In a recent report on real estate prices sent to the Government Office, the leader of the Ministry of Construction said that when applying land prices in 2024, according to calculations, land use costs of real estate projects will increase significantly compared to before.
Chain effect
According to the explanation of the Ministry of Construction, the main costs affecting housing and real estate prices include 7 expenses, including: land use fees, site clearance compensation costs, project construction costs (housing, real estate), taxes, related fees, etc.
Therefore, the new land price list close to the market price will increase land-related costs such as site clearance, land recovery compensation, land-related taxes and fees... While costs related to land use fees often account for a large proportion of the total cost of a housing project, ranging from 7%-20% for high-rise apartment projects and 25%-50% for villa and townhouse projects.
Land and housing prices in many localities in Hanoi have recently increased sharply despite the new land price list not being applied. Photo: LE THUY
The price between projects varies depending on location and favorable conditions of technical infrastructure. The cost of compensation for assets on land usually accounts for an insignificant proportion, about 2%, of the construction investment cost.
For example, at GP Invest's residential area (Hanoi), the land use fee calculated on the selling price of 1 m2 of apartment after applying the new land price list will increase to 22 million VND out of 36 million VND (accounting for about 60%). Currently, this ratio is only about 42%, equivalent to 15 million VND out of 36 million VND. Similarly, at Dong Tang Long Urban Area (Thu Duc City, Ho Chi Minh City), the ratio of land use fee on the selling price of each m2 of apartment is also expected to increase from 27% (2.3 million VND out of 8.8 million VND) to 60%-65%.
At the Chanh My Urban Area Villa project (Binh Duong province), from 16.3% to about 50%... "A preliminary survey of a number of projects shows that applying the new land price list will have a chain reaction, triggering a 15%-20% increase in real estate and housing prices compared to before" - the Ministry of Construction calculated.
According to this agency, in addition to the above factors, the high price of housing and land at certain times, projects and areas in the past time is also due to real estate project investors taking advantage of the limited supply situation to offer high selling prices. In particular, in the case of an area with very few, even only one project for sale, while the demand and number of registered buyers are high, investors can increase the selling price (due to lack of competition and reference price) to make a profit.
According to the Ministry of Construction, investors of housing projects basically spend an average of 3% of the selling price to pay to trading floors and brokers to sell the products. However, trading floors and brokers often rely on market conditions to add more prices when dealing with customers.
Projects with few products that many customers are interested in often require buyers to pay more than the price in the contract signed with the investor, called "price difference". This "price difference" is not fixed, it can be at 5% of the selling price, even 10% or 20%.
In addition, there is also a situation where some groups, speculators, investors and individuals operating in real estate brokerage disrupt market information to "inflate prices", "create virtual prices"... and take advantage of people's lack of knowledge to manipulate psychology, attract investment according to crowd psychology for profit.
Land valuation according to market principles
According to Mr. Nguyen Quoc Hiep, Chairman of the Vietnam Association of Construction Contractors and Chairman of the Board of Directors of Global Real Estate Investment Joint Stock Company (GP. Invest), the 2024 Land Law allows localities to apply the old land price list until December 31, 2025. After that, the new land price list will begin to be applied from January 1, 2026. The new price list will not be controlled by the land price framework and will force construction to approach market prices.
"Thus, currently, localities do not have to build new land price lists applying the principle of land prices close to market prices, but there is a mentality of pushing land prices up to market prices right now; leading to real estate prices being pushed up" - Mr. Hiep said.
Mr. Hiep said that if land is considered an important asset and product for the stable development of the country, it should be managed like gasoline and electricity. If the price is too high, the State will consider compensating the price. If there is no specific policy affirming the State's role in managing land prices, "floating" according to the market and difficult to control could push real estate and land prices in Vietnam into the highest group in the world, possibly even more expensive than Tokyo (Japan) or Hong Kong (China). This is unreasonable.
Therefore, the Chairman of the Vietnam Association of Construction Contractors recommends that the State should consider reviewing the principles of determining the new land price list to suit Vietnam's conditions and world trends. This will help promote economic development in general; including the real estate market, avoiding the above "bottleneck" situation that causes the market to be "paralyzed".
Associate Professor, Dr. Nguyen Quang Tuyen, Vice Chairman of the Council and Head of the Faculty of Economic Law - Hanoi Law University, stated that in order to implement land valuation according to market principles, in accordance with the provisions of the 2024 Land Law, the competent authorities must have specific, clear and consistent guidance documents on determining land prices for localities to implement; there must be a team of professional price appraisers, which is currently lacking in quantity and quality; and finally, information must be fully collected on the market to ensure publicity and transparency. Currently, the market still lacks many of the above factors, so land valuation is very difficult to implement.
"We need to know that the market is unpredictable, and real estate is individual and depends on taste. One person may say that the land price is acceptable, but another may say it is expensive. Therefore, we cannot apply that land price to an area," he said.
In addition, recently there has been a situation of inflated land prices at land auctions in suburban districts of Hanoi. This has caused market disturbances, making people in this area mistakenly believe that the market price of land is so high.
Since then, land and housing prices have increased. Currently, in Hanoi, some apartments are being sold for more than 100 million VND/m2, while there are no apartments priced at 30-40 million VND/m2, making it difficult for workers to buy houses. This is also the reason why land valuation based on market principles when assigned to localities becomes more confusing.
Therefore, Associate Professor, Dr. Nguyen Quang Tuyen stated that land valuation under the 2024 Land Law must ensure the following principles: Land valuation plan according to market principles; strictly comply with methods, procedures and processes for land valuation; ensure honesty, objectivity, publicity and transparency; ensure independence between land valuation consultancy organizations, land price appraisal councils, specific land valuation councils and agencies or individuals with the authority to decide on land prices. Finally, it is necessary to ensure harmony of interests between the State, land users and investors.
Mr. TRAN KHANH QUANG, General Director of Viet An Hoa Real Estate Investment Company: Need a roadmap
The Ministry of Construction believes that the application of the new land price list has a chain effect, triggering the price level of real estate and housing to increase by 15%-20% compared to before. In my opinion, this level is still small, but it could increase by 30%-50%. Because the basic characteristics of real estate are land and land prices, from land comes houses, then assets to borrow and do everything. Resources from land are very important, deciding many things related to the economy. Therefore, if the land price list increases, of course everything will have to follow. To control the price of houses and land from increasing according to the land price list, there is no other way but to follow the roadmap, not letting the new land price list increase too high to affect the market.
Mr. TA TRUNG KIEN, CEO, Wowhome Real Estate JSC: Adjust accordingly
In the coming time, when applying the new land price list, I think that real estate transactions will not be very active because buyers are still considering cash flow, sellers cannot reduce prices or keep prices when land prices increase, taxes also increase... To control real estate prices, the government must also consider adjusting the land price list appropriately.
Limit negative impacts
The Ministry of Construction requested the Ministry of Natural Resources and Environment to monitor the issuance of new land price lists by localities and have solutions to limit negative impacts on housing prices and market supply and demand.
The Ministry also requested real estate businesses to reduce product prices by reviewing and cutting costs, applying modern technology in construction, and at the same time promoting investment in social housing projects, renovating old apartments... suitable for the majority of people.
Source: https://nld.com.vn/bang-gia-dat-moi-va-nhung-dieu-can-can-nhac-196240925203557106.htm
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