IMPACT OF LAND AND REAL ESTATE POLICIES ON THE REAL ESTATE MARKET 2025

IMPACT OF LAND AND REAL ESTATE POLICIES ON THE REAL ESTATE MARKET 2025

INTERNATIONAL EXPERIENCE ON THE IMPACT OF POLICIES, ESPECIALLY LAND POLICY AND REAL ESTATE POLICY ON THE REAL ESTATE MARKET

Truong Ngoc Diep

Hung Vuong University, Ho Chi Minh City

Abstract: This study focuses on analyzing and comparing the impacts of certain policies related to real estate in various countries, emphasizing three main policies: tax policies to prevent speculative behavior, social housing policies, and data policies to determine market prices of real estate.

These policies play a crucial role in regulating supply and demand in the real estate market, serving as tools to control unreasonable price increases and ensure access to real estate for all social strata. The study delves into the regulations of countries such as Singapore on real estate tax, Taiwan (Republic of China) on social housing, and the French Republic on real estate data.

From this analysis, it derives some experiences and recommendations for the real estate market in Vietnam in the context of the newly amended and supplemented Law on Land, Law on Housing, and the Law on Real Estate Business. These solutions can contribute to building a stable and sustainable real estate market.

Keywords: Land policy; Real estate data; International experience; Real estate tax; Social housing.

Introduction

Every country has its own policies and mechanisms for land management, reflecting differences in land ownership regimes as well as distinct economic and social contexts. However, the common goal across nations is sustainable development in land management and coordination. Controlling speculation, effectively utilizing land funds, and ensuring fairness are always top concerns.

In recent years, real estate prices in Vietnam have increased significantly, raising concerns about the ability of younger generations and middle-income groups to afford housing, especially as the economy is still recovering from the pandemic. Therefore, studying and learning from the experiences of other countries on this issue has become extremely necessary.

The aim of this research is to analyze and compare the regulations of different countries and derive some experiences for Vietnam’s real estate market. The study focuses on countries with developed real estate markets such as Singapore, Taiwan, and the French Republic.

The contribution of this research is to provide comprehensive analyses and propose policy solutions based on international experiences, suitable for the context of Vietnam. The structure of the paper includes an introduction, main content, and conclusion with recommendations.

I. Singapore’s Experience with Tax Policies Related to the Real Estate Market to Prevent Speculation

Singapore, with its small land area and limited land fund, places special emphasis on the formulation and implementation of land-related policies. The country has achieved significant success in controlling speculation through a combination of stringent management policies, notably tax policies.

To ensure housing prices remain within reach for its citizens, Singapore introduced the Seller’s Stamp Duty (SSD) in 2010 and the Additional Buyer’s Stamp Duty (ABSD), designed to curb demand from foreign buyers and second property purchasers, thereby reducing speculative activities.

For real estate sellers, in addition to the general taxes, they are subject to an additional tax if they sell properties within a short period as stipulated in Section 22A of the Stamp Duties Act of Singapore. This regulation aims to prevent short-term trading that drives real estate prices too high and to control the risk of forming a real estate bubble.

The specific minimum holding period before a seller can transfer a property without incurring this additional tax is not directly stated in Section 22A of the Stamp Duties Act. Instead, this period is determined through directives or specific orders issued by the Minister, known as Order 22A. This holding period can change according to government policies and is adjusted for different phases.

According to Order No. S.L. 44/2010 of the Singapore Ministry of Finance, issued on May 3, 2010, sellers are subject to the additional tax if they sell properties within a period ranging from 1 to 3 years, depending on the type of real estate.

However, the Order also provides several exceptions to ensure fairness in the application of additional taxes as follows:

– In the case of divorce, the recipient of the property after the divorce is considered to have owned the property from the time the husband or wife purchased it.

– In the case of inheritance, the heir is considered to have owned the property from the time the deceased purchased the property.

– For the transfer of HDB (Housing and Development Board) flats between family members, the holding period for calculating additional taxes will be counted from the date the parents or spouse purchased the flat.

These regulations ensure that additional taxes are not unfairly applied to transfers within marital or family relationships.

For real estate buyers in Singapore, based on residency status, the number of properties owned, and the purpose of purchase, buyers may be subject to an additional tax known as the Additional Buyer’s Stamp Duty (ABSD). If the buyer already owns a property and purchases another one, or buys a property not intended for residence, they must pay this additional tax.

The ABSD applies to all individuals, including Singapore citizens, permanent residents, and foreigners. This tax aims to control the real estate investment demand of the populace, helping to adjust market prices and ensure market stability.

Thus, depending on the subject, purpose of purchasing real estate, and real estate ownership status, the buyer will have to pay different tax rates, specifically shown in the following table:

(Source: Singapore ABSD Rates (2024): Additional Buyer’s Stamp Duty Guide for second property, permanent residents, and foreigners)

The real estate market in Vietnam is facing similar challenges. As one of the highly liquid asset types, real estate always attracts considerable attention from investors. However, the increasing prevalence of speculative activities has distorted supply and demand, causing imbalances in the market and making real estate less accessible to certain social strata.

According to data from the Ministry of Finance’s electronic information portal, since 2021, real estate prices have continuously set new records, increasing despite the impacts of the pandemic.

To address this situation, the 2024 Law on Land and the 2023 Law on Real Estate Business have been enacted to regulate and prevent speculative behaviors, specifically as follows:

– Firstly, to limit the subdivision and sale of land plots, Clause 6, Article 31 of the 2023 Law on Real Estate Business stipulates that the transfer of land use rights to individuals for self-construction of housing in urban areas of categories I, II, and III is prohibited. This regulation aims to prevent the act of subdividing land plots and driving real estate prices unreasonably high.

– Secondly, Article 48 of the 2023 Law on Real Estate Business also requires that real estate transactions be paid through banks. This regulation aims to eliminate cases of “dual pricing” for the purpose of evading financial obligations to the state. However, this regulation only applies to organizations that are project investors, real estate businesses, and real estate service businesses.

– Thirdly, Article 153 of the 2024 Law on Land also stipulates an increase in revenue from land use rights, wherein for delayed or unused real estate projects, higher land use fees and land taxes will be imposed. This regulation aims to address the issue of entities accumulating excessive land without effective utilization.

However, one of the reasons for the excessively high real estate prices is the short-term transfers between individuals. Meanwhile, Article 12 of Circular 111/2013/TT-BTC, amended by Article 17 of Circular 92/2015/TT-BTC, stipulates the basis for calculating personal income tax on real estate transfers, with the personal income tax from land use rights transfers remaining quite low (2% of the transfer price).

In light of this issue, from the experience of Singapore, Vietnam can consider additional taxes for both buyers and sellers. Sellers would have to pay additional taxes in the case of short-term real estate transfers, and buyers would be subject to taxes on the second and subsequent properties, as well as properties not intended for residence (the basic purpose of real estate for citizens).

II. Taiwan’s Experience with Social Housing Policies

Taiwan is among the countries with relatively successful policies in providing and managing social housing, ensuring that low-income individuals and those truly in need have stable housing.

In Vietnam, although the regulations regarding the beneficiaries of social housing are quite specific and detailed, the process of determining whether these individuals genuinely need housing or if their actual income qualifies them for state preferential policies still faces many shortcomings. This leads to the inefficient distribution of social housing, making the policies fall short of their original goals. Additionally, if these policies are not strictly managed, they can easily lead to abuse of benefits for speculative purposes.

For social housing policies to be effectively implemented, identifying the eligible recipients for social housing is paramount. According to Article 2 of Taiwan’s Housing Act, the beneficiaries of social housing are low-income families. The standards for determining low-income families are set by the Executive Yuan and typically include factors such as annual income, the number of family members, and other financial criteria.

Social housing can be supported through various forms, including:

1. Direct construction by the government:Housing constructed by the government and subsequently sold or rented to eligible families.
2. Government loans:Families build their own housing on their land with financial support through government loans.
3. Encouraging private investment: The government encourages private investors to build social housing, which is then sold or rented to eligible recipients.
4. Government-supported home purchases:Families purchase homes with interest rate subsidies from the government.

However, to benefit from social housing policies, citizens must meet income and asset ownership conditions. The criteria for verifying income and assets are rigorously checked to accurately assess the eligible beneficiaries of social housing policies. Noteworthy points include:

– Firstly, Taiwan primarily focuses on renting social housing rather than selling it.

Renting instead of selling helps low-income citizens access housing more easily. Additionally, through rental contracts, investors can proactively upgrade and improve the quality of social housing for citizens. This also helps prevent the commercial use and speculation of social housing, as its value cannot increase through buying and selling for profit.

– Secondly, regarding the method of determining the income of policy beneficiaries.

A key factor contributing to Taiwan’s success in implementing social housing policies is a comprehensive and transparent tax data system. Citizens are required to submit annual income tax returns, providing information on income from salaries, bonuses, investment returns, and other income sources. Based on this information, authorities can evaluate the financial capacity of applicants. The tax authorities will then investigate to determine their actual income.

Furthermore, Taiwan’s tax authorities often use cross-investigation methods during tax investigations. By coordinating with banks, financial institutions, and other organizations, tax authorities can more accurately investigate the income of individuals. The investigating authorities also observe the spending patterns of individuals; if someone has low income but high spending, such as buying real estate or other valuable assets, they may not be eligible to buy or rent social housing.

– Thirdly, regarding asset status determination.

Authorities in Taiwan can check individuals’ real estate status through the national land registration system, which stores information on real estate ownership. Authorities can check this database to see if the individual currently owns or has owned any real estate. Additionally, banks and financial institutions provide information on mortgage loans, helping to determine if individuals own assets or have other financial obligations related to real estate.

In Vietnam, the conditions for benefiting from social housing policies are stipulated in Articles 29 and 30 of Decree No. 100/2024/ND-CP, which provide specific regulations:

– Firstly, regarding home ownership conditions, if the beneficiary or their spouse does not own property in the province or centrally-run city, they will be eligible to register for social housing.

This condition will be verified through the local land registration office. However, if the beneficiary owns property in other localities but continues to register for social housing in this locality, they may still have the right to purchase social housing. The primary purpose of providing social housing is for those who cannot access real estate; if these individuals already own real estate in multiple provinces, is it reasonable for them to continue receiving these benefits? Additionally, the lack of consistency in the national land registration database and the notary database makes it challenging to check and verify property ownership status.

– Secondly, income conditions.

Article 30 of this Decree also stipulates income levels for beneficiaries based on the wage and salary table certified by their organization or unit. The 2019 Law on Tax Administration clearly defines the coordination between functional agencies to determine the tax obligations of individuals. However, in reality, many cases have higher incomes beyond their wages and salaries. Therefore, investigating income based on tax, bank databases, and expenditure analysis is essential to identify the correct beneficiaries of social housing policies.

– Thirdly, Vietnam has not yet focused on developing the form of social housing rental.

In reality, renting social housing is more suitable for the financial capacity of low-income individuals. Additionally, promoting housing rental support helps ensure social security and prevents policy abuse for speculative purposes. Previously, Clause 3, Article 54 of the 2014 Law on Housing stipulated that “social housing projects must reserve at least 20% of the social housing area,” but this regulation was abolished in the 2024 Law on Housing, citing that this area was often underutilized.

Compared to Taiwan’s laws, in Vietnam, social housing construction investors are mainly private investors, who usually prioritize quick profit and capital recovery. Therefore, in Vietnam, social housing is more focused on selling rather than renting.

III. France’s Experience with Real Estate Data

Real estate data serves as a tool for the state to understand and manage the real estate market. It is particularly crucial in determining market prices for houses and land use values. Monitoring real estate prices helps the state assess market stability and formulate timely and appropriate regulatory policies. Additionally, it plays a vital role in protecting citizens’ rights. Transparency in pricing allows people to avoid inflated prices, ensuring fairness and sustainability in the real estate market.

In the French Republic, real estate pricing is determined through a centralized data system, ensuring that the published prices accurately reflect market conditions. One of the key databases in managing the real estate market is BIEN (Base d’Informations Économiques Notariales), maintained and developed by notaries. BIEN stores detailed information on real estate transactions since 1990, including sale prices, property types, locations, and other transaction-related factors.

In France, notaries play an indispensable role in the transfer and sale of real estate. Notaries are authorized by the state to verify the legality and accuracy of transactions, ensuring the rights and interests of all parties. The role of notaries in France and Vietnam has similarities, as both follow the Latin notarial system. However, notaries in France are more deeply involved in the real estate transfer process. Buyers must pay through a notary’s escrow account, and the notary handles all registration, tax, fee services, and finalizes the transaction by transferring the property to the buyer.

Therefore, notaries in France can control the “actual price” in real estate transactions. Additionally, tax collection agencies and the notarial profession organization coordinate closely, enabling tax authorities to manage, monitor, and easily detect tax violations. Thus, notarial data is quite reliable for determining the market price of real estate.

Compared to our country, Clause 1, Article 62 of the 2014 Law on Notarization states: “The notarial database includes information on the origin of property, the transaction status of the property, and information on preventive measures applied to the property related to notarized contracts and transactions.” 

In practice, notaries still store information on real estate prices; however, since they do not deeply intervene in the transfer process, notaries in Vietnam can only record the “declared lower price” by the parties. Furthermore, the notarial database is only developed at the provincial level and lacks nationwide consistency and connectivity.

The 2024 Law on Land introduced new policies, including the removal of the land price framework and the requirement for annual adjustments to the land price table, aiming to determine land prices closest to market value. Additionally, land pricing is a crucial matter; incorrect land valuation can affect the rights of land users. However, determining market land prices is not simple, especially when individuals often do not declare the actual price of real estate when transferring it to evade tax obligations.

Thus, while the notarial system and the role of notaries in France have developed comprehensively and become a robust tool for the state to manage and determine real estate values, the notarial data system in Vietnam is still in the process of being perfected. This disparity has created a significant gap in the ability to monitor and control real estate values. Therefore, notaries in our country can enhance their role to provide accurate information on real estate values.

IV. Conclusion and Recommendations

From the analysis and comparison of international experiences with land and real estate policies, this research highlights policies that our country can learn from to stabilize and develop the real estate market. Tax policies in Singapore aimed at preventing speculation, Taiwan’s social housing development policies, and France’s centralized database for market real estate valuation are exemplary policies. These policies help regulate market supply and demand, prevent real estate bubbles, and ensure access to real estate for all social strata. Specifically, Vietnam can adopt several policies as follows:

– Firstly, to address and limit the real estate bubble phenomenon, our country can consider applying taxes on short-term real estate transfers, considering the second property and non-residential real estate for citizens.

– Secondly, social housing policies should emphasize encouraging rental rather than sales. This not only quickly meets the housing needs of low-income individuals but also helps prevent real estate speculation. Additionally, accurately identifying eligible beneficiaries of social housing policies is crucial. Therefore, it is necessary to establish a stringent tax database and ensure effective coordination among relevant agencies to verify individuals’ incomes and real estate ownership accurately.

– Thirdly, applying a database like BIEN in France can enhance transparency and accuracy in real estate valuation, effectively supporting tax management and reducing fraudulent real estate transactions. Achieving this requires nationwide linkage of notarial and real estate registration databases and allowing notaries to participate more deeply in the real estate transfer process as in the French Republic. This will ensure that recorded transaction prices (market prices) are more accurate, contributing to more effective and fair management.

In conclusion, with appropriate adjustments based on our country’s economic and social conditions, these international experiences can significantly contribute to building a stable and sustainable real estate market.

References

1. – National Assembly (2024), the 2024 Law on Land No. 31/2024/QH15, issued on January 18, 2024.
2. – National Assembly (2023), the 2023 Law on Real Estate Business No. 29/2023/QH15, issued on November 28, 2023.
3. – National Assembly (2023), the 2023 Law on Real Estate Business No. 29/2023/QH15, issued on November 28, 2023.
4. – National Assembly (2014), the 2014 Law on Housing No. 65/2014/QH13, issued on November 25, 2014.
5. – National Assembly (2023), the 2023 Law on Housing No. 27/2023/QH15, issued on November 27, 2023.
6. – Government (2024), Decree No. 100/2024/ND-CP Detailing Certain Provisions of the Law on Housing Regarding the Development and Management of Social Housing, issued on July 26, 2024.
7. – Stamp Duties Act of Singapore, last accessed on August 20, 2024, from https://sso.agc.gov.sg/SL/SDA1929-S209-2010?DocDate=20170310&ProvIds=P1III-#pr9-
8. – Order No. S.L. 44/2010 of the Singapore Ministry of Finance, from https://sso.agc.gov.sg/SL/SDA1929-S209-2010?DocDate=20170310&ProvIds=P1III-#pr9-
9. – Housing Act in Taiwan, retrieved on August 21, 2024, from: https://law.moj.gov.tw/ENG/LawClass/LawAll.aspx?pcode=D0070195
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13. – Ngọc Vy (2021), “Is there a ‘real estate bubble?”, last accessed on August 20, 2024, from: https://mof.gov.vn/webcenter/portal/vclvcstc/pages_r/l/chi-tiet-tin?dDocName=MOFUCM195714
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