Real estate prices skyrocket: Ministry of Construction names 4 main reasons

(Dan Tri) - According to the Ministry of Construction, in the third quarter, real estate prices in Hanoi, Ho Chi Minh City and some other areas still tended to increase due to many factors.

According to the Ministry of Construction's housing and real estate market information for the third quarter, real estate prices in some localities are still on the rise, especially in Hanoi, Ho Chi Minh City and other major cities. The phenomenon of real estate price increases is localized, occurring in some areas, types and segments, leading to an increase in general prices.

This Ministry analyzes and identifies many factors that contribute to the increase in residential real estate prices, with some basic causes:

Firstly, the increase in real estate prices is partly due to recent fluctuations in land-related costs as well as the impact of applying new calculation methods and land price tables. In particular, in some localities and areas, there is a phenomenon of land use rights auctions with winning bids many times higher than the starting price.

The management and implementation of land use rights auctions in some areas and localities are not good, leading to the phenomenon of many investors forming associations and groups to participate in the auction. These people pay land prices many times higher than the starting price and can "abandon the deposit" after winning the land auction with the aim of establishing a virtual price level in the area to make a profit.

The auction of land use rights with the winning bid being many times higher than the starting price will have the impact of increasing the land price level, real estate price, housing price of the neighboring area and the locality. At the same time, it will increase the cost of implementing housing projects, causing difficulties for businesses, reducing supply to the market, negatively affecting the real estate market.

Second, the reason for the increase in real estate prices is also due to the phenomenon of "creating virtual prices" and "inflating prices" by speculators and individuals working as real estate brokers, taking advantage of people's lack of knowledge and investing according to the crowd psychology to make profits.

The Ministry of Construction determined that these individuals are freelance brokers, do not have real estate brokerage certificates, are weak in expertise, have limited legal knowledge, are unprofessional, and have poor business ethics, leading to opportunistic business practices, colluding to raise prices, inflating prices compared to actual values, manipulating the market, causing damage to customers, and reducing the transparency of the real estate market.

Third, the reason for the increase in real estate prices is the lack of supply and housing to meet the needs of the majority of people, low-income and middle-income earners in urban areas, especially Hanoi and Ho Chi Minh City. The reason for the lack of supply is that real estate businesses face difficulties and obstacles in legal procedures, especially in determining land prices, calculating land use fees, site clearance, and land allocation.

An apartment building in Hanoi (Photo: Tran Khang).

In addition, many businesses have encountered difficulties in obtaining credit loans and capital from issuing corporate bonds. In addition, many projects that have been or are under construction have had to be temporarily suspended, delayed, or have their construction progress slowed down.

Although the Land Law 2024, Housing Law 2023 and Real Estate Business Law 2023 have been promulgated and come into effect, institutional and legal difficulties for businesses have been basically resolved, and real estate supply has shown improvement. However, there are still some limitations because it takes time for newly promulgated mechanisms, policies and laws to be effectively implemented and put into practice.

Fourth, recent economic fluctuations related to the stock market, bonds, gold, etc. have affected the psychology of people and investors, leading to a trend of shifting cash flow to investing in housing and land as a safe "haven" for accumulated money and investment capital.

Faced with a number of reasons causing real estate prices to increase recently, the Ministry of Construction directed and requested relevant agencies and units to review the organization of land use rights auctions to ensure compliance with the law, publicity and transparency.

In addition, the authorities promptly detect and strictly handle violations of legal regulations in land use rights auctions, preventing acts of taking advantage of land use rights auctions for personal gain and disrupting the market.

The Ministry also proposed to inspect and review real estate business activities of enterprises, investors, real estate trading floors, and real estate brokers in the locality; control the purchase and resale of real estate that has been changed hands many times, especially in areas, projects, and apartment buildings with unusual price increases; inspect, examine, and take measures to correct acts of price inflation, price manipulation, and speculation; and handle violations of land laws, real estate business laws, and related laws (if any).

In addition, competent authorities need to have measures to control real estate price increases to ensure they are consistent with actual conditions and avoid negative impacts.

Source: https://dantri.com.vn/bat-dong-san/gia-bat-dong-san-tang-vut-bo-xay-dung-diem-mat-4-ly-do-chinh-20241030171222774.htm