Land prices are inflated, making the dream of owning a home increasingly distant.

VTV.vn - In the last 5 years alone, Hanoi has led the country in real estate price increases with 112%; Hai Phong increased by 71%, while Da Nang and Ho Chi Minh City increased by nearly 1.5 times.

Land prices are being inflated unreasonably.

Land prices are always a major concern for many people, including investors and those looking to buy land for housing or building houses. However, for many years, land prices have been inflated unreasonably, negatively impacting society, distorting resource allocation, and posing a risk of macroeconomic instability… This is one of the four consequences of pricing land according to market forces.

In the last five years alone, Hanoi has led the country in real estate price increases with 112%; Hai Phong increased by 71%, while Da Nang and Ho Chi Minh City nearly doubled their prices. This abnormal price surge is not driven by genuine demand, but rather by speculation, hoarding, and especially by land valuation based on comparisons with auction deals or "hot" projects in the surrounding area. This creates a vicious cycle of uncontrolled price increases, with subsequent prices always following previous ones.

In Dong Anh commune, Hanoi, real estate agents say that this area is currently the most attractive investment location in the capital... Because two years ago, the price per square meter here was less than 50 million VND, but now, due to a series of luxury housing projects being developed nearby, land prices have increased fourfold. More than 3 km away, even though it's further from the high-end housing projects, land prices are also rising in line with the central area.

For many years, in numerous localities, especially Hanoi, land prices have not reflected their true value but have been driven by organized price manipulation schemes. A typical example is using peak auction prices as a benchmark, then simultaneously raising surrounding prices. While the path forward is unclear, land prices here currently fluctuate around 140 million VND/m2. Remarkably, about two years ago, land prices here were only around 30 million VND/m2. Land prices rise and fall not only due to market forces but are also determined by a local real estate business community.

One of the major reasons for the unreasonable inflation of land prices is the way local authorities determine land price tables and adjustment coefficients. Current land price tables issued by local authorities are often significantly lower than market transaction prices. However, when calculating land use fees, financial obligations, and compensation for land clearance, adjustment coefficients are applied. These coefficients are often based on previously inflated reference transactions.

Mr. Nguyen Chi Thanh, Vice President of the Vietnam Real Estate Brokers Association, stated: "In leading developed countries like the US and Australia, the land title certificate includes information about the selling price, which they use to determine taxes, and this price fluctuates. If Vietnam wants to be recognized as a market economy , we cannot have an unwritten law where prices only go up and never down."

Mr. Nguyen Quoc Hiep, Chairman of the Vietnam Construction Contractors Association, shared: "The land valuation method in the 2024 Land Law uses a consulting unit. This consulting unit is an organization that decides all land prices. I believe this is an inaccurate approach."

Currently, in Hanoi, an apartment price of 100 million VND/m² is considered normal.

The dream of owning a home is fading away.

Currently, in Hanoi, an apartment price of 100 million VND/m² is considered normal. In some places, it even reaches 300 million VND/m². This seemingly exorbitant price is actually real. Compared to 10 years ago, it's 5 to 10 times higher. At that time, the average apartment price in Hanoi was around 20 million VND/m². This year, the price has risen to nearly 80 million VND/m², not including high-end projects. Speculators often exploit the Land Law's market-based land valuation system to inflate land prices, creating an artificial bubble and making the dream of owning a home increasingly distant for many families.

According to experts, land costs often account for up to 40% of the price of a real estate product. This is despite other factors such as land use fees (already paid under the old Land Law), construction materials, and labor costs not increasing significantly. However, speculators often use the Land Law's market-based land valuation method as a justification to inflate land prices, drive up housing prices, and create artificial price surges.

Mr. Nguyen Van Dinh, Chairman of the Vietnam Real Estate Brokers Association, stated: "In Hanoi and Ho Chi Minh City, house and real estate prices have increased sharply. The fundamental reason here is supply and demand. Demand is very high in various forms: demand for housing, investment demand, housing for many sectors, especially housing for workers, civil servants, and production workers, which is in short supply. This shortage leads to chaos in the market."

This year, out of more than 40,000 new apartments launched in the two largest markets, Hanoi and Ho Chi Minh City, over 95% are in the high-end segment, priced from 76-80 million VND/m2. There are no longer mid-range apartments priced at 35-40 million VND/m2 as was the case a few years ago. High land prices will increase the cost of buying, renting, or using land, leading to higher total investment costs for each project, thus reducing potential profits… This is a major factor impacting foreign investors participating in the Vietnamese real estate market.

Michael Piro, CEO of Indochina Capital, commented: "When the market shows signs of strong speculation, with land prices far exceeding their true economic value, we usually slow down a bit, standing back to observe instead of chasing the 'fever'."

Mr. Koen Soenens, Director of Deep C Industrial Park in Hai Phong, commented: "The reality is that within the same project, phase 1 has a different price, while phase 2 of the project has a higher land price based on market value."

4.1 million billion VND is the amount of capital that credit institutions have lent to the real estate sector.

High land prices create inadequacies in resource allocation.

4.1 million billion VND is the amount of capital that credit institutions have lent to the real estate sector. This figure is four times higher than the total public investment capital of the whole country this year and represents a credit growth of nearly 17% compared to the end of last year. However, how effective is this capital flow for the economy, and will high credit growth in real estate cause a repeat of the risks of a real estate bubble and bad debt for the banking system, as has happened many years ago?

Every day, Mr. and Mrs. Lieu come to tend to their family's vegetable gardens. Ironically, the land where they grow vegetables is actually the grounds of multi-billion dollar villas that are currently sitting idle. A huge amount of societal resources is being wasted on abandoned, uninhabited projects.

According to estimates, the real estate sector currently contributes only about 3.5% of GDP directly, but it attracts nearly a quarter of the total capital of the entire economy. This shows that the capital productivity from the real estate sector is very low.

Hundreds of villas once stood empty, with only a handful of families living there. Hundreds of billions of dong are sitting idle in these properties. The more central the location, the larger the city, and the more expensive the land, the more unoccupied the properties become. The dream of getting rich through real estate speculation has now become a burden for many investors and banks, distorting the country's growth potential.

In reality, capital flowing into real estate is circulating cyclically: Banks lend to real estate developers to build houses - Banks also lend to real estate investors to buy houses - Real estate developers use the money received from real estate investors to invest in new projects and build more houses. According to economic experts, to some extent, this contradicts the normal economic principle that credit should flow into productive sectors of the economy.

Mr. Mac Quoc Anh, Vice Chairman of the Hanoi Small and Medium-sized Enterprise Association, commented: "Excessive credit injection into real estate will directly affect manufacturing, trade, and service industries. This is because these are the sectors that create many jobs."

According to estimates, land prices have increased 3.12 times over the past 10 years. This is also why real estate attracts a lot of capital from individual investors, domestic businesses, FDI companies, and even credit institutions…

Mr. Tran Duc Anh - Director of Macroeconomics and Market Strategy at KB Securities Vietnam, stated: "Lending interest rates are usually higher than regular interest rates for production and business activities. More importantly, loans for real estate have collateral."

Dr. Pham Thi Hoang Anh - Deputy Director of the Banking Academy, stated: "Collateral assets mainly come from the real estate market. Therefore, if the real estate market goes through a bubble phase and enters a recession, it will create potential risks, which can be considered risks to the banking and financial system, especially related to the issue of bad debts."

During this National Assembly session, the Government has developed and submitted a series of proposals on mechanisms and policies to remove difficulties and obstacles in the implementation of land laws... This is seen as a positive signal to resolve issues and help create a healthy market for both citizens and businesses. Only when land prices are strictly managed by the State, publicly and transparently, will speculation, manipulation, and price inflation be eradicated, and the interests of citizens and businesses be harmoniously ensured.

Source: https://vtv.vn/gia-dat-bi-thoi-phong-giac-mo-an-cu-xa-dan-100251104210743634.htm