Prof. Dang Hung Vo: Crackdown on Land Subdivision and Plot Sales from August 1, Land Prices Will Increase, Especially in Developing Urban Areas

The new Land Law of 2024, Housing Law of 2023, and Real Estate Business Law of 2023 have officially taken effect from August 1st. Experts believe that the simultaneous enforcement of these three crucial laws pertaining to land will positively impact and contribute to the recovery and development of the entire real estate market.

Among the provisions, the tightening of regulations on land subdivision and plot sales will significantly affect the land market. Commenting on this issue, Professor Dang Hung Vo, former Deputy Minister of Natural Resources and Environment, opined that the supply of land plots will decrease in the upcoming period. Land plots that have already been formed will increase in price, especially in developing urban areas.

“However, we still cannot be certain about how the land plot segment will unfold in the future,” Mr. Vo questioned.

Moreover, Professor Vo assessed that land subdivision and plot sales are not beneficial for the real estate market as they slow down the urban planning and development process. People may hold on to their land plots and leave them vacant without constructing any buildings, which negatively impacts the urban landscape and wastes land resources.

Economically, land subdivision and plot sales create real estate commodities for people to hoard assets, but they are intended for speculation rather than actual use, with little to no contribution to infrastructure development, emphasized the expert.

One of the factors believed to have strongly influenced the real estate market recently is the early enforcement of the Real Estate Business Law of 2023, which took effect on August 1, 2024, five months ahead of schedule. Notably, it includes a new provision prohibiting land subdivision and lot separation in special, first, second, and third-class cities and in cases of land auction for investment projects to construct housing as stipulated in the Land Law.

The real estate market has been witnessing increased vibrancy, evident from the recent auction sessions that attracted thousands of participants, especially in the outskirts and vicinity of Hanoi and developing urban centers. Additionally, projects by developers with remaining land plots from the previous phase are also benefiting from the current phase, and as a result, land plots within established projects are gaining more traction.

According to Mr. Dinh Minh Tuan, Director of Batdongsan.com.vn in Southern Vietnam, tightening land subdivision and lot separation could curb the rampant land subdivision and reduce the supply entering the market. Consequently, land plot transactions will be impacted, and the market may face challenges initially.

“With the implementation of the new regulation, there may be a surge in land plot listings from investors who intended to subdivide and separate lots for profit. Conversely, land plots with certificates in local areas where subdivision is prohibited will see an increase in prices… This change will not only affect a small group of people, as in second and third-tier cities, a large number of investors participate in land plot investments due to their high liquidity. Therefore, during this transitional period, investors need to carefully consider their capital allocation into land plots,” said Mr. Tuan.

The Vietnam Real Estate Brokers Association (VARS) forecasts that by the end of 2024, the real estate market recovery will show distinct progress. The outcome will continue to vary across segments and regions but with a more balanced trend.

Regarding land plots, this segment will recover and increase in price, once again becoming the “king” of investment channels. However, VARS advises investors to focus on auction land, separated lots in areas with completed infrastructure, and reasonable price levels.