Stalled Real Estate Transactions in Ho Chi Minh City: Tax Issues Hindering the Market

The Ho Chi Minh City real estate market is currently facing a concerning situation: a large number of property transactions have stalled, primarily due to tax-related issues. According to data from the Ho Chi Minh City Department of Finance, the number of successful property transactions in Q2 2024 dropped by approximately 30% compared to the same period last year, mainly due to delays in tax-related procedures. This stagnation has negatively impacted not only individuals and businesses but also the broader real estate market in the city.

Complications from Tax Regulations

Tax procedures, which were already complex, have become even more challenging as the city government implements measures to prevent revenue loss by thoroughly reviewing property values in transactions. The new regulations require tax authorities to reassess property values instead of relying solely on the declared transaction value, leading to significant delays in processing files.

Particularly in central areas of Ho Chi Minh City such as District 1, District 3, and the Thu Thiem area, the implementation of new land prices has caused transactions to stall due to sudden changes in tax rates. According to statistics from the Ho Chi Minh City Tax Department, by mid-2024, over 5,000 transaction files remained unresolved, as the exact tax amounts had not yet been determined. This has led many buyers and sellers to wait for extended periods, directly affecting their financial plans and investment timelines.

Impact on the Real Estate Market

The stalled transactions have had a severe impact on the market’s liquidity. The success rate of property transactions in the first half of 2024 significantly decreased, causing the total value of real estate transactions in Ho Chi Minh City during this period to drop by about 20% compared to 2023. This situation has resulted in various consequences, not only reducing investment opportunities but also affecting the operations of businesses in the real estate sector.

One of the most apparent outcomes is that investors and property owners have faced difficulties in transferring assets. This has not only led to a sluggish market but has also created financial pressure on those who have taken out loans to invest in real estate, as they are unable to complete transactions and recover their capital as planned. Particularly in a climate where bank interest rates remain high (over 11% for home loans), transaction delays further increase the financial burden on individuals.

Faced with this prolonged stagnation, Ho Chi Minh City has held inter-agency meetings to find solutions to alleviate the difficulties plaguing the real estate market. The city government has directed tax authorities to expedite the processing of files and to adjust asset valuation regulations in a more flexible manner. According to the plan, by the end of Q3 2024, Ho Chi Minh City will trial an automatic valuation system based on market data to reduce the overload faced by tax authorities.

Additionally, the city has committed to strengthening cooperation among various agencies, such as the Department of Natural Resources and Environment, the Department of Construction, and the Tax Department, to ensure that the review process runs more smoothly. It is expected that by the end of 2024, the time taken to process tax files for property transactions will be reduced from 90 days to 45 days, thereby improving transaction speed and market liquidity.

The situation of stalled property transactions in Ho Chi Minh City due to tax complications presents a significant challenge in 2024. The delays in processing tax files not only diminish market liquidity but also place financial pressure on the parties involved in transactions. However, with the new policy solutions being implemented, it is hoped that the real estate market will see positive changes soon. While the market may take time to recover, these reform efforts will contribute to stabilizing and promoting the development of Ho Chi Minh City's real estate sector in the near future.