The Hanoi People’s Committee on December 20 released a new land price list, which took effect immediately and will be applied until the end of December 31, 2025. The highest new price level is VND695 million per sq m.

According to Nguyen Van Dinh, a legal expert on real estate, the newly declared land price increases, which cause official prices to come closer to market prices, will turn land into a resource for development, because the state can collect more from land taxes, while people can get higher compensation when they have to leave to make room for development projects.

However, higher land prices will put heavier burden on people when they have to pay for land use, and transfer land use right and registration tax.

Under the current regulations, the taxes and fees people have to pay in these cases are calculated based on the official land prices declared by local authorities. So, if land prices increase by five times, the taxes and fees will increase significantly.

The tax on non-agricultural land use is the lowest tax, just 0.03 percent of the land prices shown in the land price list. However, as the official prices have increased by five times, the land tax will become a heavy burden on many people, according to Dinh.

Dao Trung Chinh, director of the Land Resources Planning and Development, commented that the adjusted price levels are closer to market prices. 

Chinh said people need to get familiar with the new pricing mechanism, which aims to eliminate the dual pricing (the real transaction prices and the prices declared by sellers/buyers, which are mostly lower than the real transaction prices to avoid tax).

Regarding the worry that real estate prices would increase because of official land price adjustments, Chinh affirmed that the problem has been anticipated by the government.

In fact, the collections of land use fee and land rentals don’t entirely depend on the land price list.

Previously, the collection rate was 50 percent for the use of land area within the limit and 100 percent for the land area exceeding the limit. But the collection has decreased significantly in accordance with Decree 103. In many cases, people just have to pay 20 percent. Also, current laws allow people to owe land use right fee for five years, which helps ease financial burden on people.

The land and housing prices in Hanoi and HCM City have been increasing steadily over the last year. According to Nguyen Quang Tuyen from Hanoi Law University, the official adjustment of land prices will, to some extent, affect the input costs, thereby leading to real estate price increases. However, it is unreasonable to entirely blame the land price list adjustment for the real estate price hike in the market.

He pointed out that real estate prices have been escalating over the last year, when the new price list had not been released. The true reason behind the real estate price increase is the supply shortage.

Le Hoang Chau, chair of the HCM City Real Estate Association, thinks that housing prices have increased not because of the land price adjustments, but because of the supply-demand imbalance. 

The land cost is just one of the factors that structure real estate prices, while the important factor that determines real estate market prices is supply and demand.

Other experts agreed that in order to curb price increases, it is necessary to improve supply. In other words, developing more housing projects, especially social housing projects, is one of crucial solutions to stabilize the market.

Meanwhile, Tuyen emphasised the need to simplify administrative procedures as a measure to cut real estate prices, because simple procedures will reduce the land access cost.

He warned that some speculators and organizations may exploit the new land price list to manipulate the market and push real estate prices up. Therefore, it is necessary to tighten control over the market to prevent the phenomenon.

“Housing products must serve accommodation demand in the society, not the channel for investors to make profits,” Tuyen said.

He went on to say that speculation makes market demand artificially high, thus putting pressure on the market. When speculation increases and market prices become unreasonably high, state agencies need to conduct an intervention in the market.

Hong Khanh