Subdue Property Speculation with Taxation

During the Standing Government’s recent meeting with ministries, associations, banks, and businesses regarding the real estate market situation, Prime Minister Pham Minh Chinh gave strict instructions on handling price manipulation, speculation, and market exploitation. He specifically directed the Ministry of Finance to urgently research and implement a real estate tax policy for unused land and housing, taxing the difference between the land’s price and the selling price, and establishing a mechanism to deal with unclear transactions.

Urgent Need

Sharing his views on measures to counter speculation and price manipulation in the real estate market, Doan Quoc Duyet, Director of Viet Tin Thanh Real Estate Company, emphasized the need to combine multiple factors for sustainable effectiveness.

He highlighted the importance of constructing a robust and clear legal framework to enable buyers to accurately understand the real estate products they intend to transact. Moreover, Mr. Duyet suggested that the authorities should strengthen the regulation of supply and demand, as many developers currently sell based on available capital rather than market needs, leading to supply-demand imbalances and creating opportunities for speculation.

“The government and ministries should promote the application of technology in real estate transactions to closely monitor market activities and prevent fraudulent entities from conducting fake sales. Crucially, close coordination between ministries is essential to limit misinformation, reduce price manipulation, and stabilize the market,” Mr. Duyet proposed.

Sharing the same viewpoint, Le Hoang Chau, Chairman of the Ho Chi Minh City Real Estate Association (HoREA), expressed that the Prime Minister’s resolute direction indicates that real estate business will be prioritized for development in the coming time. He emphasized that countering speculation, manipulation, and price gouging is imperative for establishing a transparent and healthy market.

Mr. Chau pointed out the necessity of clearly identifying potential manipulators. He provided an example of “price manipulation” in land auctions, where an individual owning multiple lands in an area might intentionally drive up the auction price to benefit from the other lands they own.

“They might put down a deposit of a few hundred million VND to inflate the price of a land plot to tens of billions of VND,” Mr. Chau explained. He also stressed that the association had previously proposed supplementing punitive measures for such behavior in the Law on Asset Auction, but it was not accepted. Therefore, he hopes that in the future, the Law on Handling Administrative Violations will include sanctions such as confiscating the deposit and banning participation in auctions for a certain period to create a deterrent effect.

One of the key solutions proposed by Mr. Chau is to establish a national-level real estate exchange—a platform that concentrates products with clear origins and legal status, distinct from the current private exchanges primarily serving individual apartment transactions. He also suggested increasing the deposit ratio in auctions and tenders to prevent speculation and exploitation, but this should be carefully considered to avoid causing difficulties for genuine homebuyers.

Maximizing the Use of Tax Tools

The Chairman of HoREA also proposed that the government and ministries should concretize additional solutions, including tax policies. He cited the US real estate tax model, which levies a tax of 1.21% of the property’s value annually, helping to regulate and renew the cycle of real estate use.

In Vietnam, the Ministry of Finance is proposing a 20% real estate transfer tax on the difference between the selling and purchasing prices, after deducting reasonable expenses. This is a significant policy that requires a transparent and clear data foundation to build trust and ensure fairness for the people.

However, Mr. Chau noted that applying the same tax rate to multiple houses is unreasonable, as it fails to distinguish between properties with different areas, locations, and values. For instance, small rural houses should not be taxed the same as villas in Ho Chi Minh City.

He also emphasized the need to complete the digital infrastructure, electronic personal identification codes, and a national database of land and housing to lay the foundation for efficient and transparent management and taxation. Additionally, Mr. Chau advocated for effective communication to encourage citizens to declare truthfully and in accordance with the law. “The land price table should be detailed to each plot to ensure accuracy and alignment with the actual market value,” he stressed.

From a professional perspective, Nguyen Van Duoc, General Director of Trong Tin Accounting and Tax Consulting Company, argued that the current real estate transfer tax is too low, encouraging speculation and land hoarding. He analyzed that applying a 2% tax on the total value, regardless of profit or loss, leads to inequality and budget losses.

Meanwhile, the previous rule of taxing 20% of profits was abolished due to challenges in controlling declared prices. However, with advancements in cashless payments and transaction registration systems, Mr. Duoc believes it is time to reinstate this tax to promote fairness and curb speculation.

The expert also proposed building a national database of real estate transactions, strengthening supervision, and enhancing the responsibility of notary organizations and exchanges to enable citizens to prove incurred expenses and facilitate transparent tax management.

Dong Minh Hong, Director of DVL Tax Agency Company, agreed that a 20% tax on profits is reasonable and should be applied to individuals to ensure fairness with businesses. According to Mr. Hong, this tax rate will help reduce real estate hoarding and curb speculative price increases. “In the initial phase, if fraudulent price declaration is discovered, the state can impose criminal penalties for tax evasion, leading to a more transparent and healthy market,” he suggested.