Increasing land price list, will Hanoi house prices increase?

	Amending policies to control public land and housing management
	Experts say addressing social housing bottlenecks a top priority
	Support the development of affordable housing from land capitalization

Hanoi house prices are expected to increase when adjusting the land price list. Source: Internet

Will it impact price level?

The Hanoi People's Committee has recently proposed a 30% increase in the average price of all types of land after collecting comments on the issuance of land prices in the city by January 1, 2020 to 31 December 2024. In particular, the price of urban land is expected to be VND200 million/m2, applied to some areas of HoanKiem district such as Hang Ngang, Hang Dao and Le Thai To streets (the price applied from January 1, 2015 to December 31, 2019 is 162 million VND/m2). The lowest price is isHa Dong district with over 4.5 million/m2.

Hanoi’s Leaders said that the land price list meets practical requirements, reducing the gap with the market; contribute to establishing a synchronous policy mechanism in land management; as well as harmonize the interests of the state, people and businesses.

According to a survey bymarket research companies, house prices in Hanoi in recent months have increased significantly, with an increase of 3-5% in CauGiay District, Dong Da. In four central districts, the price increase is around 2-3%. In contrast, the neighboring districts and districts have larger amplitudes, even some increase by 10% to 30% after only ayear such as Dong Anh, HoaiDuc and Long Bien.

Nguyen Van Dinh, General Secretary of the Vietnam Association of Real Estate Brokers, said that the increase in prices in the land price list will have a strong impact on the real estate market. The first effect will be the price issue.

“Through the survey, for a common apartment under 25 million VND/m2, the price of land accounts for about 2.5 to 3 million VND/m2. If the land price frame increases, input costs increase, it is difficult to say that prices will not increase,” said the expert.

According to Dinh, with housing real estate projects, land costs usually account for 10-15% of the cost. When the land price increases by 30%, the selling price will certainly increase.

“At current prices, the market for affordable housing products is scarce. If the land price continues to be adjusted, the chances of people buying low-price apartments will be much more difficult,”Dinhsaid.

In addition, some also suggest that the high land price will push the real estate market price to a very high level, especially the land price of projects (in the primary market), the impact on businesses, other economic sectors and the investment environment, including attracting FDI inflows.

On the other hand, some also suggest that the increase in land prices, increased land clearance, cost of land acquisition, creation of land funds for real estate projects will increase costs. However, if this increase is divided equally among the entire project, the cost increase will not be significant. The change in the land price bracket is only one of the factors contributing to the real estate price in Hanoi, and if there is an increase, it is actually due to the main psychological factor rather than Hanoi's land price adjustment.

Selective increase?

In order to increase the land price list to avoid bad effects on the market, Nguyen Van Dinh suggested that the area should be zoned to divide the increase appropriately. Accordingly, in areas with limited high-rise construction, housing development such as inner-city districts may increase. Remaining areas to encourage housing development such as Ha Dong or Soc Son should not increase, there are even areas that can calculate reduction to encourage housing development.

Although he thinks that raising the land price is also necessary, creating a larger source of revenue for the budget through the land fund, Dinh is also worried that when the land price is too high, the price of real estate market will be very high, discouraging investors and negatively impacting on the real estate market.

In this regard, Prof. Dang Hung Vo, former Deputy Minister of Natural Resources and Environment, said the 30% increase of Hanoi is still not close to the market. Because according to the Government's estimated land price frame, the highest area is VND 340 million/m2, Hanoi proposes VND 210 million/m2, while in fact, the price of land in Hang Ngang and Hang Dao is 700 - 800 million VND/m2. “Thus, Hanoi’s land price is much lower than the Government's price bracket. Also much lower than field value. That is lower than the real value that we need to aim many times,” Prof. Dang Hung Vo said.

Prof. Dang Hung Vo said that the 30% increase has no impact on the real estate market. Currently, many people are mistakenly saying that when the State land price list is raised, the market price will fall. In fact, if the state price of land decreases, the market price will continue to go up. This will further accelerate speculation. “Reducing the state price list means reducing taxes. When reducing taxes, speculation will be accelerated,” Prof. Vo points out.