"Tightening" land speculation, how will the real estate market fluctuate?

From January 1, 2025, the Law on Real Estate Business 2023 will take effect, and the subdivision and sale of land plots will also be "tightened". Accordingly, localities are not allowed to transfer land use rights to individuals to build their own houses in the areas of wards, districts, and cities of special-class, class I, class II, and class III urban areas.

Discussing the above regulation, many experts believe that the real estate market will have big fluctuations in the coming time, but this is also an inevitable trend to help land be used economically and the market develop more professionally.

Land prices tend to decrease

At the Vietnam Real Estate Conference (VRES 2023) with the theme "Shaping the Future" held on December 12 in Hanoi, experts said that the real estate market in the coming time will depend on certain policy shifts.

Accordingly, the new points in the 2023 Law on Real Estate Business and the Law on Housing (amended) will have a strong impact on the real estate market. One of the regulations that many people are most interested in is the "tightening" of land subdivision and sale in wards, districts, and cities of special-class, class I, class II, and class III urban areas.

The above regulation is considered by experts to be stricter than the current regulation, which only prevents the subdivision and sale of land plots in wards of special-class urban areas and centrally-run type I urban areas; areas with high requirements for landscape architecture, the center and around buildings that are architectural highlights in the urban area.

Commenting on the fluctuations of the real estate market when the subdivision and sale of land plots is "tightened", expert Dinh Minh Tuan - Director of Batdongsan.com.vn in the Southern region, said that in the coming time, it is likely that the land price level will be adjusted down, especially for large plots of land. However, in the long term, land prices may continue to increase and transactions will return. The reason is that land prices depend on other factors such as infrastructure development, economic growth, and people's income.

Sharing from a business perspective, Mr. Nguyen Chi Thanh - General Director of Thanh Binh Construction Company said that with the new regulations of the 2023 Real Estate Business Law, the land market will have big fluctuations, but this is also an inevitable trend like other countries in the world.

Specifically, Mr. Thanh cited that in the period 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 (without having to build houses). Thanks to the above regulation, the real estate market has solved the liquidity problem. However, in recent years, many localities have "taken advantage" of current regulations to allow widespread division and sale of plots, with the risk of breaking the planning.

To prevent this situation, the 2023 Real Estate Business Law has issued a regulation that does not allow projects to be divided into plots and sold. With this regulation, investors will have to carry out rough construction for customers and the value of the plot will increase due to having to pay construction fees. According to Mr. Thanh, this will cause great fluctuations in the land market.

“However, the above regulation will also help the real estate market become more professional, businesses will focus on the investment segment of creating houses and constructions on land instead of just investing in infrastructure and 'selling unripe rice.' This new regulation also helps land to be used more economically and effectively; overcoming the situation of land speculation, slow land use, and land abandonment as in the past,” Mr. Thanh acknowledged.

Learn to play by the new “rules of the game” to adapt

Meanwhile, according to Ms. Nguyen Thu Hang - Director of Savills Vietnam Research Department, when the Real Estate Business Law 2023 officially takes effect (from January 1, 2025), a large number of investors will withdraw from the land market.

Reality has shown that real estate investors are very fond of investing in projects that are divided into lots and sold because of the low financial costs. Therefore, once the division into lots and sold lots is “tightened”, real estate products will also be less diverse. In the short term, the market will see a sharp decline in transactions due to buyers’ concerns about legality.

However, "tightening" regulations on land subdivision and sale in large cities is also a sustainable solution for cities to develop more systematically, with value in terms of planning, architecture, aesthetics and better ensure social security issues in the long term.

Mr. Nguyen Manh Ha - Vice President of Vietnam Real Estate Association, also commented that with the regulation of "tightening" the subdivision and sale of land in big cities, the real estate market will have fluctuations in the near future when the supply and land segments are less diverse.

“In the past, no matter how much money you have, you could buy land, but now customers have 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 sellers and buyers to be financially strong to participate,” Mr. Ha shared.

However, the representative of the Vietnam Real Estate Association also noted that the regulation on “tightening” subdivision is a drastic and positive measure to bring healthy development to the real estate market in the coming time. Therefore, real estate businesses need to learn to comply with the new “rules of the game” to adapt and survive.

Adding his opinion, expert Nguyen Quoc Anh - Deputy General Director of Batdongsan.com.vn, said that in order for the real estate market (including land) to develop more healthily and stably, in the coming time, the Government needs to have measures to support investors, especially in procedures such as applying for licenses or borrowing capital, to both ensure sustainable supply and create a safe environment for buyers.