Will real estate prices increase or decrease after revised land law?

Apartment blocks and houses in Thu Duc City, Ho Chi Minh City, July 2023. Photo by VnExpress/Quynh Tran

Revised legislation in land, housing, and real estate trading is poised to influence real estate prices, potentially leading to initial increases but promoting long-term stability, experts said.
The amendments made to the Land Law, Housing Law, and Real Estate Trading Law will have an immediate effect of increasing various costs for developers, they said. The amendments take effect on January 1, 2025.

Dinh Minh Tuan, southern regional director of real estate trading platform Batdongsan, pointed to the introduction of a new land price calculation method.

Instead of the current fixed price method, land prices would be determined based on purpose, land use term and various other factors, aligning them with market forces, he said.

This is likely to increase land clearance costs, compensation for land clearance and taxes related to land, he said.

Property developers would only be allowed to collect 5% of the selling price from buyers until they complete the ground floor of a project, and by then they would have spent 20-30% of the total construction costs, he explained.

Many developers now collect huge deposits from buyers to start work on a project.

From 2025 businesses without adequate finances have to depend on bank loans or bond and stock issuances, all of which will add to costs.

New rules for the use of lands for multiple purposes, which will allow businesses to use agricultural lands, would increase their prices, Tuan said.

Large swathes of lands without title deeds, traditionally a huge source of affordable, albeit high-risk, lands in the market, will be issued the deeds.

Once this happens, prices of such lands are expected to rise, Tuan said.

Vo Hong Thang, director of consulting & project development at DKRA Group, said on the other hand the new provisions would remove many legal hurdles that usually lead to costly project delays.

Additional costs arising from unexpected delays are among the main reasons for high prices, he said.

“Certain costs will rise while others will decline.”

He concluded that the decrease in costs due to fewer delays would offset the increased land prices for developers, lowering real estate prices in the long run.

Tran Van Binh, vice president of the Vietnam Association of Realtors, concurred with Thang that property prices would adjust to a more reasonable level in future.

Tran Khanh Quang, CEO of real estate firm Viet An Hoa, dismissed both arguments saying the amendments might have a marginal effect on the market but prices would be determined mostly by supply and demand.

Source: VNExpress