’s where rents decreased at a way lower rate than real estate prices.

In Vietnam a typical rental yield in Hanoi or Ho Chi Minh city is currently roughly 8%. Be careful! While this 8% return is almost tax-free for Vietnamese residents it is clearly pre-tax returns for foreign based investors.

In the next post we will review stock markets returns...

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