Struggling to find someone to inflate apartment prices

Experts say that it is difficult to identify price gouging, so instead of trying to do this impossible thing, we should increase supply and use taxes to stop housing speculation.

Hanoi’s apartment market has continuously increased hotly since the end of last year until now due to the growing gap between supply and demand. New projects have been launched in small doses, so selling prices have increased for 21 consecutive quarters, causing old apartment prices to also escalate at the strongest rate ever. The increase occurred in most districts, concentrated in the western region. Many experts in the industry have had to warn that this “fever” may involve agents inflating prices for profit, raising the risk of a bubble.

Faced with this development, the Ministry of Construction has asked the Hanoi People’s Committee to check projects and apartment complexes with unusual price increases. If there are price inflation, price fixing, speculation and other violations of the Real Estate Business Law, the Ministry of Construction said “Hanoi needs to rectify and handle it”.

However, many experts in the industry believe that it is difficult to identify and handle acts of speculation and inflated apartment prices. Lawyer Pham Thanh Tuan, Hanoi Bar Association, said the current Housing Law and Real Estate Business Law do not specifically identify or describe this behavior. Up to now, there have been no cases of administrative sanctions against people who directly speculate and inflate real estate prices.

Mr. Tuan said, for the legal documents to have a basis and criteria to determine “what is speculation and price manipulation of real estate” is not easy because this is a sophisticated activity, constantly changing and has many target groups. participating together. Previously, in the process of developing the Real Estate Business Law 2023, many National Assembly delegates proposed adding market manipulation and inflated real estate prices to the prohibited list, similar to market manipulation. stock. However, because it was difficult to describe and had no defining criteria, this proposal was dropped when the law was passed.

A panoramic view of Linh Dam Urban Area, Hoang Mai District, Hanoi. Photo: Ngoc Thanh

The leader of a business with 17 years of investment and construction of apartment and urban area projects in Hanoi, Hung Yen, and Phu Tho said it is difficult to identify unusual apartment price increases due to speculation and inflation. price. This development mainly occurs in the buying and reselling market, so the selling price will be influenced by supply – demand and market psychology.

“How can the locality handle it when there are no sanctions? While the mentality of home owners is to only sell when the price is high, buyers who do not accept it can change direction,” this person said.

The laws, according to him, cannot directly punish the act of price gouging. To handle behavior that disturbs the market, a series of different legal documents must be adjusted. He gave as an example a typical case showing signs of inflating real estate prices for personal gain: a business leaving a deposit for an auctioned land plot in Thu Thiem in early 2022. According to him, the increase in value of the land plot was more than 7 times. Starting prices are a way for businesses to take advantage of selling their real estate properties in Ho Chi Minh City and surrounding areas at high prices. Businesses can also take advantage of this price push to polish their image, increase company value to issue bonds, increase stock prices or the value of joint venture capital contributions, buy and sell debt, and buy and sell projects.

Location of 4 lots of land auctioned by businesses in Thu Thiem. Photo: Quynh Tran

Mr. Pham Duc Toan, General Director of EZ Real Estate Investment and Development Joint Stock Company, said that although the management agency began to take action in response to hot developments in the apartment segment, the dispatch still contained ” administrative nature”, the root cause has not been resolved.

According to someone with 20 years of experience in brokerage, investment consulting and project development, it is inevitable that sellers will push up prices when apartments or any other goods are scarce on the market. This is the final consequence when the Hanoi market does not approve new projects, causing supply congestion for a long time.

“How can we determine if apartments are increasing abnormally because they are blowing up when the whole market is increasing? The bottleneck is still in the supply, so whoever has goods at this time is of course alone in the market,” said EZ Property CEO.

According to experience from many countries around the world, speculative activities and inflated real estate prices are determined based on the number of houses owned, time of purchase and sale, and goals of use, from which tax tools are used to regulate. market details. For example, South Korea classifies those selling homes with less than one year of ownership as speculation and is taxed at 50% of the profit from the transaction, and in two years at 40% of the profit. If an individual owns three or more houses, if they buy a new house, they will be subject to a tax rate of up to 12%.

In France, people who leave a house vacant and do not use it for business or residence are also taxed at a high rate of about 12.5% ​​and 25% in the following years because this is a sign of real estate speculation.

Similarly, Germany defines speculation and price manipulation as selling more than 3 properties in 5 years. In addition to paying speculation tax, this group must pay commercial tax equivalent to 3.5% of the profit earned from selling houses.

In the long term, Vietnam also needs to use tax tools to limit speculation and inflated real estate prices. Mr. Pham Thanh Tuan said that it is necessary to consider issuing taxes for owners of the second property onwards or applying taxes based on the time of ownership. People who own a lot of real estate will be subject to higher taxes than people who own a little. The shorter the ownership period, the higher the tax upon transfer and vice versa.

Sharing the same opinion, business leaders specializing in investing and building projects in Hanoi, Hung Yen, and Phu Tho recommended that special consumption tax be levied on real estate. Management agencies should tighten the disclosure of housing selling prices of investors and the list of costs that make up the selling price. If profits exceed 150% from increasing product prices, businesses will have to pay special consumption tax.

“This solution will limit investors from unreasonably raising the price of new apartments, ensuring transparency and fairness in the market,” he shared.

“As long as the market has a few thousand more products, especially social housing and low-cost houses, the ‘bubble’ will immediately burst,” he said.

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