Housing prices might surge 15-20% with new official land prices: ministry

The amendments to the Land Law, effective Aug. 1, introduced an annual list of land prices that are based on land use, lease term and other factors, making it more aligned with the market than under the previous fixed framework.

The prices will be used to calculate compensation for land and land-related fees and taxes.

The ministry said in a report to the government that the price list would lead to a noticeable increase in land use fees, which constitute a large chunk of housing projects’ development costs.

The fees currently account for 7-20% of cost for high-rise apartment projects and 25-50% for townhouses and villas, it said.

For instance, the fee for a project by developer GP Invest in Hanoi would rise from VND15 million (US$610) per square meter to VND22 million, or equivalent to 60% of its selling price of VND36 million per square meter, it said.

Similarly, the fee to selling price ratio for the Dong Tang Long urban area project in HCMC’s District 9 is expected to jump from 27% to 60-65%.

The ministry said the Ministry of Natural Resources and Environment should keep a close eye on the implementation of the new prices and take measures to minimize the negative impacts on housing prices and the real estate market.

It also exhorted developers to make housing more affordable for the majority of the population by taking measures such as using technology in construction to reduce costs, developing social housing and renovating old apartments.

Many localities have implemented new prices that are significantly higher than previous ones.

Prices have increased by 20-30% in Ba Ria-Vung Tau Province near HCMC and by 2.5 times in the northern Hai Duong Province.

A draft list for HCMC, published in late July but not made official yet, shows that land prices will jump by five to 10 times and even 15-50 times in some locations.