Rising Land Prices and Their Ripple Effects: Vietnam's Real Estate Market Faces a New Test

As Vietnam prepares to implement the 2024 Land Law from January 1, 2026, many localities have begun updating their land price frameworks with the aim of aligning them more closely with market values. However, the sharp and sudden increases—often implemented without a transitional roadmap—are creating significant negative impacts, not only on households but also on businesses and the broader real estate sector.

Financial Pressure Mounts: “Unaffordable” Land Conversion Costs

In Ho Chi Minh City, numerous land-use conversion requests—from agricultural to residential—have been withdrawn due to skyrocketing land-use fees. In Hóc Môn District, fees have reportedly increased by more than 38 times, leaving many households unable to afford the conversion even if they sold the land itself.

Mr. Trần Anh Vinh, Vice President of the Ho Chi Minh City Business Association, noted:

“Many people can’t even afford the conversion fee, even if they sell their entire plot of land.”

With each locality applying different methodologies and adjustment scales, the inconsistencies are adding confusion for residents and investors alike. Especially in a post-pandemic economy where incomes remain fragile, sudden jumps in land prices—without supportive mechanisms—are proving to be economically destabilizing.

Policy Solutions: Lower Collection Rates, Gradual Phasing, and Targeted Support

To avoid paralyzing the market, Mr. Vinh recommends a multi-pronged fiscal approach:

• Apply partial collection rates of 20–30%, instead of the current 100% upfront fee.

• Reinstate the 5-year deferred land-use payment scheme for financially burdened households.

• Implement a zoned rollout: fast-track high-urbanization areas with sufficient data, and gradually phase in increases in rural or underdeveloped regions.

• Categorize and support vulnerable groups like low-income families and small businesses with clear, transparent tax deferment or exemptions.

According to Dr. Ngô Gia Hoàng from the Ho Chi Minh City University of Law, if state land prices exceed the financial capacity of most residents and businesses, the very goal of “market alignment” becomes counterproductive—creating inequality, restricting land access, and distorting the market.

Real Estate Sector: A Direct Casualty of Poorly Designed Policy

For property developers, land-use fees make up a significant portion of overall project costs. When land prices increase sharply, their profit margins shrink, forcing them to revise project pricing strategies—ultimately pushing higher costs onto end-users.

For manufacturers and businesses leasing land in industrial zones, the price hike raises operating costs significantly. Many small and medium-sized enterprises (SMEs), already strained by rising input costs and interest rates, now face an additional financial burden from land rent hikes.

A Controversial Fix: Raising Agricultural Land Prices

An unusual solution has been proposed by the Institute of Natural Resources and Environmental Economics, recommending that agricultural land prices be raised to 65–70% of residential land prices. The aim: reduce the gap and, in turn, lower the conversion cost for households switching to residential use.

However, Dr. Ngô Gia Hoàng cautions that any adjustment to agricultural land values must be data-driven and market-based, taking into account:

• Prices recorded in Vietnam’s national land database

• Actual transaction prices in land transfer contracts

• Auction prices after fulfilling financial obligations

• Income and expenditure data from land use operations

Without careful calculation, raising agricultural land values could negatively impact Vietnam’s investment climate.

Differentiating Between Shelter and Speculation

Ms. Võ Nhật Liễu, Director of the Institute for Real Estate Project Development Training (PROPIIN), emphasizes the need to differentiate between types of land users, proposing three distinct policy tiers:

1. Households converting land for actual residence: Should receive a 30–50% reduction in financial obligations or deferred payment over 5 years.

2. Individuals converting land for small-scale investment or rental purposes: Subject to a moderate fee (around 80–90% of official rates).

3. Organizations or individuals converting land for commercial projects: Full payment at market price, with no exemptions.

Additionally, she recommends that new land price frameworks be implemented in 2–3 phases over several years to give people time to adjust. A financial cap could also be introduced—for example, capping post-conversion land-use fees at no more than 30% of the total new land value.

“A good policy is not just legally correct—it must also understand and serve the people,” Ms. Võ stressed.
“Land pricing can rise. Taxes and fees can be adjusted. But implementation must be gradual, selective, and considerate of the difference between genuine housing needs and speculative activity.”

Fair Valuation – Reasonable Taxation – Sustainable Development

Mr. Nguyễn Tiến Dũng, CEO of Savista, concluded:

“When land is correctly valued, taxes are reasonable, and citizens feel protected, fairness prevails and a stable investment environment is fostered. That’s how the economy becomes truly sustainable, and government revenue improves in the long run.”

Raising land prices may be inevitable for greater transparency and efficiency—but how much to raise, when, and for whom are the critical questions that policymakers must answer with responsibility and real-world awareness.

Only when land is treated as a development resource—not a speculative commodity—can Vietnam’s real estate market evolve in a healthy and sustainable direction.