As of August 1st, 2024, three new laws related to real estate took effect, instilling strong confidence in investors. Among them, the “big players” who previously engaged in distressed asset hunting and land hoarding for subdivision are now eagerly anticipating the new laws, believing that the restriction on subdivision sales in 105 secondary and tertiary urban areas will lead to price increases in the future.
The simultaneous enforcement of provisions in the Land Law, Housing Law, and Real Estate Business Law, effective from August 1st, 2023, is expected to bring about positive changes in the market going forward.
Clause 6, Article 31 of the 2023 Real Estate Business Law restricts the transfer of land use rights to individuals in wards, districts, and cities of special, first, second, and third-tier urban areas. This new law expands the scope of application compared to its predecessor, which only applied to special and first-tier urban areas directly under the central government.
This regulation, effective from August 1st, brings certain benefits and lays the groundwork for the sustainable development of the real estate market, particularly the land subdivision segment, in the long run. Some of these advantages include: enhancing state control over subdivision sales activities, ensuring rational and efficient land use, preventing speculation and land hoarding that leads to waste and abandonment, and maintaining architectural and urban planning aesthetics (requiring construction on land before sale to buyers).
However, this regulation will also contribute to increased pressure on the supply of new subdivided land plots in the restricted areas, potentially driving up land prices in a segment that is already prone to localized overheating.
From late 2022 to the end of 2023, subdivided land plots in the outskirts of Ho Chi Minh City were continuously sold at a loss, with some investors facing financial distress even resorting to fire sales. During this period, groups of “big player” investors quietly emerged to scoop up distressed assets and hoard land. This trend continued into the first quarter of 2024 in the southern market, despite a gradual cooling of distressed prices.
The strategy of these long-term investors to acquire subdivided land in anticipation of the new laws demonstrates their forward-thinking approach. With the new laws in effect, the supply of subdivided land is restricted, giving existing products with land titles a competitive edge. The “big players” who have accumulated inventory are expected to benefit from potential price increases in the market, coupled with the advantageous deals they secured during their distressed asset acquisitions.
The early enforcement of these laws has left many investors in a state of anticipation, expecting positive outcomes. However, when asked if there will be a significant increase in land prices or a sudden surge in demand for subdivided land in the southern region following the implementation of the new laws, industry insiders mostly agree that the market is unlikely to experience a short-term spike in prices or demand due to macroeconomic factors and the ongoing global geopolitical crisis, including warfare, economic instability, and prolonged inflation.
