Shrink high-end real estate segment, promote healthy growth: lawmaker

Vietnam should restructure its real estate market towards reducing high-end housing and increasing social housing, including housing for workers, National Assembly member Tran Van Khai said Friday.

Such restructuring was needed to minimize adverse consequences and promote healthy development, he stressed.

Commenting on the draft revised Law on Real Estate Business, Khai, a representative from the northern province of Ha Nam, said government policies regulating the market remained insufficient.

He said people were hoping that the amendments would help remove the mindset that trading land was the most profitable business and provide coming generations with more opportunities to realize their dream of owning a house.

"If government policies do not feature timely and effective solutions, there may be a financial crisis, or even more seriously, an economic crisis," he said, noting that many real estate businesses were on the verge of bankruptcy.

He proposed that the drafting agency reviews the amendments to ensure the long-term stability of policies and make them open to create a momentum for healthy development.

Khai cited Singapore as a successful example in preventing speculation and market imbalance. The island nation levies progressive tax rates on real estate. For instance, buyers must pay a tax of 7% of the property value for their second home and 10% for the third. If they sold their property within the first year after purchase, they must pay 16% in tax, which is gradually reduced to zero after four years. The loan-to-value is 80% for the first home and 60% for the second one. After applying such policies for a few years, Singapore was able to control and reduce real estate prices in all segments.

In a previous group discussion, National Assembly Economic Committee Chairman Vu Hong Thanh had acknowledged that Vietnam’s real estate market was unbalanced. The housing segment worth several hundreds of millions of Vietnamese dong (VND100 million = $4,250) a square meter was abundant, while that for low-income people was very scanty, he said.

Since the second half of 2022, the Ho Chi Minh City housing market has faced liquidity challenges with the supply of high-priced houses increasing while there was hardly any product in the affordable segment.

Vo Huynh Tuan Kiet, senior manager of residential project marketing at CBRE Vietnam, said that last year, apartment supply hit 22,000-24,000 units, half of which came in the first two quarters. But this cart did not contain affordable housing, causing a scarcity in this segment at the end of the year.

Many developers have plans to launch luxury and super luxury apartments, Kiet noted, adding that this could lead to a higher price range in the future.

Socioeconomic impacts

Wholly state-owned Agribank chairman Pham Duc An, a National Assembly representative from Hanoi, said current fluctuations in real estate prices have had a great impact on socioeconomic development. Rising house and land prices make it impossible for low-income people to rent or buy, while making the investment environment in Vietnam less attractive.

“The draft law needs to have regulations to control real estate prices and specify the responsibility and proactiveness of management agencies, instead of regulating the market only when it is overheated or frozen,” An said.

Dieu Huynh Sang, a legislator representing the southern province of Binh Phuoc, said ensuring healthy development of the property market was an important condition for smooth operation of related markets such as capital, credit and currency.

She proposed a mechanism to synchronize real estate information with information on land and urban development. “Property market development must take into account rational land use planning and supply-demand balance to create an appropriate real estate price range, avoiding speculation,” she said, adding that it was necessary to promote cashless payment in real estate transactions.

Economic committee chairman Thanh said the draft bill neither featured solutions to redress market imbalance nor contained effective measures to regulate the market. “Market regulation must start from the planning stage. We have to clearly determine areas for high-end housing and social housing,” he said.

“Along with planning, there should be policies to create a support mechanism for businesses that encourages them to invest in segments where there is a market shortage,” he added.

The draft revised Law on Real Estate Business is expected to be approved by the national legislature at its upcoming session at the end of 2023.

A Vietnam Association of Realtors (VARS) report shows that from the beginning of 2022 to the end of Q1/2023, there was a "thirst" for supply, especially of affordable housing.

In 2022, about 48,500 properties were put on the market, just over 20% of the supply in 2018 - the year before the Covid-19 pandemic broke out. Most of these were high-end, expensive products.

In Q1/2023, the supply reached about 25,000 properties, mainly inventory from previously-launched projects, with a lack of options from new projects.