State to rein-in property sector

A new study will look at how the lucrative market can benefit the State

Construction minister Nguyen Hong Quan said the development of the property market was abnormal and housing and land prices in Vietnam were the most expensive in the world if economic growth rates and average per capita income were taken into account. Real estate is still one of the more consistently lucrative investment options in Vietnam, experts say. One square metre of land in Hanoi’s Hang Gai street is now reportedly worth $20,000 – almost 10 times higher than four years ago.
Land and housing prices in Hanoi and Ho Chi Minh City are three to five times higher than five years ago. Sky-rocketing prices have drawn a number of investors, Vietnamese and foreign, into the property market.
Financial Science Institute deputy director Thai Ba Can last week said real estate investment was one of the most lucrative areas compared to other industries in Vietnam.
He said that due to the global trend in interest rate cuts since 2001, domestic interest rates on foreign currency had declined as well. Gold prices have been sky-rocketing but irregular, while the stock market has plummeted recently.
“Meanwhile, real estate has constantly increased, bringing back hyper profits, leading to strong investment in this sector,” Can said.
He said that although not many Viet Kieu had managed to buy a house in Vietnam, part of the $2 billion a year they sent back to Vietnam flowed into real estate. Can said land prices had been pushed up psychologically as Vietnamese often wanted to own land rather than apartments, but urban land was limited. Government agencies did not have effective measures to stabilise prices.
He said state-owned companies had also pushed up apartment prices in new urban projects to the level of the free market although they enjoyed incentives such as preferential loans.
Other analysts have said land and housing prices at present do not correctly reflect Vietnam’s level of economic development.
Construction minister Nguyen Hong Quan said about 80 per cent of land and housing transactions were illegal and that made a big dent in the government’s tax collection.
The deputy director of the Central Institute for Economic Management, Le Xuan Ba, said that between 1996 and 2000, taxes on land and real estate transactions earned about $300 million a year for the government, but the figure could be much higher if illicit transactions were controlled.
He said the government’s expense on new projects was putting increasing pressure on the state budget as it had to recover land, compensate land users and invest in infrastructure.
Ba said land compensation for site clearance was one of the most difficult issues in the process of setting up and implementing new projects and required huge spending from state budget. Can said while demand for land and houses from ordinary people exceeded supply, supply of land for industrial parks, hotels and offices was much bigger than demand.