Higher Tax on Second Homes in Saigon

Higher tax on second and subsequent homes should be applied as proposed by The HCM City People’s Committee to the Ministry of Construction. The proposal also includes cases wherein there are a high number of real estate transactions within a year. The People’s Committee said the move was targeting at ensuring equality in owning a home.

In addition, they also proposed a so-called asset tax on land lots and land’s added value. It said the ministry should issue urban and construction bonds and raise capital from banks and credit institutions, both inside and outside the country. Mechanisms on raising capitals for investment in infrastructure and urban development should be promulgated while creating a legal framework for development of new credit tools in the property market.

To diversify capital sources in the future, the ministry should allow pilot implementation of new credit tools in the market, such as house saving fund and Real Estate Investment Trust (REITS).

The committee also asked the ministry to review and allocate capital from the State budget and assign the State Bank of Viet Nam to promulgate preferential interest rate policies for social housing projects.

Earlier, the HCM City Real Estate Association (HoREA) also supported the levy of tax on second-home owners. HoREA said the tax would help ensure stability and sustainability of the State budget while preventing speculation and waste in the property market. This could help people with real requirement own a house.

Also, to stabilise the estate market, if they see signs of a “bubble,” the Government should consider imposing tax on house and land transfer right after successful transactions.

In Viet Nam, housing purchases increased as average income per capita rose from US$1,400 in 2013 to $2,200 in 2016. It is expected to rise to $3,400 by 2020. There is no specific property tax law in the country, but there are taxes related to property, such as the tax on agricultural and non-agricultural land use. However, these policies have not resulted in stable revenue for the State budget. The taxation was first proposed in 2010, however, the draft was amended and approved as a non-agricultural land use tax law.

Statistics from the committee revealed that the city has 29 large-scale housing projects with area of 6.8 million sq.m and total investment of VND158 trillion. The committee said GDP of the construction and real estate sector rose from VND22.7 trillion in 2006 to VND88 trillion in 2015, accounting for 9.2 per cent of the country’s total.

The use of land resources in the city increased and became more effective, also attracting a large amount of foreign direct investment. Total collection from land and property in the 2006-2015 period reached more than VND100 trillion.

Average housing area in the city significantly increased between the 2006-2016 period, from 10.3sq.m in 2006 to 18.11sq.m per person in 2016. Most of the housing and estate projects have been focused in the city’s east, south and east-southern areas, which are suitable with Saigon’s common development orientation. 80 percent of the city’s total area are houses built by individuals. However, the number of commercial housing projects has also continuously increased. The city had around 135,000 new apartments, some 7,700 villas and 80,500 land lots in 2001-2015 period, according to CBRE.

The committee also said the number of businesses operating in the real estate sector rose from 1,264 in 2006 to 5,356 in 2016. Some estate firms have the capability to implement large-scale projects in the regional level. Furthermore, the system of property transaction floors, information centres, intellectual property, consultancy and estate management has been developed.

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