Suburban areas establish new price levels, propose second real estate tax, abandon Thanh Oai land auction deposits

Real estate: Auctioned land in Hoai Duc district, Hanoi. (Source: Vietnamnet)

Real estate 'falls' into the hands of the rich, prices continuously increase

According to the Vietnam Association of Realtors (VARS), the situation of abandoned houses, abandoned villas, and abandoned urban areas is increasingly appearing. Even in big cities, where land is scarce and population is dense, this situation is still rampant, showing the paradox between abandoned land and houses on one side and the scene of people struggling, working all their lives but still not sure if they can buy a piece of land or a house.

According to VARS, speculative investors – hoarding goods when they are scarce, not available to sell, then leaving them unsold waiting for prices to increase or creating artificial scarcity to push prices up in search of high profits – is very common, occurring from urban to rural areas. It affects the process of land fund development, supply and demand relations, and affects the economy in the long term.

VARS believes that the tax should be applied to second homes and above. It is natural that people with many assets, and assets that continuously generate profits, pay more taxes. In fact, most home buyers in recent times are second and third home buyers.

This proposal was made in the context of real estate prices continuously increasing, with no sign of decreasing.

According to data from this unit, the apartment price index in the second quarter of 2024 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 above VND50 million/m2.

Not only new projects, but also old apartment prices have skyrocketed. Many apartments that have been used for decades are still being advertised at prices 2-3 times higher than when they were first sold. The villa, townhouse, and suburban land segments also show signs of price increases, as some groups of investors create fake supply and demand to profit.

Therefore, to regulate the market to develop in a safe, healthy, and sustainable direction, so that land prices increase and decrease according to the market, according to VARS, issuing a real estate tax policy is an urgent task that cannot be ignored.

VARS proposes a real estate tax policy that applies to two groups of people, including buyers of second homes or more and owners who abandon projects. The tax rate will increase gradually for transactions where the seller has a short ownership period.

As in Singapore, home buyers must pay a fee of 20% of the property value for a second home, and 30% for a third home. Owners who sell their home in the first year will have to pay a tax of 6% of the property value, 2% in the second year, 8% in the third year, and no tax or fee will be imposed after the fourth year.

VARS also proposed that in case the owner does not build a project after receiving the land, he/she must also pay the abandoned real estate tax. This method is applied in Korea, land abandoned or in the process of land improvement for more than 2 years is taxed at 5% and the tax rate increases gradually according to the number of years the land is abandoned, 5 years is taxed at 8%, 7 years is taxed at 9%, abandoned for more than 10 years is taxed at 10%. In the US, abandoned land is taxed at 3%...

However, the association also recognizes that using tax tools to regulate the market faces many challenges. Among them, it requires large investments in technology and human resources, because in order to determine which is a second or third home, and to use tax tools effectively and transparently, state management agencies need to promote the construction and completion of information systems and databases on housing and the real estate market.

VARS also recommends considering possible negative impacts, such as taxation that could cause people to "exhaust" their purchasing power, leading to other long-term consequences for the economy or creating legal loopholes when the rich can still avoid taxes by transferring ownership of second, third assets... to relatives, house rents increase to offset the costs of paying taxes...

Adjacent, suburban villas are sought after

According to Vietnamnet, land auctions in the suburbs of Hanoi have been causing a "fever" in recent days. Market developments have caused many investors and real buyers to rush to find land for villas and townhouses in the suburbs built in synchronous urban areas. Surveys in the districts on the outskirts of Hanoi show that the supply of this segment is quite scarce, the number of villa and townhouse projects on the outskirts being opened for sale is small and quickly sold out.

In the West, some new villa projects cost from 180 million to nearly 200 million VND/m2.

In the Southern region, 159 Him Lam Thuong Tin shophouses are a rare supply that is being opened for sale. Currently, the shophouses, 5-storey townhouses with 2 front and back facades, which have been completed and have red books, are being introduced to the market with prices starting from 100 million VND/m2.

Along with existing supplies, the market also attracted attention with information about a project in Dong Anh preparing to launch in the fourth quarter with a price of around 300 million VND/m2...

The supply of villas and townhouses is considered to be at its lowest level in the past 10 years, which has pushed the price of villas and townhouses to continuously increase over the past year. Villa prices in some areas in Hoai Duc and Ha Dong are continuously setting new levels, increasing by 1-30% compared to more than a year ago. In some potential areas, the number of interested customers has even increased, causing local price fever.

Ms. Le Thi Bich Ngoc - Deputy General Director of Truong Son Land said that the sharp increase in apartment prices and high auction prices have caused many investors to shift to suburban areas. Accordingly, the low-rise segment will continue to heat up. In the near future, the price of new products in suburban areas may establish a new price level when the Land Law officially takes effect from 1/8, pushing up the costs of villas and townhouses.

According to observers, in the short term, the liquidity of the villa and townhouse segment will increase, and secondary prices will likely continue to rise. “From now until the end of the year, the villa and townhouse segment in Hanoi will continue to witness price increases as supply is scarce and demand continues to increase. However, the supply will mainly be in suburban districts, and the inner city area has exhausted land funds for new projects,” said Ms. Nguyen Hoai An, Director of CBRE Hanoi.

According to Mr. Nguyen Van Dinh - Vice Chairman of Vietnam Real Estate Association, when resort real estate is still quite quiet, land in the provinces is waiting for its time, and inner-city apartments are too hot, suburban villas and townhouses are still the choice of many investors because they both ensure stability and have high potential for price increase. "Currently, the market for villas and townhouses in Hanoi has run out of inner-city products, forcing the demand for low-rise housing to move to the suburbs, which will also be the driving force for continued price increase of this segment in the future," Mr. Dinh affirmed.

Thanh Oai auction land: 55/68 lot with no deposit

The deposit deadline has passed, but only 13/68 plot of land in Ngo Ba area, Than village, Thanh Cao commune, Thanh Oai district (Hanoi) has fulfilled its financial obligations. 55 plot of land with deposit forfeited has a winning price ranging from 80 million VND/m2 to more than 100 million VND/m2.

According to the regulations, the land auction winner must fulfill the financial obligations according to 2 installments within 30 date. The final payment of this auction is on 14/9 date.

However, information shared by the Thanh Oai District Land Fund Development Center with the press shows that, as of today (16/9), although the payment deadline has expired, only 13/68 land lots have fulfilled their financial obligations. Among the lots that have paid in full, the highest lot is priced at more than 55 million VND/m2.

The lots with high winning prices from 80 million VND/m2, including the winner of the lot with the highest price of 100,5 million VND/m2, have not paid on time. Thus, 55 lots are understood to have forfeited their deposits.

Previously, the auction of 68 land lots in Ngo Ba area, Thanh Than village, Thanh Cao commune caused a stir among real estate investors and the public when there were more than 4.000 qualified applications, with more than 1.500 customers. The winning price was 7-8 times higher than the starting price. From the starting price of 8,6-12,5 million VND/m2, the highest winning price exceeded 100 million VND/m2.

Specifically, lot LK03-10 with an area of ​​nearly 65 square meters has the highest winning price of up to 2 million VND/square meter, 100,5 times higher than the starting price.

It is known that the auction of 68 land lot in Ngo Ba area, Thanh Than village, Thanh Cao commune was held on 10/8, expected to collect more than 400 billion VND. With 13 land lot fulfilling financial obligations, the total amount collected was only more than 80 billion VND, reaching 20% of the expected amount.

Cases of conversion of housing function from date 1/8

Article 124 of the 2023 Housing Law clearly stipulates cases where housing functions can be converted.

Accordingly, cases of conversion of housing functions include:

Convert from resettlement housing to social housing.

Convert from public housing or social housing when no longer needed to resettlement housing.

Converting housing under the provisions of Point d, Clause 1, Article 13 of the 2023 Housing Law to official housing or social housing for rent.

Other cases as decided by Prime minister Goverment on the basis of the proposal of Ministry of Construction.

Note: The conversion of housing functions as prescribed in Clause 1 of this Article must comply with the following principles:

Must be consistent with the approved provincial housing development program and plan, and not cause loss of public assets.

After being converted, the house must be used effectively, for the right purpose and in accordance with the standards and technical regulations of the converted house.

Must be approved by the Ministry of Construction or the Provincial People's Committee.