Vietnam Plans New Taxes to Cool Housing

Vietnam intends to impose new tax policies and more stringent control over credit to contain the skyrocketing property rates and property speculation.

Vietnam is setting up new tax policies in efforts to curb the skyrocketing property prices and to control speculation in the real estate industry, with the question of affordability cutting across the board. Growth of credit and lessened overseas investment opportunities have been a stimulus to high housing demand, resulting in high turnover trade and high amounts of empty houses in cities.

Prime Minister Pham Minh Chinh has demanded a move to stabilize real estate prices, especially in the apartment market segment, yet made it clear that it should have fair access to housing. He has encouraged the finance ministry to make sufficient funding in social housing programs, where he aims at building at least one million affordable apartments to house low-income earners by the level of 2030.

The Ministry of Construction reported that the prices of apartments increased 20-30 percent last year, as well as land plot prices that increased 20-25 percent. The affordability strain has been huge, as in large urban areas, real estate costs are plummeting in the range of 100 million dong per square meter, which is close to the average annual earnings.

Suppliers have concentrated on the high-end businesses and this has restricted the supply for the middle- and low-income earners. According to market players, speculation in the market can hardly be checked because property is considered a safe investment vehicle.

The central bank has said that it will retain the pace of credit expansion and restrict the provision of credit to risky areas, including real estate. The sentiment among investors has been low, with some of the largest property firms and the real estate index shrinking due to uncertainty about the policy.