The amended Law on Real Estate Business, passed on November 28th, stipulates that land use rights cannot be transferred to individuals for self-construction of houses or self-subdivision and sale of land plots in wards, districts, and cities of special, type I, II, and III urban areas. This law will officially take effect from January 1st, 2025.
According to investors and experts, this regulation will have a significant impact on the real estate market.
Mr. Giang Anh Tuan, Director of Tuan Anh Real Estate Exchange, predicts that in the coming period, small-sized houses will be scarce, while large-sized properties will be difficult to sell.
For a long time, detached houses with an area of around 30 square meters priced at 2-3 billion VND have always been attractive to buyers because the price is suitable for most people, especially those with a genuine need for housing.
" Houses with an area of 30-40 square meters were previously always scarce. Now, with regulations tightening land subdivision, houses of around 30 square meters will truly become rare commodities sought after by many, including those who need a place to live and investors, " Mr. Tuan said.
Small houses measuring 30 square meters are predicted to become increasingly popular. (Photo: Ngoc Vy).
Meanwhile, large plots of land will be difficult to sell because, without the option to subdivide them, they would have to sell the entire large plot at a high total price, while the number of financially well-off buyers is not large.
Recently, many investors have been hunting for plots of land measuring several hundred square meters, planning to subdivide them into smaller lots to sell to those with real needs. Many landowners have made a fortune with this "subdividing land for resale" scheme. However, if regulations tightening land subdivision regulations come into effect, this business practice will become impossible.
Nguyen Huu Cau, a real estate broker in Hoang Mai district ( Hanoi ), said that if land subdivision is strictly regulated, there is a risk of unsold plots because large plots of land come with significant financial requirements. Not all customers are willing to invest in large plots of land due to the large financial resources and slow liquidity. This type of property is only suitable for those who want to open homestays, resorts, or farmstays. However, this customer base is small.
Meanwhile, there is a large group of customers who want to buy small plots of land, with budgets ranging from a few hundred million to 2 billion VND. They want to hold onto the land, wait for positive news, and then sell when prices rise.
“ A 200 m2 plot of land costs around 8-10 billion VND. If it's divided into smaller plots of about 40 m2, investors can easily access and sell it to many people because the budget is only around 3 billion VND. That's why large plots of land are more likely to remain unsold. And investors who hold large plots of land and haven't had time to separate the land titles will find it difficult to sell or will be forced to sell at a lower price ,” Mr. Cau said.
According to Mr. Cau, the profit margin from buying large plots of land and then subdividing them for resale ranges from 30-50%. This is why many investors "prefer" this land subdivision method.
" The prices of small plots of land will certainly be pushed up in the near future ," Mr. Cau predicted.
Analyzing this issue, Mr. Dinh Minh Tuan, Director of Batdongsan.com.org in the Southern region, predicted that the land plot segment will face difficulties when this law officially comes into effect.
Mr. Tuan explained that currently, 90% of land plot transactions on the market come from privately subdivided plots developed by individuals and small real estate companies.
According to Mr. Tuan, it is always easier for individuals to apply for land subdivision permits compared to businesses developing projects. This is because this type of property offers a wide range of prices and smaller plot sizes, making it easier to sell. Investors who buy large plots of land and subdivide them for resale prefer this method because it allows for free buying and selling without the need for formal project planning.
Mr. Tuan believes that tightening regulations on land subdivision also means that the land plot market will face difficulties due to a scarcity and shrinking supply. Buyers will also find it difficult to access these plots due to the limited supply.
This expert predicts that investors holding large plots of land may be forced to sell at a "reduced price." The discounted properties will likely come from investors who bought land with the intention of subdividing it for profit. When liquidity slows, landowners will be forced to lower prices.
However, due to their high value, large-scale land plots will attract fewer buyers, potentially allowing potential buyers to negotiate lower prices with landowners. The declining liquidity of land plots will further exacerbate the difficulties in the ongoing economic downturn.
Chau Anh
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