After August 1, will real estate prices increase or decrease?

From today (August 1), three laws related to real estate, including the Land Law, Housing Law, and Real Estate Business Law, officially take effect with many new regulations. Besides the expectation that hundreds of projects will be resolved and transparent, there are also many concerns that real estate prices will increase due to the impact on supply.

The law has not yet taken effect, but prices have increased.

From the beginning of 2024 until now, when the 3 laws have not yet taken effect, prices of segments in the real estate market have continuously "escalated". Especially in the 2 big cities of Hanoi and Ho Chi Minh City, if those in need are just a little slow, prices may have changed. In particular, the apartment segment recorded the strongest price increase. In Hanoi, Savills' real estate market report for the second quarter of 2024 showed that since 2020, the average primary apartment price has increased by 18% per year, while the secondary price has increased by 14% per year. Mr. Huynh Thanh Khiet, Deputy Director of the Ho Chi Minh City Department of Construction, informed that the apartment segment is witnessing a more steady price increase than other segments. During this period, prices have increased continuously at an average rate of 15 - 20% per year. Even in the low-end segment, each square meter in 2015 cost 25 - 35 million VND, but by 2023 it had increased to 40 - 60 million VND. Mid-range apartments in 2023 cost 50 - 70 million VND/m2, while in 2015 it was only about 35 - 50 million VND/m2. The high-end segment currently costs 70 - 100 million VND/m2. Apartments in the central area had the highest price of 80 - 200 million VND/m2 last year, while in the suburbs it was 30 - 60 million VND/m2.

Real estate prices are expected to continue to increase, affecting people's access to housing.

PHOTO: NGOC DUONG

Regarding the land segment, Ms. Pham Thi Mien, Deputy Director of the Vietnam Real Estate Research Institute, said that low-rise and land types have also begun to "spark" positive recovery signals when some projects recorded good sales and transfer transaction results. In Hanoi, the suburban area is also where land prices have witnessed an increase of 10-20% compared to the beginning of the year. In particular, before the 3 laws took effect, the real estate market in Ho Chi Minh City was feverish when the city's adjusted land price list was expected to be applied from August 1 with an increase of 5 times to 50 times, helping land prices to be closer to the market but also causing many difficulties when affecting dozens of groups of subjects. Yesterday, the Ho Chi Minh City Real Estate Association issued a document proposing to postpone the application deadline to avoid putting pressure on land use fees on people. The reason for the increase in real estate prices is due to the scarcity of supply. Legal problems make it difficult to implement projects, and a series of investors are stuck with corporate bonds, so they have to shrink. Low supply and high demand mean that despite low liquidity, prices remain high. There are currently thousands of stuck projects waiting to be resolved to supplement market supply. Therefore, it is expected that the 3 new laws, when implemented, will help reduce real estate prices and make it easier for people to access housing. However, in reality, there are no signs of this happening.

The market is hot, prices will increase…

According to economic expert, Dr. Vu Dinh Anh, putting the above 3 laws into effect soon will overcome many legal limitations, remove difficulties, help suspended projects to be restarted, as well as create conditions for the birth of new projects. "In principle, when supply increases, the supply-demand equation is balanced, real estate prices in general and land prices in particular will cool down, but in reality, the opposite is happening. This is a natural and inevitable manifestation of the market when it starts to become active again; at the same time, it is consistent with the motivation and reality of both buyers and sellers," he explained.

Real estate prices will change a lot from today, when 3 laws come into effect.

PHOTO: NGOC DUONG

This expert analyzed that over the past 2 years, the real estate market has almost frozen. When the market is cleared, it will become active again and one of the first signs is the increase in prices. In addition, although many projects have the opportunity to restart, from the investor's perspective, during the time the project is "stuck", their costs have increased a lot. The land is left there, the project is still standing but still has to pay interest, depreciation costs... not to mention the debt between the investor and the construction companies. The cost increases so when the project restarts, the project owner will increase the price to compensate. On the other hand, from the buyer's perspective, there is a high possibility of still accepting the price increase because at the present time, the ability to access capital is much better than before and interest rates have decreased. Part of the calculated costs for real estate investment in terms of capital access and interest can be flexible with the increase in prices. This leads to the trend of real estate prices increasing as is the reality today. Looking at the long term, Dr. Vu Dinh Anh said that it is not possible to determine whether real estate prices will increase or decrease after the 3 laws come into effect. Because the law has many changes that affect real estate prices in many different directions. The increase or decrease depends on the reasons for land price fluctuations in the past time in each segment. For example, the real estate market has recently been facing the problem of limited supply. If based on the regulations in the 3 new laws, the possibility of increased supply in the coming time will be very high. Thus, the reason for the increase in land prices due to lack of supply will be resolved, possibly creating a downward trend. Similarly, the implementation of allowing the sale of real estate on assets formed on land with land lease rights will make the market more dynamic. Most importantly, according to Mr. Anh, although the law comes into effect, the level of impact on the market depends largely on how the decrees and regulations are specified and implemented. For example, regarding the regulations on house rental, the current law requires the lessor to establish a business, but this will likely increase the householder's obligation to the state budget. Many opinions suggest that the conditions for establishing a business should not be based on the number of houses or the area of ​​the house for rent, but should be based on the value of the house for rent. The current sub-law documents have not yet taken into account these suggestions. "The finalization of the regulation requiring landlords to establish a business also affects the real estate market, at least in terms of whether the rental real estate sector can develop or not. If the rental market develops when the demand for housing ownership decreases, it will affect housing prices. If it is too difficult and the rental market cannot develop, it will also reduce the demand of those who want to buy more houses to rent. That said, the level of impact on the market depends largely on the concretization of regulations, guidance on sub-law documents and even regulations in other laws but related to the real estate market," said Mr. Vu Dinh Anh.

… but can't increase immediately

Assessing the impact of the above three laws on the real estate market, Master Ngo Gia Hoang (Ho Chi Minh City University of Law) commented: The 2024 Land Law has removed the land price framework issued by the Government every 5 years, meaning that localities are not restricted in issuing land prices that must be lower than the Government's price framework as before, helping localities to be proactive in building land price lists in accordance with the actual situation. In particular, with the application of the land valuation method according to market principles, the State's land prices will keep up with market developments, limiting the current "two-price" situation. However, with the provisions of the 2024 Land Law, land prices in local land price lists will increase compared to the previous period. The impact of increasing state land prices leads to an increase in some financial obligations of land users such as land use fees, land rent, non-agricultural land use tax, registration fees or increased compensation and site clearance costs. Meanwhile, real estate enterprises may have to increase investment costs when land costs increase, causing real estate prices to increase as well. It is also possible to exclude speculative factors, pushing up land prices in some localities, taking advantage of people's anxiety that when the above laws come into effect, real estate prices will increase to create a virtual fever, pushing real estate prices up compared to their actual value. Meanwhile, MSc. Nguyen Chi Hieu (Deputy Head of the Faculty of Accounting - Auditing, University of Economics - Law) said: Localities issue new land price lists every year that closely follow market prices, so enterprises will have to bear higher land and premises rental costs, affecting profits and possibly leading to increased prices of goods and services, causing inflationary pressure. Sudden price increases can cause instability in the real estate market, with too rapid price increases potentially creating a real estate bubble, leading to financial and economic risks. Not only businesses, but also people will face greater financial burdens when they want to buy land or housing, especially those with low or middle incomes. Rising land prices make the cost of buying housing more expensive, reducing the accessibility of housing for many people, especially young people or new families. Not only that, the 2024 Land Law stipulates that investors who want to implement commercial housing projects can only receive the transfer of residential land use rights and negotiate with people to buy land. Meanwhile, the draft Resolution on piloting commercial housing projects without residential land has not yet been approved by the National Assembly. "Then tightening the subdivision and sale of land, removing the land price frame... means that the input costs of many commercial real estate projects may increase, leading to an increase in housing prices and real estate prices. However, real estate prices will increase but not immediately but will be delayed because they depend on many factors. Short-term supply will certainly be limited, this is a necessary condition for real estate prices to increase, while demand for real estate is an unclear unknown," said Mr. Hieu. However, according to him, in the current situation, in the general difficulty, speculative buyers have not yet spent much money and are afraid to borrow from banks. People with real demand think that real estate prices are still high so they are still waiting. Therefore, real estate prices have not increased dramatically in the short term, but in the long term, they will definitely increase. When the three laws above come into effect, they cannot make real estate prices increase immediately, which is also the opinion of Mr. Le Hoang Chau, Chairman of the Ho Chi Minh City Real Estate Association. Because of the delay in policy implementation and projects also need a roadmap, the process takes a lot of time, even years to have products on the market. But it can be seen that the land price list issued by localities according to the provisions of the Land Law will be closer to reality as recently announced by Ho Chi Minh City. The sharp increase in the draft land price list will affect input costs of many sectors of the economy, first of all, the cost of compensation for site clearance will be pushed up higher, causing a chain reaction that increases housing prices, house rental prices, increases in land rental costs, factory rental costs in industrial parks and in investment projects for trade, services, and tourism, leading to a possible increase in the price of goods in general. This will adversely affect social housing projects in which enterprises agree to receive land use rights to implement the project.

No longer a regulation on apartment ownership period

Article 58 of the 2023 Housing Law stipulates that the term of use of an apartment building is determined based on the design documents and the actual time of use of the apartment building according to the inspection conclusion of the competent authority. The term of use of an apartment building according to the design documents must be clearly stated in the appraisal document of the competent authority according to the provisions of the law on construction. The term of use of an apartment building is calculated from the date of acceptance of the apartment building for use according to the provisions of the law on construction. Thus, the 2023 Housing Law does not stipulate the term of ownership, but only stipulates the term of use of the apartment building. When the apartment building expires and is at risk of collapse and must be demolished, the value of the house will no longer exist, but the value of the right to use the land for long-term stability will still be there, and will be the basis for people to be compensated.

Real estate brokers must have a practice certificate

According to Article 9 of the Law on Real Estate Business: organizations and individuals when doing real estate business must establish an enterprise in accordance with the provisions of the law on enterprises or establish a cooperative or cooperative union in accordance with the provisions of the law on cooperatives with real estate business lines (collectively referred to as real estate business enterprises). In case an individual does small-scale real estate business, he/she does not have to establish a real estate business enterprise but must declare and pay taxes in accordance with the provisions of the law. In addition, according to Article 61 of the Law on Real Estate Business, an individual practicing real estate brokerage must have a practice certificate and must practice in a real estate trading floor service enterprise or a real estate brokerage service enterprise. Thus, with this new regulation, individuals are not allowed to practice real estate brokerage freely as at present.

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Source: https://thanhnien.vn/sau-ngay-18-gia-bat-dong-san-tang-hay-giam-185240731233701751.htm