The Hanoitimes - The Government should impose a tax on property transactions that are traded within a year after the purchase, aiming to reduce speculation and help the estate market develop sustainably.
The proposal was in a project on developing the Ho Chi Minh City real estate market in 2016-2020 with a vision to 2030 submitted to the Government and the National Assembly for approval recently.
According to the project, which was approved by the municipal People’s Committee, the city’s property market still lacks transparency, causing speculation. Individual investors buy houses and land not for the purpose of accommodation or rental but with the intention of quickly reselling them for profit. However, the home buyers did not pay for asset taxes and additional income. Sometimes, the investors held a majority of transactions in the market, making land and house prices increase and reducing supply for people seeking to buy homes to live in.
Housing purchases in Ho Chi Minh City have increased rapidly thanks to rising income
Ho Chi Minh City therefore proposed that the Government should review regulations relating to taxes on real estate transactions to encourage people to truthfully declare the value and additional income from the transactions. This could help the market develop transparently and healthily.
In addition, besides taxing assets on land and the added value of land and property on land from infrastructure investment, high tax rates on owners of more than one house must be applied, according to the proposal.
Under the project, the city said that research should be also made to create a legal framework for a number of new financial tools such as the housing savings fund or the real estate investment trusts (REITs) that help develop the local real estate market.
The city also proposed to issue urban bonds and construction bonds besides mobilizing capital from domestic and foreign banks, credit and financial institutions to have funds for the real estate market development.
Earlier, the Ho Chi Minh City Real Estate Association (HoREA) also supported the levy of tax on second-home owners.
The Ministry of Finance also said it will compile a law on asset tax, including taxes on owners of more than one house, to limit speculation as well as wasteful use of real estate assets, helping people with real requirement own a house.
This stirred the realty market which only recently escaped a prolonged frozen period to enter recovery thank to a combination of support measures, but currently still lacked market information transparency.
According to property expert Dang Hung Vo, Vietnam does not have adequate market information, which will make it difficult to tax second-home owners effectively. It is not the right time to impose asset tax on home owners, he said.
Vu Van Phan, deputy director of the Housing and Real Estate Management Department under the Ministry of Construction, said the real estate market was especially sensitive to policy changes.
For the long-term, the imposition of asset taxes, including home-ownership tax was necessary, but when to tax, how to tax and who would be taxed needed to be studied thoroughly, Phan said.
Phan added that purpose of imposing tax would be to prevent speculation and encourage home owners to use their assets more effectively.
In Vietnam, housing purchases increased significantly as average income per capita rose from US$1,400 in 2013 to $2,385 in 2017. It is expected to rise to $3,400 by 2020. There is no specific property tax law in the country, but there are taxes related to property, such as the tax on agricultural and non-agricultural land use.