Land price increase: More financial pressure for businesses and people

Mr. Pham Duc Toan - General Director of EZ Real Estate Joint Stock Company (EZ Property) analyzed: Previously, the payment of land use fees was calculated according to relatively stable practices. For example, in the Northern Delta provinces, the payment cost for 1 hectare of land was only about 10 billion VND. However, now this number changes every day, leading to a situation where businesses cannot predict the actual cost.

“ There are projects that last for many years. When they first started in 2018-2019, the land price was only about 21-22 million VND/m². But now, after adjustment, the price can be calculated up to 49-50 million VND/m². This difference makes businesses almost exhausted ,” Mr. Toan cited.

In addition, projects that are behind schedule due to procedural or site clearance problems often have their land use fees recalculated, or even hundreds of billions of dong collected. The lack of stability and consistency in pricing further increases financial pressure on businesses.

The skyrocketing land prices will put many businesses under great financial pressure. (Illustration photo: Minh Duc).

Also discussed land price list Regarding the high adjustment, Mr. Le Hoang Chau - Chairman of the Ho Chi Minh City Real Estate Association also cited that a business renting a warehouse with an area of 11,000 m² in District 4 (old) in Ho Chi Minh City had to pay 3.3 billion VND/year in 2022. By 2023, Ho Chi Minh City adjusted the rental coefficient, the fee jumped to 7.7 billion VND. By the beginning of 2025, applying the new land price list according to the percentage, the cost increased to more than 21 billion VND/year, 3 times higher than the previous year and 7 times higher than 2022.

This reality causes fixed costs of businesses to increase significantly, directly affecting cash flow, production and business plans and competitiveness in the market.

According to him, in the past 3 years, Ho Chi Minh City has adjusted land prices 3 times, accordingly, businesses have had to face 3 big changes in land financial obligations in the direction of paying more taxes and fees.

" This puts a lot of financial pressure on businesses. With increased land prices, the city may be able to collect budget revenue in the next five years, but after that, businesses and investors will "run" to other places," said Mr. Chau.

In addition, Mr. Chau said that land price is the input cost of the economy . There are many solutions to reduce housing prices, in which the State must determine a reasonable source of revenue from land.

Sharing the same view, Mr. Nguyen Quoc Hiep - Chairman of the Vietnam Association of Construction Contractors - also frankly said that while the Land Law clearly states the principle of ensuring harmony of interests between the State, land users and investors, in the current method of calculating land prices, the interests of enterprises in general, land-using and leasing enterprises and real estate enterprises in particular have not been taken into account.

" There are cases where, within just one year, land allocation decisions in the same area, on the same plot of land, but 4 months apart, land prices increased by 40%, faster than the rate of inflation ," Mr. Hiep raised the issue.

According to Mr. Hiep, when all businesses are affected by rising land prices, the number of projects will decrease, unable to create sustainable revenue for the locality.

People also bear the burden

According to Lawyer Nguyen Van Dinh, high prices will turn land into a resource for development. The budget will collect more from land, and people whose land is recovered will be compensated more appropriately. However, this will also lead to an increase in the financial burden for people when paying land use fees, income tax from land use rights transfer, registration fees, etc.

Specifically, the increase in land prices also causes people's land use-related costs to increase. For example, the first issuance of certificates, permission to change land use purposes of households and individuals; annual land rent payment; land use tax calculation; registration fees and especially income tax from land use rights transfer... are all based on the land price list.

If the land price list doubles, the land use fees, taxes, fees, charges… that people have to pay will be twice as high, while this is a large group of subjects. The land price list will certainly cause a wide and comprehensive impact.

Therefore, how to price land to have a "neutral" land price list, helping to harmonize interests between subjects is a difficult problem. Lawyer Nguyen Van Dinh believes that adjusting legal documents on taxes, fees, charges... in land use will contribute to overcoming the disadvantages caused by increasing land prices, protecting people, especially vulnerable groups, helping to maintain social stability but still turning land into a development resource.

People are also affected when land prices increase. (Illustration photo: Minh Duc).

Vietnam Real Estate Association (VNREA) also pointed out a reality, land is an important input material for production and business and land price is a direct factor constituting the cost of products through land use fees, land rent, compensation costs for site clearance of localities and businesses, investors as well as people.

Land prices according to the land price list will affect the land access opportunities of businesses, investors, input costs, product prices, and business competitiveness.

VNREA also said that the chain reaction from rising land prices could also cause the real estate market to stagnate, negatively impacting related sectors such as construction, materials, finance, banking, etc., thereby affecting the growth target and macroeconomic stability. If prices are determined reasonably, it will contribute to the growth of GRDP (gross regional product).

According to the association, the sharp increase in land prices will also put great pressure on public investment costs and the progress of infrastructure projects. When land costs increase, the city's key infrastructure projects are at risk of cost overruns, exceeding estimates, causing difficulties in balancing the budget.

At the same time, the prolonged negotiation and compensation process can slow down the implementation progress, affecting the efficiency of public investment and the goal of synchronous infrastructure development that the locality is prioritizing to promote in the coming period.

The increase in land prices according to the land price list will cause financial pressure on people and businesses using land due to the sharp increase in financial obligations (land use rent, land use purpose conversion fee, land-related fees and charges). At the same time, it will also increase the burden on the state budget when implementing compensation, support and resettlement.

The Real Estate Association is also concerned that the real estate market is currently in a fragile recovery process, many businesses have to restructure, and capital flows are limited. Increasing land prices at this time could create a “double burden”, slowing down the market’s recovery.

Therefore, VNREA believes that land price increases need to have a reasonable roadmap, in the context of the fragile recovery of the real estate market. Sudden adjustments can negatively affect related sectors such as construction, materials, finance and banking, thereby affecting the growth target and macroeconomic stability.

Associate Professor Dr. Tran Kim Chung - former Deputy Director of the Central Institute for Economic Management - recommended focusing on collecting land price information accurately and transparently. Specifically, information needs to be collected from various sources such as actual transactions, land auctions, price consulting activities...

This process needs to be done regularly and continuously to update market fluctuations. In addition, there needs to be a strict control mechanism to ensure the honesty of information, especially the declaration of land purchase and sale prices.

“ There needs to be a comprehensive design for land price zoning to build a realistic land price map. Avoid leveling in zoning and subdivisions in land price regulations; It is necessary to build weighted and realistic indexes ,” Associate Professor, Dr. Tran Kim Chung emphasized.

Source: https://baolangson.vn/bang-gia-dat-tang-them-ap-luc-tai-chinh-cho-doanh-nghiep-nguoi-dan-5063601.html