Taxation of the second home to reduce house prices, it is a lesson from Singapore

Singapore government tax policies in the over-heated real estate market have helped ease home prices, enabling low-income people to own apartments.

How did Singapore tax the second home?

Singapore is the largest real estate market in Southeast Asia, at $ 241 billion, well above Indonesia ($ 189 billion), Thailand ($ 89 billion), and Malaysia ($ 84 billion), Philippines ($ 48 billion), Vietnam ($ 21 billion) …

Taxation of the second home to reduce house prices

In the past, Singapore also had a period of overheating of the real estate market leading to soaring real estate prices, which made many people unable to afford housing. In contrast, some people can buy up to five to seven homes for speculation.

In light of this fact, the Singapore government quickly realized that without the measures to control the performance of the market, the price of real estate would continue to rise rapidly, the whole economy might explode, Citizens and banks will go to bankruptcy.

So the second taxation solution was applied.

The sole purpose of this tax is to help the market develop sustainably and help people in need of a home that will be affordable.

Specifically, the government has made progressive taxation on home buyers. Any Singaporean who purchases a home must pay 7% of the value of the property for the second home, 10% of the third home. For foreigners who buy a house, they pay 15% for all properties.

For the seller of the house, if the purchase and sale of real estate right in the purchase year, the tax must be 16% of the value of real estate; sale on the second year of paying 12% tax; the third year is 8% and the fourth year is only 4%. After 4 years the seller will not have to pay taxes.

Singapore government also limits the maximum loan. Accordingly, when individuals borrow money to buy assets, banks will not be allowed to lend too much. For example, when borrowing to buy the first house, the bank would lend 80%, the second would be 60%, the third would be 40%. The more you buy real estate, the lower the loan.

As a matter of fact, these policies have reduced the number of real estate transactions by about 40% (from 37,000 transactions to 12,000). Property prices also fell. In particular, the highest segment decreased by 35% – 40% of the purchasing power of foreigners (pay 15%).

The price of real estate is not low. This makes it possible for people with low and medium incomes who are previously unable to afford to own their own homes.

After five years of implementation of the “Real Estate Cooling Solutions”, real estate prices in Singapore have been controlled, no longer skyrocketing as they were before, and even falling in all segments. .

In Vietnam, is land price the key?

In Vietnam today, house prices are being anchored at too high a rate compared to people’s income. According to the calculation of the Association of Real Estate TP. The house price is 20-25 times higher than the income. At this price, middle-income people have to save up to 17 years to get enough money to own a flat.

According to Nguyen Bich Trang, Director of CBRE Vietnam, the price of houses in Vietnam is too high due to the influence of many factors. The first is the price of land or rent is very high compared to the common ground. Secondly, the lending rate is above 10% (while in Australia it is only 4-5%), which has led to the development costs of the project. Third, the unofficial costs are also huge.

With these three limitations, Ms. Trang said that the reduction in house prices in Vietnam today is very difficult, if not to say … impossible.

Recently, the Ministry of Finance has proposed to tax the second house with the expectation of increasing budget revenues, anti-speculation and anti-waste land. However, in the context that interest rates are unlikely to fall, unofficial fees remain high and land prices are high, this proposal is worried by businesses that will increase housing prices further, causing negative impact on the real estate market.

In view of Ho Chi Minh City of Real Estate Association (HoREA), the taxation of real estate is necessary, but it is only reasonable when simultaneously amending the policy and mechanism of collection of land use fees in accordance with the current Land Law.

Specifically, HoREA said that land use fees are not a tax, nor a fee but a burden for businesses and home buyers; not transparent and create mechanisms “ask – give”.

Land use fees account for a large proportion of the cost of housing, about 10% for condominiums; About 30% for townhouses, about 50% for villas. Therefore, if the real estate tax is levied without amending the land use fee policy and mechanism, it would be unreasonable.

The Association proposed to change the method of calculating the current land use levy to “land use tax” when the State allocated land or allowed to change land use purposes, as proposed by the People’s Committee. Report to the Government on November 8, 2013 submitted to the Government:

“In the long run, it is recommended to study the concept of ‘land use fee’ instead of the land use tax at a certain rate, proposing about 10% or 15% of the land price list. The first limitation of land use fee collection is too large to generate sustainable and long-term revenue for the State. “

“The application of land use levies when the State allocates land or permits the conversion of land use purposes in the first years will have the effect of reducing the land use levy revenue from the provincial budget, Houses and consumers reduce the cost of land use as they currently do, which reduces the cost of housing, and can predict the cost of land use taxes when investing in the project, “HoREA analyzed.

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