Vietnam ministry backs tax on second properties to curb speculation, stabilize real estate market

Vietnam’s Ministry of Construction has supported taxing second properties and beyond as a potential measure to curb speculation and stabilize the real estate market.

In a report on the real estate market submitted to the Government Office, the ministry (MoC) enumerates four major factors behind the recent abrupt rise in housing prices in certain areas, particularly major cities.

Recent fluctuations in land-related costs, driven by the introduction of new calculation methods and an updated land price framework, are identified as the first factor. Additionally, management and oversight of land use rights auctions in some areas have been inadequate, allowing groups of investors to collude and drive up land prices.

The second factor is the practice of inflating land prices by speculators and unlicensed real estate agents who exploit buyers’ limited understanding of the market.

Inadequate housing supply to meet demand, particularly among low- and middle-income earners in urban areas like Hanoi and Ho Chi Minh City, is identified as the third factor.

Lastly, recent volatility in the stock, bond and gold markets has affected public and investor sentiment, prompting a shift of capital into real estate as a safer haven.

In suggesting solutions to these issues, the ministry emphasized the need to enforce newly enacted laws on land, housing, real estate and other related regulations.

It recommended refining regulations governing land use rights auctions by increasing deposit requirements, setting starting prices that more accurately reflect market value, shortening payment period for auction winners, and restricting participation by speculative buyers.

The ministry also proposed taxes on second and additional properties to curb speculation and discourage short-term buying and selling for profit.

It stressed the importance of mitigating adverse impacts of the new land price framework, introduced under the 2024 Land Law, on land prices, housing prices and supply and demand within the real estate market.

The ministry also suggested establishing a state-managed center for real estate transactions and land use rights to prevent collusion between real estate trading platforms and brokers that could disrupt the market.

It stressed the importance of strengthening inspections and oversight of land use rights auctions, bidding processes, property construction, real estate business activities, brokerage and other related operations.

Data compiled by real estate website Batdongsan.com.vn shows that as of June this year, average real estate selling prices in Vietnam had increased by 24% from the beginning of 2023.

According to the Vietnam Association of Realtors (VARS), 27,335 projects entered the market in the second quarter of this year, 50% of which featured apartments. Of this, 60% were high-end apartment projects with prices of over VND50 million ($1,983) per sqm. Mid-end and affordable apartments accounted for just 14% and 7% of the supply, respectively.