Despite the real estate market seeing signs of recovery, investors still enjoy high profits as a result of the market lacking available properties and transparency, according to economic experts.
Market bounces back
The real estate market in Hanoi has begun to gain momentum since May with areas of land in Ha Dong, My Dinh, An Khanh and Thang Long seeing a sharp increase in price.
For example, price of land for the An Khanh-An Thuong project has increased from VND15-17 million/m2 to VND18.5 million/m2.
The President of Vinaland’s Executive Board, Nguyen Minh Hoang said that since earlier this year, house and land prices in HCM City have soared by 20-30 percent. For areas with a good infrastructure like Nam Sai Gon, land prices have jumped by 40-50 percent. Meanwhile, the land price for major projects like Him Lam and Phu My has increased from VND30 million/m2 to VND50 million/m2 and from VND12 million to VND19 million/m2, respectively.
Supplies of real estate are not high and transactions are mainly buying and selling activities secondary investors and customers with real needs, therefore, the discrepancy between land prices is quite high.
For instance, the original price of land for the gold project Splendora in Bac An Khanh was between US$1,800-US$2,300/m2 but the difference in land prices on the unofficial transfer market resulted in a transferred apartment costing VND1 billion.
Despite the strong fluctuations in land and house prices, transactions have slowed down due to the limited volume of properties, Hoang noted.
Speculators line their own pockets
According to a real estate expert, people are often swayed by land investors. Therefore, rumours from investors can push up land prices in each region very quickly. Recently, the price of land in My Dinh, Hanoi has become more expensive as there is a rumour that this area will be turned into a district. In addition, some people have been cheated by illegal projects, especially the recent fraud by the Vietnam Real Estate Joint Stock Company. The real estate market is also an investment channel, and it is expected that investors make a profit. However, now the real estate market is recovering, investors can benefit while there is still a lack of transparency in the market.
The Ministry of Finance has recently issued a circular on personal income tax on real estate transfers, which will officially take effect on September 26. There are two ways of calculating the tax: 25 percent on the total profit or two percent on the total value of the transferred real estate. However, according to analysts, only speculators will suffer from the personal income tax as they constantly purchase real estate.
Analysts say that the new tax levy is not strong enough to have an impact on the market. Although there remain many shortcomings, experts hope that this new tax will become a useful tool to make the real estate market healthier and limit speculators.