Real estate "out of sync" with supply and demand due to barriers to land use conversion

Burden from land use conversion costs

Speaking at the first meeting of the Central Steering Committee on housing policy and real estate market, Prime Minister Pham Minh Chinh emphasized: "There are many people who need houses but because the prices are too high, they cannot buy them." This comment clearly reflects the serious shortage of affordable housing, especially in megacities like Ho Chi Minh City.

One of the main reasons is the high cost of converting land use purposes. It is noted that in some suburban wards, many agricultural land areas still cannot be converted to residential land.

Bất động sản — *High land use conversion costs have caused the affordable housing segment to almost disappear in Ho Chi Minh City.*

Ms. Dang Thi Ba (residing in Tang Nhon Phu ward, Ho Chi Minh City) said: "Previously, the fee for changing the purpose was about 3.5 million VND/m2, now it has increased to 55 million VND/m2, a difference of 13-14 times. With this price, even business is not profitable, let alone people who want to build houses to live in."

Ms. Dang Thi Ba expressed concerns about the cost of changing land use purposes.

Land use conversion records have decreased sharply.

In fact, from July 1, 2025, at the People's Committee of Tang Nhon Phu Ward (HCMC), there were only 4 applications for land use purpose change out of a total of 88 applications for land use right certificates. Many other wards are in a similar situation, with scattered applications, a sharp decrease compared to before.

The number of applications is much lower than before because the new land price list has increased, people are waiting for prices to decrease.

Mr. Phan Ngoc Tan - Vice Chairman of People's Committee of Tang Nhon Phu Ward

In Tan Tao Ward (HCMC), Mr. Le Minh Hieu - Vice Chairman of the Ward People's Committee said that since the two-level government came into operation, the locality has only handled 5 cases, of which 3 are transfer cases. Mr. Hieu emphasized: "People expect a more reasonable land use fee, especially for first-time change of purpose cases, so they only pay 30 - 50% of the current tax rate."

The People's Committee of Tan Tao Ward (HCMC) also recorded a decrease in the number of land use purpose conversion records.

Concerns about housing supply imbalance

According to Decree 151/ND-CP effective from July 1, 2025, owners must pay 100% of the land value according to the land price list when changing the purpose. This policy causes the housing market to fall into a state of supply imbalance, especially in the affordable segment.

Private real estate business is almost non-existent because the cost of converting land use is too high. We need to encourage people to build houses to live in and do business, instead of just paying and leaving it there. The reasonable level is 20% within the limit and 30% outside the limit to create momentum for the market.

Real estate expert Tran Khanh Quang

Expectations of relief from new policy

Experts suggest diversifying supply from high-end to affordable to avoid the phenomenon of "virtual" housing price increases.

Experts say that to solve the housing problem, it is necessary to diversify supply sources from high-end to low-end, to avoid "virtually" increasing housing prices. The Ministry of Finance is currently seeking opinions on the draft Resolution on calculating land use fees. Many opinions expect the new proposal to remove difficulties, create conditions for the development of the individual housing market and reduce the monopoly of high-priced housing projects.

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