Now that real estate market is witnessing a fever, the warnings from economic experts about a bubble phenomenon are very plausible in the near future. In a talk with the journalist of the Vietnam Business Forum, Mr Nguyen Manh Ha - General Director of the Housing Management Department (the Ministry of Construction), predicts that investors are likely to face further risk if they drive up house and land prices on unreal demand.
Is the policy of progressive taxation on real estate, proposed but not yet implemented by the Ministry of Construction to "cool" the market, a cause for the current increase in the house and land price?
I think such an increase is only concentrated in well-located housing areas occupied by high income earners and, in fact, investors have lifted the price far beyond what actual demand will support. Although there are not yet statistics, there are surely more than a few buildings in My Dinh, Trung Hoa – Nhan Chinh (Hanoi) that do not have real owners.
Aside from the much mentioned reasons such as the supply and demand imbalance, and the escalation in compensation cost, land price and building materials, another reason is that this year the amount of money poured into the real estate market from different investment channels is increasing.
However, the real estate market in the past has been likened to the stock market, so investors also have the “herd” investment psychology. It is thus a warning for investors that the real estate market is lucrative yet risky.
The State aims to encourage investment from all economic sectors, but its policies are applied differently to different sectors, the State will not restrict investment in real estate but the most profitable sectors will be subject to progressive taxation.
The Government has issued a decision and assigned the Ministry of Finance to study different levels of taxes in preparation for levying progressive tax on land users.
Are we powerless before the rampant land fever without any effective solutions to cool it down?
This is not a matter of the State giving administrative orders or stipulating a ceiling price to stabilize the market immediately. Such management could only exist in the state-subsidy and non-market period.
Up to now, we have implemented the social housing policy for over 10 years. It must be said that the State has lent special attention to the matter of housing for low income earners. That is why it is increasing housing supply with preferential policies for enterprises investing in accommodation for low income earners or direct priorities for house buyers.
The Ministry of Construction is also developing a project of building social houses for rent. It is estimated that 500,000 apartments will be built from now to the year 2012. Low income earners can rent or buy them at a price stipulated by the state, not a subsidy price but a guarantee price. Low income earners will certainly have opportunities to buy houses.
For the housing market for the high income earners, the State will use taxes to adjust the price progressively so that a higher income faces a higher tax.
So how will this income tax be applied, when it is not simple to define real estate income for taxation?
The real difficulty lies in this matter, I think. In other countries, this can be done easily via personal accounts but in Vietnam, it is very difficult. The Government has assigned the Ministry of Finance to study this matter and is awaiting proposals.
Anh Tuan
Vietnamese
