Tax Real Estate Soon to Cool Down Soaring Housing Prices

At a recent housing seminar, Dr. Cấn Văn Lực, Chief Economist at BIDV Bank, emphasized the urgent need for Vietnam to implement anti-speculation property taxes.

His proposal comes amid skyrocketing property prices in major cities, far outpacing income growth, despite ample supply and declining real demand.

According to the Ministry of Construction, in the first nine months of this year, average primary apartment prices in Hanoi reached 80 million VND per square meter, a 33% increase year-on-year. Luxury projects are priced between 150-300 million VND per square meter. Similarly, in Ho Chi Minh City, primary prices averaged 89 million VND per square meter, up 36% from last year, with high-end projects starting at 150 million VND per square meter.

Dr. Lực attributed the price surge to limited supply due to legal hurdles in thousands of projects, rising input costs, and land price manipulation. He highlighted the growing disparity between housing prices and income, noting that Vietnamese civil servants need at least 26 years to save for a home, compared to the global average of 15 years. This affordability crisis threatens economic stability by diminishing homeownership opportunities.

“The government should promptly introduce taxes on second homes, vacant land, and short-term transactions. These measures, common globally, are essential for market regulation,” Dr. Lực stated.

Dương Thùy Dung, Managing Director of CBRE Vietnam, agreed that anti-speculation taxes are crucial for market stability. After years of study, she believes this policy, despite potential short-term impacts, is inevitable.

CBRE Vietnam reported that in the first half of the year, Hanoi apartment prices reached 80 million VND per square meter, while Ho Chi Minh City prices hit 85 million VND, both rising 22-30% year-on-year.

Meanwhile, DKRA Vietnam’s research revealed that 70% of successful real estate transactions in the past eight months were by investors and speculators, with only 30% by actual homebuyers.

A Batdongsan (Property Guru) survey found that 86% of property buyers resell within a year, while only 14% hold for over five years.

“To redirect capital toward genuine housing needs and long-term investment, property taxation is unavoidable,” Dung remarked.

Lê Hoàng Châu, Chairman of the Ho Chi Minh City Real Estate Association (HoREA), advocated for taxes to curb speculation, short-term trading, and land hoarding. HoREA proposed a tiered transfer tax based on holding period: 5% for sales within six months, decreasing to 4% (6-12 months), 3% (1-2 years), and 2% (over 3 years).

“This flexible approach is ideal for stabilizing volatile markets,” Châu commented.

In mid-August, Deputy Prime Minister Trần Hồng Hà urged the Ministry of Finance to tax vacant land, delayed projects, and unoccupied completed properties, rather than large-scale developments. This aims to curb land hoarding and price inflation, addressing market inefficiencies and housing affordability challenges.

Regarding property transfer taxes, the latest draft of the Personal Income Tax Law removes the proposed 20% tax on gains based on holding period. The current 2% rate on transaction value remains unchanged.

Experts argue that taxation is the most direct tool to realign the property market with real demand by eliminating short-term speculative gains. However, effective price cooling requires complementary measures, including streamlined project approvals, administrative reforms, increased supply, and infrastructure development.