Savills: Vietnam should abolish land price frameworks.

Recently, when seeking feedback on the draft proposal for land prices in Hanoi, applicable from January 1, 2020 to December 31, 2024, the Hanoi People's Committee proposed an average increase of 30% in land prices.

The Ho Chi Minh City Real Estate Association (HOREA) submitted its comments on the land price framework for the period 2019-2024 to the Ho Chi Minh City People's Committee and the Ministry of Natural Resources and Environment, proposing to maintain the minimum price but increase the maximum price by one-third compared to the current level.

Ms. Tran Thi Khanh Linh, Head of Valuation at Savills Ho Chi Minh City, believes that a land price list for a 5-year period is quite long due to the rapid changes in real estate prices. Therefore, she suggests that there could be smaller adjustment periods, such as every 6 months or 1 year, to update market fluctuations.

According to Ms. Linh, land prices are adjusted by supply and demand and are therefore constantly changing. Therefore, in the long term, a fixed land price framework should not be implemented for a period as long as 5 years. In reality, there has been a significant difference between market land transaction prices and these fixed price frameworks.

"Lawmakers should only clearly define the mechanism and method for determining market value. All financial obligations related to land should be based on market value, and this determination should be entrusted to independent, competent agencies and organizations. Determining land prices according to market value is the optimal mechanism to limit state budget revenue losses and satisfy all relevant land users," Ms. Linh said.

At the same time, according to her, the People's Committees of provinces and cities need to be given more autonomy in issuing land price lists to ensure that they are consistent with prevailing market prices and the realities of each locality. Currently, the constraint of Decree 44/2014 on localities when issuing land prices is that they cannot exceed 30% of the maximum price in the framework, which limits their ability to reflect market changes.

According to experts at Savills, applying the current pricing framework, which does not accurately reflect market value, disadvantages those whose land is expropriated and leads to disagreement. This slows down the compensation and land clearance process, delaying project implementation and ultimately shrinking the supply.

For investors, according to the 2013 Land Law, real estate projects valued at over 30 billion VND are not based on the land price list but must use market valuation to determine financial obligations. Therefore, adjusting the state land price framework does not significantly affect the input costs of real estate projects, and consequently, the prices of real estate products are not significantly affected.