Real Estate Market to Reshape

The effective Land Law and the issuance of documents to conduct the implementation of this law have considerably removed defects in the real estate market, especially regarding informal activities. The real estate market’s operations have become more and more publicized.

However, Mr. Dang Hung Vo, deputy minister of Natural Resource and Environment, said the local real property market will vacillate because of incoming laws on land-use tax and on income tax from land use right transfer.

Currently, the above two taxes are imposed on organisations, not on households and individuals. As regards land-use taxes, Vietnam is still applying old land taxation regulations mainly on cultivated lands which are almost free from taxes while it hardly implements such taxes on non-agricultural lands.

Nowadays, tax rates on non-agricultural lands are quite low as they are calculated on an area basis and on preset low prices for agricultural land. The land-use rights transfer tax rate imposed on individuals and households is 2 per cent and the registration fee is 1 per cent. If combined, the rates are quite high.

These complicate the local real estate market, discouraging the introduction of the management system. According to specialists in real assets, high taxes will encourage land sellers to make informal transfers to evade taxes. To avoid this, Vietnam should publicize the implementations of all rights related to land.

According to Mr. Vo, cutting taxes related to land-use rights transfer will help set up an effective real estate management system.

In addition, there are two styles of buying and selling real estate in Vietnam. One is buying real estate as reserves. This is not called speculation but savings in real estates. The other is buying and reselling to bag profit. To deal with this situation, an increase in land use rights taxes is necessary.

Vo said many people are waiting for the new Land-use Law which will strongly regulate the market. High taxes will force real estate bulls to get rid of kept assets on the one hand and discourage them to speculate on the other. What’s more, high taxes will force buyers of large areas to pay more than those buying small ones. However, Vietnam has not set up regulations for this market because of the incompletion of other tax laws, which hampers the evaluation of market trends. In other words, the rational market trend is only made by a regulatory mechanism while the legal framework only acts as an adjustor for market operations.

• Quynh Chi