Land price trend down
The Law on Real Estate Business 2023 (amended) effective from January 1, 2025 was passed by the National Assembly on November 28. Accordingly, the Law on Real Estate Business 2023 (amended) has tightened regulations on land subdivision and sale by stipulating that land use rights cannot be transferred to individuals for self-construction of houses in wards, districts, and cities of special-class, class I, class II, and class III urban areas.
This regulation is stricter than the current regulation that only prevents the subdivision and sale of land plots in wards of special-class urban areas and class I urban areas directly under the Central Government; areas with high requirements for landscape architecture, central areas and around works that are architectural highlights in urban areas; frontages of regional-level roads and above and main landscape roads in urban areas. The new regulation issued under the 2023 Law on Real Estate Business is expected to have a strong impact on the land market.
Mr. Nguyen Chi Thanh - General Director of Thanh Binh Construction Company said that in the period of 2010 - 2015, due to the real estate market falling into a liquidity crisis, the Ministry of Construction allowed projects to be divided into plots and sold (not having to build houses). Thanks to this regulation, the market has solved the liquidity problem. However, since then, many localities have "taken advantage" of the regulation, allowing the division and sale of plots of land indiscriminately, with the risk of breaking the planning. Therefore, the Law on Real Estate Business has issued a regulation that does not allow projects to be divided into plots and sold. That is, investors will have to carry out the rough construction for customers. Thus, the value of the land will increase due to having to pay for construction. This will limit land speculation. The land market fluctuates greatly. However, this is also an inevitable trend like other countries in the world.
"The real estate market becomes more professional, businesses will focus on the investment segment of creating houses and constructions on land instead of just investing in infrastructure and "selling green rice". At the same time, it helps land to be used more economically and effectively; overcoming the situation of "land speculation, slow land use, and abandoned land". This policy is also expected to contribute to "screening" investors, forming more professional and capable real estate businesses after businesses with limited financial capacity and technical capacity are eliminated by the market" - Mr. Thanh assessed.
Promote healthy development of real estate market
Tightening regulations on land subdivision and sale in large cities is a sustainable solution to make Vietnamese cities more orderly and beautiful, with values in planning, architecture, aesthetics and better ensuring social security issues in the long term.
This regulation is also one of the most powerful changes of the recently passed Law on Real Estate Business. In particular, for licensed but unfinished real estate projects, investors will have to carefully calculate short-term and long-term solutions in the coming time.
Thus, in just over a year, real estate businesses will have to start applying this regulation. Therefore, the market will have a sharp price reduction as investors push to sell quickly to recover capital, avoiding the situation of stuck products. However, in the context of the current sluggish market, liquidity is not easy. Only businesses with enough financial confidence will retain products to implement the new planning.
Mr. Nguyen Manh Ha - Vice President of Vietnam Real Estate Association said: "In 2025, we will tighten the subdivision and sale of land in big cities. This will have a strong impact on the market. First of all, the supply and demand of land will be less diverse. If in the past, any amount of finance could buy land, now customers have to determine to spend an additional 1 - 3 billion VND to build a house. In the long run, land is no longer an "easy" playground for many people. This market will require both sellers and buyers to be very well-capitalized to participate. The regulation on tightening subdivision is a drastic and positive measure to bring healthy development to the real estate market. Real estate businesses must learn to comply with the new rules of the game to adapt and survive".
Up to now, real estate investors have favored the form of investing in projects that are divided into lots and sold because of the low financial costs. Once the division of lots is tightened, this type of investment will be eliminated, and real estate products will be less diverse. According to Ms. Nguyen Thu Hang - Director of Research Department of Savills Vietnam, when the new Law officially takes effect, a large number of investors will withdraw from the market.
In the short term, the market will see a sharp decline in transactions due to buyers' concerns about legality. The market will certainly have price adjustments. It may take 2-3 years, when supply decreases, for real estate prices to increase. The market will develop more sustainably when real estate products are aimed at people with real needs.
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