The Him Lam-Kenh Te residential project in District 7 recorded no new transactions over the past two weeks, a sharp decline from the normal 30-40 transactions a month.

Pham Van Hai, general director of ACB Real Estate Company, said his firm had recorded only a few home sales in the medium price sector recently. He said the buyers all needed houses to live in immediately and could not worry about the capital gains tax coming into effect.

A director of a property firm in District 1 who wished to be unnamed said investors did not want to pour money into apartments because they wanted to know how the market would react to the new tax first.

Property developers in Vietnam are allowed to raise funds from their buyers to build their projects. If a buyer wants to transfer the right to own the property in the future to another person, the capital gains from the transfer will be subject to a tax rate of 25 percent. If it is impossible to calculate the taxable income, a tax of 2 percent will be imposed on the value of the transaction.

Experts said the introduction of the tax will have a large impact on the market as almost all new residential projects were funded that way.

Bui Tien Thang, deputy director of Saigon Thuong Tin Real Estate Joint Stock Company, said projects that are about to be completed would be affected the most.

A 100-square meter land lot at the Him Lam-Kenh Te project, for instance, was bought at VND900 million in 2005, but now the lot can be transferred at VND4 billion, which translates to a capital gains tax of VND775 million, Thang said.

Fearing the high tax rate, people who need to transfer their homes to their relatives have been rushing to complete the procedures over the past few days.

Nguyen Van Luc, a buyer of an apartment in Thu Duc District, told Thanh Nien he had transferred the apartment to his son successfully to beat the tax deadline. “I only had to pay a transfer fee of 1 percent to the project investor, but with the new capital gains tax I would have had to pay 25 percent.”