The second real estate tax issue is heated up, a roadmap needs to be developed in line with market health.

Can property taxes reduce home prices?

In a report sent to the Government Office on the reasons for the recent increase in real estate prices, the Ministry of Construction said it would study and propose a tax policy for those who own and use many houses and lands to limit speculation and buying and selling in a short period of time to make a profit.

According to the Ministry of Construction , the factors contributing to the recent increase in housing prices include the "participation" of a number of investors, groups of investors, speculators and real estate brokers. Regarding auctions with winning prices of over 100 million per square meter, the Ministry of Construction said that many investment groups specialize in participating in auctions and then selling immediately to make a profit. Outside the auction area, many brokers are waiting for the results, ready to offer to buy and sell land at a difference of 200 - 500 million VND per lot. The buying and selling of many lots of land for illegal profit is common, even organized, increasing the price level of land and housing in the surrounding area.

Some groups, investors and individual real estate brokers distort market information to "inflate prices", create virtual prices... and take advantage of people's lack of knowledge to manipulate psychology, attract investment according to crowd psychology for profit.

Normally, investors of housing projects spend an average of 3% of the selling price to pay to the trading floor and brokers to sell the products. However, brokers often choose according to the market situation to add more price when transacting with customers, causing buyers to pay "the difference".

“During the feverish period, many brokers also use the “deposit” method to buy houses and land from sellers and then increase the price by 10-15% to sell to others. For example: An apartment is priced at 5 billion VND, the broker deposits 1 billion VND to buy and agrees to pay within 1 month. But within this 1 month, the broker will find customers to sell at a difference of 6-7 billion VND.

In addition, some investors also contribute to pushing up housing prices by “offering high selling prices”, raising the expected profit level higher than the average of real estate projects. In areas where only a few, or even one project is open for sale, investors can raise prices to make a profit, due to lack of competition and reference prices,” the Ministry of Construction stated in the report.

Commenting on this issue, Master Nguyen Van Dinh - Real estate legal expert said that one of the reasons for the escalation of house and land prices is the phenomenon of speculation and hoarding with the mindset of "nothing is richer than trading land", supported by banks. This is a "VIP" customer group of banks because the loans are always mortgaged with houses and land - which are considered to almost always increase in price and have little risk. The investment needs of the people are legitimate, but when this phenomenon is at a high level, it becomes speculation and hoarding of houses and land, distorting the market, causing land to be abandoned, and wasting resources.

MSc. Nguyen Van Dinh said that taxing houses and land is a mandatory solution, clearly stipulated in Resolution No. 18-NQ/TW of 2022 of the Central Executive Committee on continuing to innovate and perfect institutions and policies, improving the effectiveness and efficiency of land management and use. Resolution 18 sets out the tasks and solutions: "Overcome the situation of wasteful land use, leaving land fallow, polluted, and degraded", "Prescribe higher tax rates for people using large areas of land, many houses, speculating on land, slow land use, and leaving land fallow".

Mr. Nguyen Van Dinh said that at the land auctions, the winning bid price was dozens of times higher than the starting price in the past. Most people were skeptical about the auction results rather than happy about the fact that the state budget would receive additional large sources of revenue. The reason is that the land plots after winning the auction are often abandoned, in many cases forming "ghost urban areas", most of these "projects" often have a very low occupancy rate, even after decades of implementation, only a few houses have been built and people have moved in. Accordingly, Master Nguyen Van Dinh said that the taxation of houses and land has a political basis in Resolution 18 of the Party but must be implemented synchronously and fairly among localities.

An important factor is the need for a database for taxation, to ensure that the right subjects are taxed, and to promote the effectiveness of tax policies. At this time, the exact determination of who owns this real estate has not been resolved due to the lack of a complete database and the phenomenon of having someone else take the name of the property.

However, the Prime Minister has approved Project 06 to develop applications for population data, identification and electronic authentication to serve digital transformation. The new Land Law, Housing Law, and Real Estate Business Law also mention the construction of a national database on land, housing, and real estate information; if implemented effectively, in the near future a reliable database system can be built, which is an important database to enforce the real estate tax law after it is passed.

“ If real estate is subject to tax, if an information system and database of real estate can be collected to “attribute ownership”, to see exactly who owns this property, then something that seems impossible can happen: real estate and house prices will decrease, even decrease sharply. Real estate speculation will be almost prevented. Banks will also have to look for a new customer base instead of land tycoons.

Taxation is to concretize the view that "houses are for living, not for speculation" and only then will the dream of settling down for workers become less distant" , Mr. Nguyen Van Dinh emphasized.

The real estate market has recently shown signs of improvement when the National Assembly officially approved three important laws of the market, taking effect 6 months earlier than expected, starting from August 1, 2024. While the real estate market is only bustling in Hanoi, other localities are still quite quiet. In the context of real estate businesses facing many difficulties and investors still being "stuck" in provincial markets, the recent proposal to tax second homes has received many opposing views.

In fact, the tax on second homes is not a new proposal, but has been mentioned since 2009, but for many reasons it could not be legalized until it was officially included in Resolution No. 18-NQ/TW issued in June 2022 by the National Assembly Standing Committee. However, the process of developing regulations/policies to regulate the land market, specifically through additional taxation on land use rights and ownership of assets on land from the second real estate or more, has encountered many obstacles.

Specifically, many experts are concerned that if the imposition of real estate tax is not carefully calculated and leveled, it could create a counterproductive effect, increasing housing prices, making it more difficult for low-income and middle-income people to access housing.

Which route is suitable?

Tax is an effective tool to deal with tax evasion in real estate transfers, speculation, price inflation, etc. However, taxing second homes needs to be carefully calculated to be both suitable for market realities and to ensure the harmony of interests of all parties.

According to many experts, tax can be a tool to control skyrocketing land prices, reduce speculation, prevent market manipulation, and bring real estate back to its real value. However, with the current unclear land information management mechanism, taxing is not easy.

Tax is a good solution, helping to increase revenue for the State budget and contribute to adjusting the market in the short term of 6-12 months or 1-2 years, but it cannot maintain the impact in the long term. However, there are also many concerns that tax will only increase prices, because the land price will be added with tax by the seller.

Sharing with the press, financial expert Dinh The Hien said that property tax is simply understood as a tax levied on people who own property; the more property, the more tax. For people with an average standard of living, who only have one house to live in, there is no need to worry.

For those who have a lot of assets (real estate), and the assets continuously generate profits, paying more taxes is natural. In cases of borrowing for investment, taxes are part of the cost that investors must calculate, "profit and loss".

Recently, the Vietnam Association of Realtors (VARS) also proposed a real estate tax policy applicable to two groups: buyers of second homes or more and owners who abandon the project. The tax rate will gradually increase for transactions where the seller has a short ownership period.

Previously, in August 2023, Ho Chi Minh City voters continued to propose taxing second homes and imposing higher taxes on vacant properties that do not generate land value. The Ministry of Finance said it has researched and developed a draft Law on Real Estate Tax, 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).

Khanh An

Source: https://www.congluan.vn/lai-nong-chuyen-danh-thue-bat-dong-san-thu-hai-can-xay-dung-lo-trinh-phu-hop-voi-suc-khoe-thi-truong-post314987.html