Hanoi hopes to cut prices with tax on abandoned villas

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Hanoi wants to impose a 5-10 percent tax on an estimated 655 abandoned villas around the city in order to curb property speculation.

VnEconomy reported that the capital city is planning to introduce taxes on abandoned villas based on how long the property has been left unoccupied.

A villa abandoned for three months will be taxed 5 percent while property left alone for more than a year will be taxed 10 percent of its market value, the news website reported.

The article did not mention the date such fees would take effect. 

Besides taxpaying, owners of unused villas will face fine of between VND10-20 million (US$480-960) for each abandoned unit they own.

Official statistics showed that by the end of June there were an estimated number of 655 abandoned villas in Hanoi, accounting for 25 percent of the capital's villas.

A recent report by real estate company Savills Vietnam said villas in Hanoi were priced between VND5-40 billion ($240,000-2 million), two times higher than the price of high-end detached house projects, although the segment is under high liquidity pressure amid a slumping market.

Luu Cong Huy, manager of a real estate trading floor in Hanoi, said that many among unoccupied villas belonged to "fat cats" who speculate on the properties. 

Speculators insist on keeping villa prices high even when demand is low. Therefore many villas have been left abandoned for years.

An article by VLAND said talks about the new taxes had been controversial because it was difficult to determine if a villa was "abandoned" for speculative purposes or simply "left for later use" as a homeowner intends to have his or her children move in when they grow up.

The news website cited Dang Hung Vo, former Deputy Minister of Natural Resources and Environment, as saying that if Hanoi does not put a tax on abandoned villas simply because it does not want to hurt homeowners who leave homes for later use, the city would be accepting the unreasonably high villa prices.

In order to cut prices, the tax should be introduced whether or not homeowners have plans for the future use of a villa, said Vo, adding that people should buy villas whenever they have the genuine demand for a home instead of storing it for later use.

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