Using tax policy to regulate real estate market

Mr. Nguyen Van Dinh, Chairman of Vietnam Real Estate Brokers Association.

The Ministry of Justice is proposing the Government develop a real estate tax law project to submit to the National Assembly Standing Committee and supplement the project to the National Assembly's 2024 Law and Ordinance Development Program. What do you think about this project?

In my opinion, the development of the Law on Real Estate Tax is consistent with international practices. Many countries in the world have built this law.

The use of tax tools to operate and regulate the market, especially controlling speculation and pushing real estate prices is necessary and attracts the attention of management agencies and enterprises. It can be affirmed that Vietnam needs to issue a complete tax law to supervise the operation of the real estate market and encourage the real estate market to develop effectively and minimize negative activities.

Are some contents proposed by the Ministry of Justice for the operation of the real market such as high taxation of luxury apartments, separation of residential land and houses to tax real estate; supplementation of tax regulations for individuals' incomes from real estate transfer appropriate?

I agree with the goal of taxing high-class apartments (valued at over VND50 million/m2), of the agencies drafting the Law on Real Estate Tax. The tax on the high-income group will further support the development of social housing and popular housing as well as contribute to the State market.

On the other hand, the high tax rate on luxury apartments will push up house prices and cause liquidity difficulties, so investors have to consider the investment in difficult-to-sell products or easy-to-sell products. Thereby encouraging the promotion of housing development with more affordable prices, resolving the urgent need for housing for people.

In addition, the supplementation of tax regulations for individuals' incomes from real estate transfer in the Law also attracts investors. Currently, the tax rate on transfer income is 2%. The income from real estate transfer includes income from the transfer of land use rights and land-attached assets, from the transfer of the right to own or use houses, the right to lease land, water surface and other income from real estate transfer.

Recently, individuals often declare transaction value much lower than the actual trading value to reduce the amount of tax payable. The easy real estate tax management has caused tax evasion and pushed up land prices by speculators. If strict regulations are issued and high tax rates are applied to speculation, it will prevent this situation.

However, the process of perfecting tax policies also needs to be assessed before submitting them to the competent authorities for promulgation at an appropriate time to ensure high efficiency. Especially in the current context, the real estate market has faced many difficulties, including the use of effective tools to support the development of a sustainable and transparent real estate market in accordance with the development planning and strategy.

What do you think about the real estate market trend in 2023?

The real estate market in 2023 is forecast to remain under pressure because Vietnam's economy will still be affected by external factors. However, there is still an opportunity for the market’s recovery. It is expected that transactions will resume and more supply to the market at the end of the second quarter of 2023.

Vietnam’s real estate market in this period does not repeat the crisis cycle of 2012. Currently, urban development and infrastructure investment and the demand for real estate investment and business have seen strong growth. These factors create a great motivation for the resilience of the market. Therefore, if we only remove the obstacles including legal, capital bottlenecks, and strengthen confidence, the market will surely return to balance.

Thank Sir!