Land prices in many provinces have increased sharply, housing prices are expected to increase accordingly.
With the land price list about to be applied, housing prices will increase but it will be very difficult to sell...
"Along with legal problems, the high land prices in the land price list will increase the selling price of houses. This will reduce the total demand with the ability to pay because a part of customers no longer have the financial capacity to buy a house. Therefore, it can lead to a decrease in the number of transactions in the real estate market...", many experts commented.
It is expected that the land price list applied for the period 2020 - 2024 in Hanoi will increase by an average of 15 - 30%; in Binh Duong, it will increase by 45 - 95%; land prices in some areas of Quang Ninh province will increase up to 5 times compared to the old price list...
The market still lacks new supply.
The land price list (established by the provincial People's Committee every 5 years and publicly announced on January 1 of the first year of the period) is determined as the basis for calculating land use fees; calculating land use tax; calculating fees and charges in land management and use; calculating fines for administrative violations in the land sector; calculating compensation to the State for causing damage in land management and use; calculating compensation and support when the State reclaims land...
Therefore, when land prices increase, the input costs of real estate products will naturally increase.
"The increase in land prices in the land price list will directly affect businesses, factories, and industrial parks that are renting land from the State. Because when land prices increase, land rental prices also increase, leading to increased production costs. When land prices increase by 5-10%, businesses can accept it, but an increase of 30-40% is sudden, significantly affecting their production and business activities," said Mr. Nguyen Quoc Hiep, Chairman of GP Invest.
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According to Mr. Hiep, for residential real estate projects, land costs usually account for 10-14% of the cost. When land prices increase by one and a half times, this figure will reach 25%, so the selling price will certainly increase. Not only that, the increase in land costs will also cause all products related to the construction industry such as cement, steel, bricks, etc. to increase in price. This will push up housing costs. At that time, I wonder if consumers will accept it or not?
It is known that land is an important source of revenue for the State budget, but currently, according to regulations, projects using public land must be auctioned and bid. For land in the center of Hanoi and Ho Chi Minh City, even if the land price list increases, it will not reach the market price.
However, there is almost no land left for real estate projects in the city center. Therefore, the number of projects and investors that can make high profits from large land rent differences is very rare.
"I think that the increase in land prices, combined with difficulties in implementing construction investment procedures, will cause a slowdown in investment flows. And next year will still be a quiet year for the real estate market, the market will lack new real estate projects and with the land price list about to be applied, housing prices will increase but will be very difficult to sell," said Mr. Hiep.
Reduce market size
Sharing the same view, Mr. Nguyen Chi Thanh - Vice President of Vietnam Real Estate Brokers Association analyzed that currently, in localities, land planning for agricultural development, urban land, industrial land... is quite clear.
Accordingly, the increase in land prices in the land price list (generally called floor prices) is also a step towards transparency in land prices, which will encourage people in big cities to agree to convert from agricultural land to industrial land, urban land...
However, the floor price increasing much compared to the old price also makes the implementation of real estate projects more difficult, at the same time the cost of infrastructure construction also increases because of high compensation and site clearance, and the cost of investment in production and business all increase.
While credit for real estate is increasingly tightened, increasing land prices will make investors less interested in investing in production activities due to inefficiency. The conversion of land use models and urbanization in big cities will also be affected. Moreover, current housing prices are too high compared to the average income of the people.
With the current situation, the supply of housing projects will continue to decrease in the coming time. New projects that are implemented and qualified to be brought to the market will have high selling prices due to increased input costs, limiting the opportunity to access housing for the majority of urban residents.
The Ho Chi Minh City Real Estate Association also believes that the increase in land prices will lead to an increase in financial obligations of individuals, households and businesses. When carrying out procedures to legalize home ownership and land use rights, if financial obligations increase, it may lead to a number of people not carrying out procedures to issue "red books", transacting real estate by hand, increasing the "underground market". The state will lose tax revenue, be difficult to manage, and easily cause disputes in society.
In the real estate market, land use fees account for approximately 10% of the cost of an apartment; approximately 30% of the cost of a townhouse; approximately 50% of the cost of a villa.
Cost is the basis for investors to decide the selling price of housing products on the market. Therefore, the increase in land prices will inevitably have a direct impact on increasing housing prices, leading to the possibility that middle-income and low-income urban people will have more difficulty in creating housing.
"Currently, a 2-bedroom commercial apartment is affordable at around 2 billion VND. For a couple (with 1 child) with a salary of around 20 million VND/month, they can only save about 5-6 million VND/month (60-70 million VND/year), so the dream of owning a house is even more distant, if they do not receive preferential support for social housing credit.
In addition, the land price is too high, it will push the real estate market price up very high, especially the land price of projects (in the primary market), negatively affecting businesses, other economic sectors and the investment environment, including attracting FDI capital flows," said Mr. Le Hoang Chau, Chairman of the Ho Chi Minh City Real Estate Association.
