Keeping up with market prices is essential

According to the 2024 Land Law, effective from August 1, 2024, localities are allowed to apply the old land price list until December 31, 2025 and apply the new land price list from January 1, 2026. The new price list will not be controlled by the land price framework and must be built to approach the market price.

Ho Chi Minh City is the first locality to solicit opinions on the draft adjusted land price list. Prices in the adjusted land price list are much higher than the old price list, such as in Thu Duc City, prices increased 10-15 times; in Nha Be, Binh Chanh, Can Gio, and Cu Chi districts, prices increased 10-20 times. In Hoc Mon district alone, there are many roads where land prices are expected to increase 15-30 times.

On this issue, Savills experts said that the land price list in Ho Chi Minh City has not kept up with and is often significantly lower than the actual market value. This long-standing price difference has created a "two-price" system, leading to many serious consequences.

According to Ms. Do Thi Thu Giang, Director of Savills Consulting Services in Ho Chi Minh City, this issue makes the state's land management difficult and complicated. "For example, the difference between the price declared on the notarized contract and the actual transaction price is often used to reduce land transfer tax. Or in other cases, paying annual land rent based on a land price list lower than the market has led to a loss of the state budget," Ms. Giang cited.

Savills experts also said that the development of real estate projects also encountered many difficulties, especially in the land acquisition and site clearance stages. Compensation levels based on land price lists that are not close to market prices have caused delays, dissatisfaction and financial losses for those affected, leading to prolonged disputes and lawsuits over land.

Because of these outstanding issues, Ms. Giang believes that applying a land price list based on market principles is inevitable and necessary. This progressive change will help overcome previous limitations, ensuring transparency and fairness in the system. In particular, a land price list approaching market prices will facilitate the compensation and site clearance process, especially in important infrastructure development projects, by promoting consensus from the people on the level of support and compensation.

Commenting on the proposed land price list, Savills experts also said that there is still a significant difference between the proposed land price and the actual transaction price. For example, on Cao Thang Street (District 3), the market transaction price is about VND525 million/m2, while the proposed land price is only VND330 million/m2. On Tan Thang Street (Tan Phu District), the transaction price is about VND150 million/m2, while the proposed price is VND90 million/m2. In general, the proposed land price list only reaches about 60%, while some other areas reach 70%, compared to the market price, showing that there is still a significant difference.

Issues to consider before applying

Ms. Do Thi Thu Giang said that, based on Article 159 of the 2024 Land Law, the land price list is used for 11 cases. In addition, Article 109 and Article 111 of the 2024 Land Law on Support and Resettlement Arrangement also use land prices according to the land price list. Thus, the proposed land price list of Ho Chi Minh City will directly affect two different groups of subjects, both beneficial and detrimental.

The beneficiary group includes those who receive support from the State when land is recovered and resettlement is arranged (according to Articles 109 and 111 of the 2024 Land Law).

The affected group includes households and individuals who are recognized and have changed their land use purposes. According to the previous Land Law 2014, financial obligations were estimated differently between land within and outside the quota: with land within the quota, it was calculated according to the land price list, and with land outside the quota, it was calculated according to the specific land price.

However, the current Land Law 2024 no longer makes this distinction, but the entire area will apply the price according to the land price list. Thus, with the price according to the proposed land price list being much higher than the current land price list, it will increase the financial obligations on the area within the limit. With the proposed land price list being much higher than the current land price list, it will increase the cost of financial obligations on this area.

The proposed land price list of Ho Chi Minh City, expected to take effect from August 1, 2024, has been postponed for further consideration. Savills experts believe that this postponement is reasonable, because the proposed price list has increased significantly compared to the old price list, and is proposed to be applied in a short period of time. This creates great financial pressure for the affected groups. Therefore, the development and application of the land price list needs to be carefully considered to balance the interests of all parties, especially prioritizing the protection of the rights of the people.

In addition, the methods used to determine land prices are still not uniform and simple. In some high-value areas, the method of constructing land price tables seems to be just a fixed coefficient multiplication for all routes.

For example, in District 1, a multiplier of 5.0 is applied across all locations and routes. As a result, Dong Khoi Street is proposed to cost VND810 million/m2 (compared to the current VND162 million/m2), and Hai Ba Trung Street (from Bach Dang Wharf to Nguyen Thi Minh Khai) is VND484 million/m2 (compared to the current VND96.8 million/m2). Similarly, District 4 has a multiplier of 11.3 and District 5 is 5.58.

"This approach is essentially no different from applying the old price list and multiplying it by coefficient K, so it does not truly reflect the market value of each route as in the spirit of the Land Law," said Ms. Giang.

In conclusion, Ms. Do Thi Thu Giang said that although updating the land price list to reflect market value is an important step forward, the current proposal needs to be further improved. The method needs to be refined and more specific for each area instead of just applying general coefficients. A gradual, transparent transition that ensures the interests of all stakeholders is essential to ensure the long-term success of this new system.