Draft of the New Land Price Table: Is the Land Price Approaching Reality?

In the context of the continuous growth and development of the real estate market in Ho Chi Minh City, the land registration office in Thu Duc City is currently facing an overload as residents flock to complete procedures related to land use rights certification. This bustle not only reflects the deep interest of the people in the real estate market but also highlights the importance of the new draft land price table in shaping the value of real estate in this area. Debates regarding the discrepancies between official land prices and actual transaction prices have become a hot topic, raising numerous questions about whether the proposed adjustments are truly approaching market value.

According to information from the Department of Natural Resources and Environment of Ho Chi Minh City, the new draft land price table submitted to the City People's Committee on October 16 proposes the highest land price at 687 million VND/m2, which is four times higher than the current price table. However, this figure is still much lower compared to actual transaction prices, with the highest recorded in central areas like Dong Khoi, Le Loi, and Nguyen Hue streets reaching up to 1.2 billion VND/m2. This discrepancy not only raises concerns for investors but also causes apprehension among residents who wish to convert agricultural land into residential land. This presents a significant challenge in determining an appropriate land value that encourages economic development while ensuring the rights of land users.

Mr. Vo Hong Thang, Deputy General Director of DKRA Vietnam, noted that the new land price table would significantly impact those owning agricultural land in peripheral areas such as Cu Chi, Hoc Mon, Binh Chanh, and Can Gio. These areas are facing immense pressure due to the sharply increased land prices, and residents who want to convert agricultural land to residential or subdivide plots will face more difficulties because of the significant rise in conversion costs. This makes housing accessibility increasingly difficult, particularly for middle- and low-income households. Meanwhile, real estate expert Mr. Tran Khanh Quang predicts that the new price table will push up residential land prices in suburban areas by 20-30% within the next six months, significantly increasing the financial burden for residents and small investors.

Another notable point in the draft is that the proposed land prices are between 50-70% of actual market values. This adjustment is considered a step in the right direction to make the market more transparent and closer to real values. This has positive implications for accelerating compensation and land clearance progress, effectively supporting the implementation of infrastructure and urbanization projects. However, the challenge lies in ensuring a balance between the increased land price costs and financial savings. Particularly, in the context of many projects being in the land clearance phase, inconsistencies in land value assessments can lead to delays and additional costs for developers.

Mr. Nguyen Quoc Bao, Chairman of the Ho Chi Minh City Real Estate Club (HREC), agrees that issuing a new land price table is necessary and brings many benefits to the market. This move not only helps enhance transparency but also contributes to increasing state budget revenues through taxes related to land transfers and usage. However, Mr. Bao also warned that this increase in land prices could lead to higher real estate prices in the near future, forcing real estate companies to improve their production processes and construction quality to ensure reasonable profit margins. This requires developers to have wise business strategies while seeking to optimize construction costs to maintain competitiveness.

The State plays a crucial role in regulating the market, especially when the real estate market is entering a phase full of volatility and challenges. Legal policies need to be perfected and applied synchronously to minimize the negative impacts caused by the land price adjustments. At the same time, coordination between management agencies and local governments is extremely necessary to ensure smooth implementation of new regulations, helping the real estate market develop sustainably and stably.

Moreover, the rising land costs also create considerable pressure on real estate enterprises, especially projects that have to carry out land clearance and compensate residents. Increased compensation costs not only affect input costs but could also lead to an increase in the final selling price of products. In this context, enterprises will need to improve construction quality to align with the new price level and meet buyers' expectations. Large projects with existing land reserves will have a significant advantage as their compensation costs are less affected by the new land price table, helping maintain market competitiveness and retaining an edge over competitors.

Mr. Tran Khanh Quang also pointed out that, although the new land price table has been reduced by about 20% compared to the previous draft, it is still 5-10 times higher than the current price table. This reflects the necessity of adjusting the price table in accordance with the new Land Law, aiming towards the stabilization of the real estate market. He also noted that if the draft is officially issued, suburban areas of Ho Chi Minh City such as Cu Chi, Hoc Mon, District 12, Binh Tan, and Binh Chanh will experience significant fluctuations, as these areas still have large agricultural land reserves and residents are looking to convert them into residential land for housing construction.

Experts predict that two main scenarios will occur once the new land price table is issued. First, the existing residential land supply will quickly increase in price by 20-30% within the next six months due to high demand and limited supply. Second, investors will continue to promote the conversion of agricultural land into residential land for business purposes, leading to a 30-50% increase in land value within the next 6-12 months. These fluctuations will create many opportunities for investors but also present potential risks, particularly for small investors and low-income buyers.

Another issue emphasized by Mr. Quang is that in the new draft land price table, residential land prices are calculated based on specific roads, while agricultural land prices are calculated for entire areas, which is more generalized and does not adequately reflect the actual value differences between different regions. He suggested that agricultural land pricing should also be more detailed, similar to the method applied to residential land, to ensure fairness and transparency, as well as accurately reflect the potential and usage value of each plot of land.

Overall, issuing a new land price table is an important step towards making the market more transparent and enhancing the efficiency of state management in the real estate sector. However, to achieve the best effectiveness, the implementation needs to be accompanied by synchronized legal and economic support measures to ensure a balance between the interests of the state, businesses, and the people. State regulation and close coordination between management agencies will play an essential role in ensuring the sustainable and stable development of the real estate market in this volatile context.