Foreign organizations and companies operating in the country, as well as foreign individuals with valid visas, will be able to buy houses and apartments, according to Phan Trung Ly, head of the National Assembly’s Law Committee. The National Assembly overwhelmingly passed the legislation Tuesday, and President Truong Tan Sang is expected to sign it. The measure will take effect next July, Mr. Ly said.

Vietnam’s real-estate market has hit hard times in recent years, a victim of a long period of speculative investment. Several property developers are struggling to lower their stockpiles, making it hard for the banking system to clean up nonperforming loans associated with property.

“This is a good policy…and the new law will definitely help increase demand for properties,” Hanoi-based economist Nguyen Minh Phong, told The Wall Street Journal.

The new law is expected to lift demand for homes, helping property developers reduce their inventories and banks clean up their bad debt, said Le Hoang Chau, chairman of the Ho Chi Minh City Real Estate Association.

“However, we don’t expect a huge boost for sales as Vietnam isn't yet an attractive destination for foreign home buyers,” Mr. Chau said.

Don Lam, chief executive officer of Vinacapital, one of the leading asset management groups in Vietnam, predicts foreigners with Vietnam ties will want to buy beach houses in central Vietnam as second homes.

“I think the new law is necessary, but it will take time to really work as it needs implementation guidance,” said Mr. Lam.

Some restrictions apply: foreign organizations and individuals won’t be able to purchase more than 30% of the apartments in an apartment building. Also, foreigners will only be allowed to own a property for 50 years, although there will be the possibility of extensions.

Mr. Phong said lawmakers are expected to issue more conditions before the law takes effect, including restrictions on property ownership in “sensitive areas,” which might include places deemed important for national defense.

By Trong Khanh & Nguyen Anh Thu - The Wall Street Journal - November 26, 2014