Forecasting that housing prices are unlikely to decrease, the Vietnam Real Estate Brokers Association continues to propose taxing second or abandoned properties.
This proposal was made by the Vietnam Association of Realtors (VARS) in the context of real estate prices continuously increasing with no sign of decreasing, especially in the apartment segment.
According to VARS data, the apartment price index in the second quarter in Hanoi and Ho Chi Minh City increased by 58% and 27% respectively compared to the same period in 2019. The mid-range segment is increasingly scarce and more than 80% of the supply of newly launched apartments this year is priced at over VND50 million per square meter. Even some new apartment project also has a selling price of up to tens of thousands of USD per square meter.
Not only new projects, but also old apartment prices are still high. Many apartments that have been used for decades are still being advertised at prices 2-3 times higher than when they were launched. The villa, townhouse or suburban land segment also shows signs of price increases, because some groups of investors create fake supply and demand to profit.
According to Mr. Nguyen Van Dinh - Chairman of VARS, the current legal system has no sanctions to control and prevent land speculation and hoarding to push up prices. Meanwhile, the uncontrolled buying and selling and transferring of land is the main cause of "land fever" in many localities. Speculators buy land and then leave it abandoned, waiting for prices to increase or create artificial scarcity, which is common, the purpose is to "push up prices to make a profit".
"Researching real estate tax is urgent to regulate the market. Don't ignore this policy just because it's difficult to enact," said Mr. Dinh.
Experts propose a real estate tax policy that applies to two groups: buyers of second homes or more and owners who abandon projects. The tax rate will gradually increase for transactions where the seller has a short ownership period.
For example, Singapore imposes a 16% tax when the owner sells a home in the first year after purchase. The tax rate drops to 12% if the owner sells the apartment in the second year and 8% in the third year. They are not subject to this tax when selling the house after the fourth year. On the buyer side, from April 2023, the country will increase the tax on the purchase of a second property by 3%, to 20%; the third property is 30% (the old rate is 25%).
VARS also proposed that if the owner does not build a project after receiving the land, he or she must also pay a real estate abandonment tax. This method is applied by Korea, with a tax rate of 5% and the tax rate increases gradually according to the number of years the property is abandoned. Similarly, France imposes a tax on vacant houses of 17% of the first year's rental value and doubles (34%) in subsequent years.
Regulating the market through real estate tax policies, according to the Chairman of VARS, will reduce speculation and curb the increase in real estate prices. This policy also encourages owners of abandoned projects to rent or sell, increasing supply to the market.
In fact, this is not the first time a second real estate tax has been proposed to reduce housing prices. Seven years ago, the Government proposed a pilot second real estate tax in Ho Chi Minh City, but it was not approved. There were many opposing opinions, one of which said that the tax was too early.
In August 2023, voters in Ho Chi Minh City continued to propose taxing second homes and imposing higher taxes on vacant land and houses that do not generate land value. The Ministry of Finance said it has studied and drafted the Real Estate Tax Law, expected to be added to the 2024 Law and Ordinance Development Program, and submitted to the National Assembly for comments at the 8th session (October 2024). Currently, these proposals remain at the draft stage.
However, the use of tax tools to regulate the market faces many challenges. Economist Dinh Trong Thinh said that in order to effectively use tax tools, management agencies need to promote the construction and completion of databases and information on the real estate market. From there, the determination of second and third homes... and their values will be public and transparent.
Mr. Nguyen Van Dinh also recommended that tax rates should be carefully studied to avoid duplication and double taxation, which would drain people's purchasing power. Meanwhile, the rich can avoid taxes by transferring property ownership to relatives.
"Every policy has its problems when it is first introduced, the problem is to consider the pros and cons. The same goes for real estate taxation, the pros will outweigh the cons," said the Chairman of VARS.
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