Is the increase in real estate prices because the locality 'pushes' land prices up 15 - 20%?
Many localities have issued land price adjustment coefficients applicable in 2021, with an average increase of about 15-20% compared to the land price list of the previous 5-year period...
Illustration photo.
Housing and Urban Development Departmentreal estate market(Ministry of Construction) has just released a report assessing the impact of land prices on real estate and housing prices, emphasizing that real estate prices are still increasing in 2020 and the first two months of 2021, with some areas and projects having prices increase by over 10% compared to the beginning of 2020.
In response to the opinion that the issuance of new land price lists by localities that are higher than before is also the cause of the increase in real estate prices, especially residential real estate, causing more difficulties for real estate businesses as well as housing opportunities for low-income people, the Department of Housing and Real Estate Market Management emphasized that the phenomenon of increasing real estate prices in localities has many different causes.
The reasons given are: When the population increases, the economy develops, industrialization - urbanization but the supply has not been able to meet the demand, leading to a mismatch between supply and demand; due to the shift of investment capital flows to ensure safety when other investment channels encounter difficulties during the epidemic period; ... due to real estate speculators taking advantage of factors such as preparationurban planning, preparing to build infrastructure projects, expand urban areas... causing information disturbance to "inflate prices" for illegal profits...
The increase in market prices of raw materials, fuels, and input costs for real estate projects is also the reason for the increase in real estate product prices.
Apartment selling price in Hanoi market.
For a real estate project, land cost is one of the important input costs that affect the output price of the project. However, the structure and proportion of land cost in real estate cost is very different for each project: on average, in urban areas, land use fee accounts for about 10% of the cost of an apartment; about 20-30% of the cost of a low-rise townhouse; about 50% of the cost of a villa (in suburban and rural areas with very cheap land prices, this ratio is lower; in central urban areas with very high land prices, land use fee is the main cost in the cost).
After the Government issued Decree 96/2019/ND-CP dated December 19, 2019 on land price framework, the People's Committees of provinces/cities have developed and issued Decisions to promulgate local land price lists applicable for the period 2020 - 2024; Localities have also issued Decisions to promulgate land price adjustment coefficients applicable in 2021 for implementation. Accordingly, the land prices issued by localities have an average increase of about 15-20% compared to the land price list of the previous 5-year period.
Thus, in the case where the land cost of a real estate project is based directly on the land price in the issued land price list, the increase in land price by about 15-20% of localities will only increase the cost of residential real estate by about 1.5-5%. However, for real estate projects implemented through land use rights auctions, bidding for projects using land or receiving land use rights transfers, the land cost of the project is affected by the market land price (at that time, the adjustment of the local land price list only has an indirect impact).
On the other hand, the applicationland price frame,The new land price list in localities has not been published for a long time (the earliest is from January 1, 2020); projects completed and having products offered for sale in the market in 2020 are mainly projects implementing and applying land prices according to the previous price frame and land price list. Therefore, the fact that localities issue new land price lists that are higher than before is not the main reason leading to the phenomenon of increasing housing and land prices of projects in localities in 2020 and the past time.
However, the Department of Housing and Real Estate Market Management also emphasized that the increase in land prices will still have an impact on increasing real estate prices in the coming time, especially the housing prices of people in existing areas.