Vietnam is drafting a real estate ownership tax law to curb skyrocketing property prices and speculation amid scenes of people queuing overnight

Vietnam is drafting a real estate ownership tax law to curb skyrocketing property prices and speculation amid scenes of people queuing overnight to join lotteries for apartments, property dealers said.

They said overall property prices have gone up about 50 per cent since the beginning of the year, mainly because investors diverted money from the stock market into property.

Speculation in land and equities in the emerging-market economy is becoming a concern for policy-makers and economists who want to avoid market bubbles and sustain Vietnam’s high growth rates for years to come.

‘In some areas in Hanoi and Ho Chi Minh City, especially in the luxury condominium sector, prices have tripled in the past year alone,’ Nguyen Xuan Dao, chief executive of property developer Vietnam Property Inc, said.

Dealers said most condominium projects in Hanoi and Ho Chi Minh City are sold out before they are even built.

Mr Dao said a 150- square-metre condominium in Hanoi’s Ciputra City, a development by Indonesian developer PT Ciputra Development Tbk, now sells for about US$240,000, compared with about US$80,000 last summer.

This in a country where the GDP annual per capita income is about US$835 this year, although economists believe it is five or six times higher in Hanoi and Ho Chi Minh City.

Property dealers said that according to the draft law, owners who have more than one home would be subject to annual real estate taxes. The law would come into effect in 2010.

Only transfer taxes are now levied on property sales and most transactions are paid in cash, making it difficult for the authorities to track them and collect taxes on capital gains.

Property dealers said that a government plan announced in July to allow Vietnamese living overseas and expatriates to own real estate on a freehold basis had also triggered speculators to buy more property for future re-sale.

‘Most people buy to re-sell and the people who really need a place to live cannot afford the price,’ said Tran Du Lich, director of Ho Chi Minh City Economic Institute.

In Ho Chi Minh City, where most overseas Vietnamese from the United States and Europe choose to resettle, prices have soared between 60 and 100 per cent.

A square metre at luxury project The Lancaster in the heart of business district 1 jumped from about US$3,000 last year to US$4,200 this month. Rents for luxury apartments are up by 20 per cent to about US$35-US$38 per sq m, property management firm CBRE Richard Ellis said.

Last week, hundreds of buyers camped overnight outside the sales office of Singapore’s CapitaLand, to pay deposits for The Vista project on the Saigon River with prices starting at about US$200,000 each.

Other developers, including Taiwanese developer Phu My Hung, asked prospective buyers to pay US$12,000 to participate in a lottery in which only 35 per cent would win the right to buy its apartments. — Reuters

Source : Business Times - 25 Oct 2007