The Ministry of Finance (MOF) has collected opinions for its idea on imposing property tax on real estate which aims to prevent speculation and reduce prices, thus allowing people to have more opportunities to own accommodations.
However, contrary to predictions, experts and the public don’t applaud the idea. They believe that the taxation won’t help obtain the goals that MOF wants, but will worsen the situation, while the opportunities to buy houses will become smaller.
What does the market need?
Experts believe that keeping transparent information about real estate, from development and planning to laws, will help avoid price inflation and market disturbances. However, publication of the real estate projects needs to be done in many localities.
Nguyen Van Dinh, Chair of the Vietnam Realtors Association (VRA), said after local authorities gave warnings about the artificial land fever and publicized the information about the land use plans, the land price cooled down.
“In some localities such as Hoa Binh, land prices were inflated because prices there were still considered reasonable, but were expected to increase in the future,” Dinh said.
“The abnormal real estate price increases recently are blamed on many parties, including unclear information, which makes it difficult to assess the real value of real estate,” he commented.
Dang Hung Vo, former Deputy Minister of Natural Resources and the Environment , said that transparency and control of information play an important role in stabilizing real estate prices. However, he recommended that, in order to make information transparent, the State needs to have a database with updated information about the real estate market from the local to central levels.
According to the Ministry of Construction (MOC), the prices of houses and land increased continuously last year. As of the end of 2021, the apartment price had risen by 5-7 percent on average. Meanwhile, the prices of separate houses in projects increased by 15-20 percent and land prices by 20-30 percent compared with late 2020.
The major reason behind the price increases was the short supply. Other reasons included higher input costs, including labor force and building material price increases.
Nguyen Quoc Anh, a respected real estate expert, commented that in order to stabilize the prices, it’s necessary to improve the supply. To improve supply, it’s necessary to remove legal bottlenecks.
Stressing the need to improve the supply, Anh said that if imposing property tax on real estate, this would force prices down, but just in the short term.
“The prices would go down for a short time because people would have to listen to the news. Meanwhile, the prices would go up in the medium and long term,” he said, adding that this could be seen in some markets such as Singapore and Malaysia.
He said that plentiful supply would create healthy competition. In a market with healthy competition, the prices would be reasonable, thus giving more opportunities to people to own accommodations.
According to Le Hoang Chau, chair of the HCM City Real Estate Association (HOREA), the housing supply in HCM City has dropped sharply because of legal problems. The current laws say that only realtors developing projects on 100 percent of residential land will be recognized as project investors.
“The regulation has made it impossible to implement hundreds of commercial housing projects throughout the country over the last five years,” Chau said.
He warned that it would be a problem if Vietnam imposes property tax on real estate while still maintaining collection of land use fees, which means new taxes will be heaped on existing taxes.
HOREA has proposed a standard process for the development of commercial housing projects to define the time for each procedure and shorten the time for administrative procedures.
The association has also proposed that the Government soon amend and supplement Decree 100 to perfect the mechanism and policy on social housing development, and attract more enterprises and use the land banks reserved for social housing development.
In order to have more affordable apartments, Chau said it’s necessary to apply comprehensive measures, including reductions of bank loan interest rates, and VAT (value added tax) and CIT ( corporate income tax) o attract more investors.
While some people support the Ministry of Finance’s (MOF) plan to tax houses, others warn that taxation is not feasible and this may bring the opposite effect.
Prime Minister Pham Minh Chinh has assigned the Ministry of Finance (MOF) to study and design some kinds of tax related to the real estate market, including property tax, in order to stabilize the market and reduce speculation.