Land Prices Skyrocket, Driving Up Housing Costs
The Ho Chi Minh City Real Estate Association (HoREA) has submitted further recommendations to the National Assembly regarding the draft Resolution on mechanisms and policies to address challenges in implementing the Land Law.
In their submission, HoREA Chairman Le Hoang Chau highlighted that some localities are calculating land use fees and land rent by multiplying the land price table with a land price adjustment coefficient. This method significantly increases financial obligations for businesses compared to the surplus method.
HoREA proposes separate coefficients for real estate projects to curb housing prices. Illustrative image.
Analysis of examples shows a significant disparity between the two methods, sometimes by several times. For instance, a 1-hectare plot on Nguyen Xien Street (Thu Duc City) has a land price of 56.6 million VND/m², with an adjustment coefficient of 1.4, resulting in a calculated land price of 80 million VND/m².
However, using the surplus method for a high-rise apartment project (based on project revenue minus construction, management, loan interest, and profit), the surplus value is only about 35 million VND/m². This is 2.28 times lower than the 80 million VND/m² calculated above.
HoREA calculates that if businesses pay land use fees based on the adjusted land price, they would need to raise selling prices above 100 million VND/m² to avoid losses.
Another case on Dang Cong Binh Street (former Hoc Mon District) shows an even larger disparity. The land price is 18.5 million VND/m², with an adjustment coefficient of 2, resulting in a price of about 37 million VND/m².
However, the surplus method yields only about 9 million VND/m², six times lower than the 37 million VND/m². According to HoREA, to avoid losses, businesses would need to raise apartment prices above 70 million VND/m².
The association also cited the Ho Chi Minh City Department of Agriculture and Environment, which stated that determining land prices by multiplying the land price table with an adjustment coefficient is inappropriate and requires careful study to analyze its economic impacts.
Based on these calculations, HoREA argues that applying the land price formula using the adjustment coefficient (K1) is unsuitable for large-scale real estate projects with high land use coefficients and complex technical requirements.
Pricing land for high-rise real estate projects, urban areas, or commercial housing differs significantly from pricing small plots or individual houses.
HoREA notes that the substantial differences in land use scale, land use coefficients, and investment rates among affordable, mid-range, and luxury housing segments make a uniform adjustment coefficient impractical.
Proposing Separate Coefficients for Real Estate Projects
HoREA suggests dividing the coefficient K into three groups: K1 as the general adjustment coefficient applied from January 1 annually, K2 for compensation when the state recovers land, and K3 as a separate coefficient for calculating land use fees and land rent for real estate projects.
Specifically, coefficient K3 should be determined by the provincial People’s Committee for each project or project type. For example, for the Nguyen Xien Street plot, if K1 is 1.4 but K3 is 0.4, the land price would drop from 80 million to 32 million VND/m².
Additionally, HoREA recommends that the city People’s Committee issue specific decisions on land price adjustment coefficients for groups of similar projects in the same area or for large, unique projects.
During the National Assembly’s plenary discussion on December 1 regarding the draft Resolution, many delegates focused on land pricing—considered the “biggest bottleneck” in implementing the new Land Law.
Delegate Cam Ha Chung (Phu Tho Province) agreed with transitioning from specific land price determination to using land price tables and adjustment coefficients. However, she warned that if the land price table and coefficient K are not based on comprehensive, transparent data, many localities’ new land prices could soar. Applying a high coefficient K would create a financial shock for citizens and businesses…
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