Raising taxes won’t help reduce real estate speculation

Do Duc Doi, Deputy Head of the Ministry of Natural Resources and the Environment's Statistics Department, talked about the possibility of land price fever in 2008, when Vietnam allows foreigners to buy houses and raises tax.



Could you please tell us the reasons behind the land price fever in 2007?


Since Vietnam has become a WTO member, more and more foreign investors come to Vietnam, which has led to the higher demand for accommodation from foreigners.



The average income of Vietnamese people has been increasing, and a lot of people now want to buy houses of their own. Meanwhile, Vietnam has been applying a more flexible policy which allows more immigrants to inhabit cities, which has led to the higher demand for accommodation in big cities like Hanoi and HCM City.



Some people said that the land price fever in 2007 resembled the one that occurred in 2002. What do you think about that?



I have to say that the Land Law 2003 has been freezing the real estate market. As the result, nearly all real estate projects were very slowly implemented in 2003 and 2004. The Government should have sought the solutions to develop the real estate market. However, the thing it did was trying to take back the land it allocated to the projects which were slow in implementation. I don't think that this is a good solution for the real estate market.



The land price keeps skyrocketing. Do you think of any solution to curb the land price increases?



The land price fever occurs mostly in two big cities Hanoi and HCM City, and only luxury villas and apartments have been seeing price increases, while normal apartments did not see sharp price increases. In fact, local authorities have been doing a little to increase the supply on the market. Hanoi, for example, approved over 20 real estate projects in the last few years, and only four projects have been implemented. In HCM City, only six out of the 25 approved projects have been implemented.



How do you think the real estate market in 2008 will be?



The Ministry of Natural Resources and the Environment has suggested several measures to improve the situation, emphasizing the need to increase the supplies, especially in Hanoi and HCM City.


We also need to reconsider the financial policies for the real estate market. I think the currently applied policies are not good. Vietnam is still applying administrative measures to control the real estate market, while it should use economic measures.



Commercial banks are providing loans to fund people's house purchases with high interest rates. Do you think that this would make the land fever worsen?



I don't think that it is a bad thing which can push the land price up. As I said above, the land price fever occurs in Hanoi and HCM City only.


As you have said, the supply is now short on the real estate market. In this context, the Government is considering allowing foreigners to buy houses in Vietnam. Do you think that this would push the land price up?



When we want to attract foreign investment, we have to create good conditions for them to do business and live in Vietnam. If you make investment in Singapore or Australia, you will have the right to buy houses. As we have joined WTO, we need to accept international practice.



Some experts said that it is necessary to adjust the tax scheme that allows for reduction of land speculation. What do you think about the suggestion?



I don't think that raising tax can be the right decision. The state should apply suitable tax rates in order to encourage people to fulfill their duties. If the tax rates are overly high, unaffordable for people, they will try to evade taxes.



In general, we need to build up comprehensive policies on land management in order to create a healthy real estate market. (Dan tri)