Rising Land Prices Present New Challenges for Vietnam’s Real Estate Sector
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- 20 Jan 2025
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As of early January 2025, approximately 25 provinces in Vietnam have implemented new land price frameworks, effective until the end of 2025. These adjustments are part of the reforms introduced under the Land Law 2024, which aims to enhance transparency and align land prices more closely with actual market values. However, the dramatic increases in land prices in certain localities have raised significant concerns within the real estate sector.
The updated land price frameworks allow provincial authorities to periodically revise land prices, facilitating a gradual transition towards a market-oriented valuation system expected to be fully implemented by 2026. This approach is intended to mitigate sudden price hikes that could disrupt the interests of land users and investors. Despite these efforts, some areas have experienced staggering price increases, with land prices in Ho Chi Minh City rising by up to 38 times, reaching VNĐ687.2 million (US$27,055) per square meter. In Hanoi, prices have increased between two- to six-fold, with the highest recorded at VNĐ695.3 million per square meter.
Nguyễn Quốc Hiệp, Chairman of the Vietnam Association of Construction Contractors (VACC), expressed concerns about how rising land prices could impact Vietnam’s investment environment. He noted that competitive land prices, along with affordable labor and efficient logistics, have traditionally attracted foreign direct investment (FDI). However, with increasing labor costs and now escalating land prices, Vietnam's competitiveness may be at risk, potentially deterring future investments.
Hiệp highlighted shortcomings in the current land valuation process, particularly for businesses involved in leasing or purchasing land for development. He warned that the new pricing could lead to fewer projects being initiated, ultimately affecting local government revenues and stifling economic growth. He called on the Ministry of Natural Resources and Environment to provide clearer guidelines to ensure a fair and balanced approach to land valuation.
The complexity of land price determination has already begun to impact project implementation. Tuta Group, a Bắc Giang-based real estate company, reported challenges due to unclear regulations surrounding phased land allocations, leading to delays and uncertainties in project execution. The Land Law 2024 defines commercial and service land for business and tourism facilities, but high one-time land rental fees for this type of land may discourage investment in tourism projects.
Vũ Lan Anh, Deputy General Director of CEO Group, suggested that to balance interests between the state and investors, commercial and service land prices should be set at 20-40% of residential land prices. Nguyễn Mạnh Khởi, Director of the Legal Department at the Ministry of Construction, acknowledged these concerns and emphasized the importance of clear communication and a well-defined framework to support market-based valuation.
Land valuation has long been a bottleneck in Vietnam’s development projects, often exceeding the 60-day approval deadline and extending to one or two years. Associate Professor Nguyễn Quang Tuyến of Hanoi Law University noted that some projects have been delayed for years due to the protracted valuation process. He warned that if these inefficiencies are not addressed, the growth of the real estate market could slow down, negatively impacting the broader economy.
Experts at a recent workshop on land valuation stressed the importance of balancing market conditions with the broader economic impact. They cautioned against using land price increases solely as a tool for boosting state revenue, as this could lead to speculative behavior and market volatility. Instead, they advocated for a more measured approach that supports sustainable development and long-term stability.
The rising land prices have also sparked concern among local residents, particularly in urban areas where the cost of living is already high. Many fear that increased land prices will translate into higher housing costs, making it more difficult for average citizens to afford homes. This situation could exacerbate existing socio-economic disparities and pose challenges for urban planning and social cohesion.
The government faces a delicate balancing act in implementing these reforms. While aligning land prices with market values is essential for transparency and fairness, the potential negative economic and social consequences cannot be overlooked. Experts suggest that policymakers carefully consider the pace and scope of these changes to ensure they promote economic growth without compromising the stability of the real estate market or the broader economy.
In response to these challenges, the Ministry of Natural Resources and Environment has instructed provincial authorities to improve land price management and prevent land waste. They are urged to follow the Prime Minister’s directive to review and adjust land prices in auction areas before setting starting prices for land use rights. Local authorities must also expedite the process of determining specific land prices for calculating land use and lease fees, especially for land allocated or leased before the Land Law 2024 came into effect.
The rising land prices in Vietnam present both challenges and opportunities for the real estate sector. As the government implements reforms to enhance transparency and align land prices with market values, it is crucial to address the potential negative impacts on investment, project implementation, and affordability for local residents. A balanced approach that considers the interests of all stakeholders will be essential in navigating these changes and ensuring sustainable growth in the real estate market. By fostering a fair and transparent land valuation process, Vietnam can enhance its attractiveness to investors while also safeguarding the needs of its citizens.
