Brian Jeffrey
On December 20, the Hanoi People’s Committee announced an updated land price list, effective immediately and valid until December 31, 2025. The peak price now stands at VND695 million per square meter.
Legal real estate expert Nguyen Van Dinh noted that these higher land prices will align official rates closer to market values, enabling land to become a more valuable resource for development. This shift means the government can increase revenue from land taxes, and residents could receive better compensation when required to vacate properties for development projects.
Nonetheless, these heightened land prices could impose significant financial strain on residents, particularly concerning land use fees, transfer rights, and registration taxes.
Currently, the taxes and fees owed by individuals are calculated based on local authorities’ officially declared land prices. Thus, a fivefold increase in land prices will result in substantial increases in associated taxes and fees.
Although the tax on non-agricultural land use is relatively low at 0.03% of the declared prices, the sharp rise in official prices may lead to burdensome tax liabilities for many, according to Dinh.
Dao Trung Chinh, Director at the Land Resources Planning and Development, stated that the revised price levels are more in line with actual market prices. He advised that the public should become accustomed to this new pricing system to eliminate discrepancies between actual transaction prices and official valuations that are often underreported to minimize taxes.
Chinh mentioned that concerns about potential spikes in real estate prices due to these adjustments were anticipated by the government.
In reality, revenue from land use fees and rentals is not solely reliant on the land price list. Previously, collection rates were set at 50% for land within limits and 100% beyond them, but these have significantly dropped under Decree 103, with many instances resulting in just a 20% fee. Current regulations also permit individuals to defer land use right payments for up to five years, alleviating some financial pressures.
Over the past year, housing prices in Hanoi and Ho Chi Minh City have consistently risen. Nguyen Quang Tuyen from Hanoi Law University indicated that while the official land price adjustment could impact costs, it would be unjust to attribute the overall rise in real estate prices to this adjustment alone.
Tuyen observed that prices had already begun to escalate prior to the new list’s release, attributing the real estate price surge to a shortage of supply.
Le Hoang Chau, head of the HCM City Real Estate Association, concurred, stating that the increase in housing costs stems from a mismatch between supply and demand rather than the land price adjustments.
Land costs are only one element that shapes real estate prices, with the supply-demand dynamic being the most significant influence.
Experts agree that boosting supply is crucial to mitigate price hikes. Developing more housing projects, especially affordable housing, is seen as a vital step towards stabilizing the market.
Tuyen also stressed the need to streamline administrative procedures to lower real estate prices by reducing costs related to land access.
He cautioned that some speculators might exploit the new land price list to manipulate the market and artificially inflate real estate prices. Therefore, enhanced market oversight is essential to prevent such outcomes.
“Housing must address societal needs for shelter, and not merely serve as a profit-making avenue for investors,” Tuyen stated.
He warned that speculation can create an artificial demand surge, putting extra pressure on the market. When speculation leads to excessively inflated prices, intervention from state agencies becomes necessary.
