New land price list could push up housing prices by 15-20%

One of the most important points of the 2024 Land Law is to abolish the old land price framework. Instead, the land price table is updated annually, determining prices close to the market based on the purpose, land use period, input information, other influencing factors... The land price table is used to calculate land use fees, rent, land use tax, income from land use rights transfer, management fees, fines, compensation for violations in the land sector and starting prices for auctions.

In a report on real estate prices sent to the Government Office, the Ministry of Construction said that when applying land prices in 2024, according to calculations, land use costs of real estate projects will increase significantly compared to before.

Because the new land price list is close to the market price, it will increase land-related costs such as site clearance, land recovery compensation, land-related taxes and fees... Meanwhile, costs related to land use fees often account for a large proportion of the total cost of a housing project, ranging from 7-20% for high-rise apartment projects and 25-50% for villa and townhouse projects. This level varies between projects due to the location and favorable conditions of technical infrastructure. Compensation costs for assets on land often account for an insignificant proportion, about 2%, of construction investment costs.

For example, at GP Invest's residential area, the land use fee calculated on the selling price of 1 m2 of apartment after applying the new land price list will increase to 22 million VND out of 36 million VND (accounting for about 60%). Currently, this ratio is only about 42%, equivalent to 15 million VND out of 36 million VND. Similarly, at Dong Tang Long Urban Area (District 9, Ho Chi Minh City), the ratio of land use fee on the selling price of each m2 of apartment is also expected to increase from 27% (2.3 million VND out of 8.8 million VND) to 60-65%.

This proportion also increased at the Chanh My Urban Area Villa project (Binh Duong), from 16.3% to about 50%. The Thanh Lam - Dai Thinh 2 project (Hanoi) also increased land use fees from 15% to 33% of the selling price.

"The land price list will have a chain reaction, triggering a 15-20% increase in real estate and housing prices compared to before," said the Ministry of Construction.

In addition to land-related costs, the cost of a product in a real estate project is also made up of construction investment costs, technical infrastructure, social infrastructure - utilities, loan costs, sales, taxes, etc. Most of these costs are assessed by the Ministry of Construction as "less volatile", and even loan costs tend to decrease according to the general decrease in interest rates. Therefore, these costs are not factors that have changed housing prices in recent times.

The Ministry of Construction requested the Ministry of Natural Resources and Environment to monitor the issuance of new land price lists by localities and find solutions to limit the negative impact of land price lists on housing prices and market supply and demand.

The Ministry also requested real estate businesses to reduce product prices by reviewing and cutting costs, applying modern technology in construction, and at the same time promoting investment in social housing projects, renovating old apartments... suitable for the majority of people.

Recently, localities have continuously issued new land price lists or expected price lists, with higher adjustments than before. For example, the new land price list in Ba Ria-Vung Tau province increased by 20-30% compared to the old one, with the lowest price being 513,000 VND and the highest being 78 million VND per square meter. Or in Hai Duong, the land price according to the new price list is also 2.5 times higher than the old price list.