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An auction of 51 land lots in Lien Mac commune, Me Linh district, Hanoi, on June 28. (Photo: VNA)
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The housing market is expected to receive positive adjustments with the early application of the Land Law, Housing Law, and Real Estate Business Law from August 1.
Market effects include a continued shift to suburban areas, with land plots becoming an attractive segment for buyers. However, there has been a sudden increase in land auction prices in Hanoi, raising concerns about a wave of “artificial prices.”
Resale transactions of successfully bid land lots further push up land prices. Experts advise against investors inflating prices and causing chaos in the real estate market.
The recovery of the land plot segment is evident in the high participation in land auctions. Successful auctions have brought significant budget revenues, with some land lots auctioned at prices several times higher than the starting price.
For example, an auction of 68 land lots in Thanh Oai, Hanoi, attracted nearly 2,000 participants, with winning bids ranging from 63 to 80 million VND per square meter, the highest being 100.5 million VND per square meter.
Compared to the starting price of 8.6-12.5 million VND per square meter, the winning bid was 5-8 times higher. Brokers and investors in Hanoi immediately used this information to compare and increase selling prices. Experts warn that this could lead to “artificial” increases in Hanoi’s real estate prices, which is dangerous.
Meanwhile, data from Batdongsan.com.vn shows that the most common listing price in Thanh Cao commune in the second quarter was only 27 million VND per square meter. In the past five years, the highest listing price in Thanh Cao was 48 million VND per square meter, recorded during the land fever peak in the first quarter of 2022.
The optimistic developments in the land plot market since the beginning of the year indicate a returning confidence in this segment. However, investors need to remain cautious as the state has started to tighten controls and aim to limit land subdivision through new laws.
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(Illustrative image. Source: VNA)
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Nguyen Van Dinh, Chairman of the Vietnam Real Estate Brokers Association, said that in the first half of the year, the land plot segment in Hanoi’s suburban districts heated up. However, land transactions have increased but are not really bustling, with some areas showing signs of “price manipulation.”
When the land plot market is vibrant, land auctions become a new speculation market instead of providing more supply for those in need of housing. Therefore, investors and homebuyers should be cautious.
According to Do Thi Thu Hang, Senior Director of Advisory and Research Services at Savills Hanoi, the housing market in Hanoi is expected to enter a “new cycle” with the early enforcement of the three laws. Many long-standing issues in the market will be resolved, and impacts will occur faster.
For example, the limited supply issue in many localities will be improved. When supply is limited, people have fewer choices, leading to unstable and rising prices. Therefore, addressing the supply issue will positively impact the overall market.
However, although the laws took effect early, it will take time to resolve the supply limitations as projects are awaiting guiding documents, Hang analyzed.
Experts noted that the prices of housing segments are high, significantly affecting investment decisions and market liquidity. With the gradual issuance of guiding documents, prices are expected to stabilize, and people’s interests will be better protected, such as conditions and regulations for selling off-plan products.
Additionally, issues with previously unapproved projects can be resolved, and other matters can be addressed, including land use fee calculations, land leasing, and social housing development.
The early passage of the laws will also support the market early, positively impact buyers’ and investors’ psychology, and boost their confidence in decisions and business plans.
For instance, the Real Estate Business Law stipulates that developers can only collect a deposit of up to 5% of the real estate value and only when the house or construction work has met the conditions for business operations according to the law.
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(Illustrative image. Source: VNA)
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This helps protect buyers from the risk of capital occupation before completing the necessary legal procedures and gives them more time to prepare financially. Simultaneously, this regulation boosts confidence in transactions for the market.
In the future, when the real estate market recovers, land prices will have the opportunity to increase but only moderately. Unlike previous cycles, this new cycle will not see “artificial fever” in land plots or “real estate bubbles,” Hang remarked.
In Hanoi, the limited land fund, projects, and supply in the center will lead to a shift to suburban areas. This trend will continue to affect both apartment and villa segments.
For apartments, demand mainly comes from the middle-income group, with purchasing power for products below 3 billion VND. However, there are few choices in Hanoi within this price range, so many buyers consider projects in suburban areas like Nam Tu Liem, Ha Dong, and Gia Lam, which provide 93% of the supply in this segment.
By the end of this year, the villa and townhouse segment will have 13 projects providing a total of 2,951 units, most of which are in Dong Anh district, accounting for 34% of the future supply. Ha Dong district follows with 19%, and Hoai Duc district with 16%.
Nguyen Van Duc, a real estate investor in Hanoi, said that the land auction results in Thanh Oai, with prices several times higher than the starting price, surprised many people. The positive developments in the land plot market since the beginning of the year have boosted investors’ confidence in this segment.
However, the early enforcement of the real estate-related laws, which are expected to tighten land supply, may have prompted investors to rush to “stockpile” in anticipation of price increases. This also contributes to “artificial” price hikes, Duc noted.
Assessing the trend of moving to suburban areas in Hanoi, experts said that the city is investing in developing belt infrastructure to reduce pressure on the inner city and relocate people to peripheral areas. Well-invested new urban areas in peripheral areas with synchronous and quality utilities have seen increasing transactions, making people more open to moving to these areas.
Nevertheless, experts warned that when the land plot market is vibrant, land auctions could become a new speculation market. Instead of providing more supply for those in need of housing, there may be resale transactions of successfully bid land lots. This could be a “trick” to create a new price level and then forfeit the deposit to profit from price increases in neighboring areas.
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