Growth of Real Estate Transaction Tax Revenue in Ho Chi Minh City Increases by 54%: Market Signal Analysis

In the first nine months of 2024, Ho Chi Minh City's real estate market recorded significant growth, with tax revenue from real estate transfer transactions increasing by 54% compared to the same period last year. This result brought the total personal income tax from real estate transfer transactions to VND 4,914 billion. According to the Ho Chi Minh City Tax Department, this growth is mainly attributed to the public's desire to complete transactions before the new Land Law took effect on August 1. This phenomenon reflects a common mindset in the real estate market, where buyers and sellers aim to protect their existing rights before legal changes occur.

Particularly in June and July, Ho Chi Minh City recorded notable growth, with tax revenue increasing by 50% and 74%, respectively, compared to the same period last year. However, after the new Land Law officially came into effect on August 1, the absence of new land pricing tables from the Ho Chi Minh City People's Committee led to a significant decrease in real estate transactions. This resulted in a 32% decrease in tax payments in August, along with a 28% drop in tax revenue. This indicates that the market relies heavily on the stability of the land price framework and clarity in regulations.

However, when Ho Chi Minh City decided to temporarily apply the existing land price table on September 21, the number of tax payments increased by 9% compared to August, while total tax revenue rose by 19%. This is a positive signal, indicating that market sentiment is gradually stabilizing and capable of responding swiftly to appropriate policy adjustments.

Reasons for Tax Growth and Market Impact

By the end of September, total tax revenue related to land in Ho Chi Minh City reached VND 10,510 billion, an increase of 58% compared to the same period last year, but only about 27% of the annual budget target. Of this, land use fees reached VND 5,933 billion, growing by 54%. Notably, there were some extraordinary payments, such as Khang Phuc Real Estate Company paying VND 811 billion for a project in Bình Chánh District. This highlights the crucial role of large enterprises in driving land revenue and implementing major projects.

Despite the increase in land use fees, they still fell short of expectations, primarily due to legal obstacles in project implementation and land auction procedures. Issues such as cumbersome procedures and a lack of attractiveness in the auction market have prevented land auction revenue from meeting the anticipated targets.

Moreover, in the first nine months, land lease revenue reached VND 4,234 billion, an increase of 72% compared to the same period last year. This growth was largely due to some real estate companies paying land lease fees in lump sums. However, this also indicates a reliance on non-recurring revenue, as these special transactions contributed significantly to the total tax revenue.

Future Prospects and Challenges

The fluctuations in Ho Chi Minh City's real estate tax revenue during the first nine months of 2024 reflect a complex and challenging market landscape. On one hand, the urgency to complete transactions before the new Land Law took effect played a key role in driving tax growth. On the other hand, the lack of clarity in legal regulations and delays in the issuance of new land price tables led to delays and disruptions in real estate transactions.

To ensure market stability in the future, the Ho Chi Minh City People's Committee needs to promptly issue appropriate land price tables to minimize instability. Additionally, simplifying legal procedures, particularly in land auctions and land use conversion, will be crucial in creating a favorable investment environment, thereby promoting sustainable growth in the real estate sector. Furthermore, a transparent and efficient management system must be established to ensure market stability and predictability, enabling stakeholders to plan and invest with greater confidence.