Soaring Land Prices Drive Up Project Costs
Recently, property prices have surged, far exceeding the affordability of the general population. Experts attribute this escalation to certain localities significantly increasing land price lists in accordance with the 2024 Land Law to align with market rates.
This has resulted in severe consequences, such as a sharp rise in financial obligations (land use fees, compensation costs for site clearance) for businesses, thereby inflating project input costs.
Dr. Trần Xuân Lượng, Vice Director of the Vietnam Real Estate Market Research and Evaluation Institute, explains that housing prices are influenced by various factors, including project input costs. Notably, land use fees, compensation, and site clearance expenses account for 30–40% of total project development costs.
The sharp rise in land prices over the past period has become the biggest bottleneck, driving up input costs for real estate projects.
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“As land prices climb, input costs surge, significantly increasing total investment levels. In major urban projects, land costs represent an even higher proportion, putting pressure on final selling prices and pushing housing prices upward,” said Dr. Trần Xuân Lượng.
Dr. Trần Xuân Lượng further notes that higher land prices force real estate companies to invest more in acquiring land, leading to increased capital pressure and financial burdens (borrowing costs, opportunity costs).
Additionally, high land prices make it challenging for developers to introduce products to the market at reasonable prices. In the commercial housing segment, selling prices are often pushed higher, making it difficult for genuine buyers to afford.
Moreover, elevated land prices distort housing development strategies, with many companies focusing on high-end or luxury segments to offset high land costs, rather than catering to the affordable housing market. This imbalance results in a market oversupply of luxury homes and a shortage of affordable housing.
The State Will Actively Determine Land Price Lists
Regarding land pricing, at a recent seminar, Mr. Nguyễn Quốc Hiệp, Chairman of the Vietnam Construction Contractors Association, highlighted that one of the most critical bottlenecks in the current Land Law is the land valuation method.
Under the 2024 Land Law, land prices are determined by market mechanisms. However, as land prices rise uncontrollably, the situation of “land prices chasing housing prices” persists without resolution. Therefore, state intervention is necessary to regulate the market.
The amended Land Law will empower the state to actively determine land price lists.
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Mr. Hiệp emphasizes that land is a critical input for many businesses. When land prices soar, numerous companies are forced to scale down operations or even shut down, leading to localized economic downturns.
According to Mr. Hiệp, revisiting the land valuation method is essential to balance budget revenues, stabilize the real estate market, and foster economic development.
A representative from the Ministry of Agriculture and Environment stated that the current Land Law amendment aims to restore the state’s decisive role in determining land price lists and related financial obligations for different land types, as the state represents the collective ownership of the people.
Land price lists will be formulated using multiple valuation methods to closely align with market prices, while considering socio-economic conditions and state management requirements in each locality. This approach allows for flexible adjustments tailored to specific regions, avoiding a one-size-fits-all approach.
“The 2024 Land Law amendment seeks to restore the state’s decision-making authority, combining market principles with regulatory oversight to prevent secondary markets from dictating primary land prices,” the Ministry representative emphasized.
Đình Phong
– 06:38 27/09/2025
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