Land prices in many places have increased sharply due to merger news

At the first quarter real estate market report event organized by Batdongsan website on the morning of April 11, Mr. Dinh Minh Tuan, Director of Batdongsan Southern region, said that in March alone, after the explosion of information about the merger of provinces and cities, land prices and searches nationwide fluctuated strongly, increasing on average from 20-67% compared to the same period.

Specifically, in the Northern region, the selling price of land in Hanoi increased by 42%, Bac Giang (+80%), Hai Duong (+100%), Hung Yen (+75%), Bac Ninh (+52%), Ha Nam (+50%), Nam Dinh and Thai Binh (+44%). In the Central region, the selling price of land in Hoi An (Quang Nam) increased by 100%; Cam Le, Lien Chieu, Dien Ban districts (Da Nang) increased by 80%, 75% and 52% respectively. The remaining districts of Da Nang such as Hoa Vang, Son Tra, Ngu Hanh Son also had land prices increase by 44 - 50%.

In the Southern market, the increase in land prices was recorded at a lower level, fluctuating between 20 - 30%. Dong Nai and Ba Ria - Vung Tau had the strongest price fluctuations, an average increase of 30%, Binh Duong increased by 25%, Can Tho increased by 11%, Ho Chi Minh City increased by 7%.

Along with prices, the number of searches for land in March also increased by an average of 50% compared to the previous February. Hanoi's land searches increased by 52%, Ho Chi Minh City increased by 31%, and the remaining provinces increased by 54 - 140% compared to February. The land segment was also assessed by brokerage firms as having the strongest growth in transactions in the first quarter. More than 44% of brokerage firms said transactions increased by 10% or less and 24% said transactions increased by 10 - 50%.

Similarly, the report of the Association of Real Estate Brokers (Vars) also showed that in March, just a few weeks after the information about the proposed merger of provinces and cities, land prices in some localities were pushed up, in some places up to 20 - 30%. However, in reality, the number of recorded transactions only increased in the provinces and cities predicted to be the merger centers, where the real estate price level was not too high.

According to DKRA Group, in the first quarter, land prices increased locally in some provinces and cities such as Nhon Trach (Dong Nai) increased by 30-50%, Phu My, Chau Duc (Ba Ria - Vung Tau) increased by 20-30% while most of the southern provinces only increased by an average of 6-8%. This local increase was led by information about the merger of provinces and cities.

Mr. Dinh Minh Tuan, Director of the Southern region of Batdongsan, said that the above-mentioned land price increase was recorded in the number of listings, more specifically the expected increase from the seller, not entirely the actual transaction price. The upward trend was stronger in the Northern provinces and remained "modest" in the Southern provinces. With the news of the province merger, investors in the North also showed more interest than other regions across the country.

According to data compiled by Google in February, the Northern region and Hanoi recorded the highest number of searches for the keyword "province merger", the remaining provinces and cities include Vinh Phuc, Ninh Binh, Thai Binh, Bac Ninh, Binh Duong...

Regarding the "hot" increase in land prices, experts say that this increasing trend is unsustainable and has many potential risks.Dr. Nguyen Van Dinh, Chairman of the Vietnam Real Estate Brokers Association, said that the increase in land prices due to planning changes is not new to the Vietnamese real estate market. History shows that whenever information about new planning appears, land prices in the related areas often increase sharply in the short term. The main reason comes from the FOMO (fear of missing out) mentality of investors.

According to Mr. Dinh, the merger of provinces and cities will have a positive impact on the real estate market, possibly helping to reduce some legal procedures for project implementation, helping the market have more supply, especially in the affordable housing segment. People will have more options to buy houses at more reasonable prices.

However, for real estate value to increase sustainably, there must be a foundation, which means there must be synchronous development of transport infrastructure, economy and society. If it only increases based on rumors about infrastructure and planning, it is very easy to risk burying capital and incurring losses.

Agreeing, Mr. Dinh Minh Tuan said that there are 3 factors that determine the sustainable increase in real estate prices in a locality: public investment, local economic foundation and immigration rate. If the increase is based only on the news of merger into a locality or city in a short time, it cannot be ruled out that it is a virtual increase. If investing based on rumors, the risk of encountering risks is very high, especially for investors who are new to the market or using financial leverage.

Recommending investment in the face of virtual land fever due to information about provincial mergers, real estate expert Le Quoc Kien said that we need to be extremely cautious and not follow the crowd mentality. Mergers can easily create a wave of speculation, pushing land prices up according to trends and psychological "games", not based on real demand. If planning is delayed or official information is slow to be announced, the market may "burst the bubble".

According to Mr. Kien, real estate prices depend on future expectations including roads, infrastructure, exploitation capabilities, plus the local economic and employment situation as well as the ability to attract people. All of these create real growth value for a real estate. A potential market still grows well regardless of whether there is a change in the boundary or not and vice versa.

Experts advise investors to be cautious and long-term, and to limit short-term speculation based on price increases if they are not professionals and do not have enough capital.