Land prices have been rocketing in HCM City’s outskirts since the end of 2017 due to high demand and lots of objective factors such as strong development of infrastructure, alternative investment and brokers’ rumor. The land fever on the market in Ho Chi Minh City is considered to leave big and worrying consequences. However, several factors show that the land price surge has been cooling down from 2018.
A representative of a real estate exchange company in District 9 said the price of land lots had been rising steadily by 10 to 15% since Tết 2017 (Lunar New Year), while some plots in the outskirts of HCM City had increased by 30% and offered lots are usually bought very quickly.
For example, one woman said that a 56-sq metre wide piece of land lot that she bought in the morning and put up for sale was immediately bought by someone else in the afternoon, netting her VNĐ700 million (US$30,730).
In another case, one man in Bình Tân District (Western area) said, he just bought a 120 sq metre wide land lot on Tên Lửa Street for VNĐ5.5 billion. Now someone is willing to pay VNĐ9.5 billion for it. 1
Main reasons causing land fever
A financial expert said that investing in land lots is more profitable and affordable compared to property. Besides, there is only a limited amount of empty land, but demand is always rising, so prices will increase accordingly.
Moreover, the recent strong development of infrastructure with a dozen of small and large completed traffic projects has also contribute to the increase of the land value, especially in Thu Duc and Districts 2, 9 in the Eastern area.
In addition, one cause of the land price spike is the deadly fire at the Carina apartment complex in District 8 on March, 2018. More buyers are looking to invest in land and houses instead of apartments.
Trần Vĩnh Tuyến, vice chairman of the People’s Committee warned that land brokers and speculators were giving false information in order to raise prices for making profit and that very few people know the real value of land. 2
Notably, there are some broker’s possible tricks. Some lots of land have been taken back by city authorities for development but their former landlords have still put these lots up for sale using scanned copies of land use right certificates, he said. 3
Phạm Lâm, general director of property consultant DKRA Việt Nam, said the land fever would lead to a real estate bubble unless it is controlled in a timely manner.
The government’s efforts to reduce the land fever
According to the recently amended regulation for allowing large plots of land to be divided into smaller plots, making the procedures much stricter, land buyers of large plots now have to build new roads before they divide the land in new residential areas.
To slow down speculation, district authorities also must draw up detailed planning (1/500 scale) for new residential areas where land plots are separated for sale.
Furthermore, plans for land separation in new residential areas where new roads will be built along with surrounding infrastructure must be approved by the Department of Planning and Architecture. 4
For the long-term support, a national land database will be completed in 2020 and information on land from the smallest administrative unit to the central level.5
The fever has been cooling down
In the end of May, 2018, sales of land plots have decreased significantly in HCM City. Lê Hoàng Châu, chairman of the HCM City Real Estate Association, said that according to property brokers in hottest areas (Thu Duc and District 9), sales volume had dropped by around 40% compared to the peak period last month. The land liquidity there has fallen by 60% compared to the previous months.
According to a property company which specializes in land plots, the number of successful transactions in these areas has plummeted by 70% compared with the first five months of the year.
Châu attributed the situation to the limited supply of new land plots available for sale. Thus, investors have few choices, while the prices in the secondary market are too high.
Đoàn Thiên Việt, general director of Đại Thắng Real Estate Ltd Co, said that the Government decision that has made it more difficult to divide land for sale has also contributed to the decline in land sales. Generally, investors have become cautious in buying big land plots to divide land for sale to secondary buyers. 6