WHO BLOWS UP APARTMENT PRICES?

Having lost the price of the house for two years, Ms. Ha has not yet bought a two-bedroom apartment.

When she heard that the Ministry of Construction suggested that Hanoi “take measures to correct and deal with” speculative behavior and inflated apartment prices, she asked, as if angry with me: “What is the price, not the alcohol content, who blows and handles it?”

Verifying the behavior of price gouging and speculation in the real estate sector is not easy from the regulatory to the practical point of view.

Recently, apartment prices in the inner city of Hanoi have increased quite high. The cause of the increase in prices has been mentioned by many experts, but from a personal perspective, I see that the supply of apartments did not increase over time, leading to more “demand” than “supply”. The scarcity of supply is understandable given the financial difficulties of much of the business post-Covid, especially the legal entanglement that has left projects almost “standing still”. In addition, the falling interest rate on bank savings has led to a tendency for people to shift their idle money to invest in illiquid assets such as housing.

Apartment prices rose more strongly than land but people still flocked to buy apartments. The price increase took place in large cities such as Hanoi, Ho Chi Minh City, and not just a few projects. There is a demand for supply. With less supply, the price goes up. The rise in apartment prices should be seen mainly due to market factors rather than speculation or price gouging.

Housing transactions between the seller and the buyer are normal commercial activities, not regulated under the price framework of the State. The purchase price of apartments will fluctuate according to the supply and demand of the market. The right to determine the sale price is vested in the owner of the property. The parties participate in the purchase and sale transaction according to the principle of “buy, just sold”. When the sale price is high without a buyer, the asset will be adjusted back to the correct value. Seen from this perspective, dealing with “inflated” behavior is a “non-market” move.

Legally, the current Housing Law and Real Estate Business Law does not specifically define or describe this behavior. Therefore, it is very difficult to sanction the person who directly speculates and inflates real estate, even in cases where there are obvious signs of “price gouging”, when the participant in the auction of land deliberately raises the price very high and then drops the deposit, in order to create a new price floor. Nor are any cases where depositing is sanctioned by the simple fact that it is civil relations about the deposit.

The law provides for a number of single specific signs, of a speculative nature such as: fraudulent behavior, deception; non-disclosure or dishonest disclosure of information about real estate. However, with the practice of bidding, pricing, speculation, the law does not specify specifics, so of course there are no corresponding processing regulations.

At the end of 2023, when the National Assembly discussed the Real Estate Business Law and the amended Housing Law, many members of the National Assembly petitioned to add prohibited acts to the law such as: speculative behavior, market segmentation, similar to securities manipulation. However, due to the difficulty of specifying the specifics, this proposal was dropped when the laws were passed.

So, so to speak, finding inflated behavior, apartment speculation has been difficult, dealing with these behaviors is even more difficult.

If the State agency is still tinkering with the management plan in the form of “inspection” and “sanctioning” speculation and inflating real estate prices, it is very difficult to bring effect, if not almost impossible. Even if sanctions were to be imposed, it would also be “snatched away from the plate” by profiting from speculation, inflating the price far greater than administrative sanctions.

So what is the solution to the real housing price spike over the past few years?

There is an opinion that regulation of supply and demand is the root solution for managing speculation, which drives housing prices. I think this is a short-term and psychological solution. Increased supply may not rule out the possibility of a housing bubble due to speculative factors.

In the long term, in my opinion, instead of using administrative tools, the State should consider issuing taxes with the owner from the second property onward or applying taxes based on the time of ownership. Those who own more properties will be subject to higher taxes than those who own less. The shorter the period of ownership the higher the tax transfer and vice versa. Those who own housing that is vacant, unused are also taxed.

Tax policy is an effective tool for controlling speculation, surfing and real estate business. Effectively using the tax tool, the manager will not have to tinker with and fine the person who “blows the price”.

Lawyer Pham Thanh Tuan - WeLand Legal Director

(Article published on Vnexpress on 25/04/2024) https://vnexpress.net/ai-thoi-gia-chung-cu-4738522.html

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