Although the new land price framework in HCM City has only recently taken effect, some brokers have taken advantage of the change to increase property prices, according to Thoi bao kinh te Sai Gon (Sai Gon Economic Times) newspaper.

Under the new pricing framework (from January 1 to December 19), the land prices in districts have increased an average 1.5-1.6 times compared to rates in 2014. Some property brokers have increased prices on land lots in suburban districts.

 
 

Nguyen Van Dong, who lives in Thu Duc District, said last week an employee from TP Real Estate Co in District 9 called him many times to offer land lots on La Xuan Oai Street in Truong Thanh Ward in District 9, with prices of VND490-510 million ($23,300-24,300) each.

"The staff urged me to buy before Lunar New Year because the selling price will possibly increase by VND20-50 million ($952-2,380) on each land lot under the newly issued land pricing framework," he said.

There were other cases as well. In districts Thu Duc, 9 and 12, property brokers have increased prices by VND1-3 million ($47.6-142.3) per square metre.

Le Van Luat, who has been a property intermediary in Thanh My Loi Ward, District 2, said land lots had been previously bought by investors, and the price increases were not related to the new pricing framework.

Prices in future

For land lot projects and large-scale apartment buildings in HCM City, investors said they would not increase prices at this time.

For instance, the Dong Tang Long land lot project in District 9 was invested in by Thu Thiem Housing Development JS Co. It is offered at VND6.9-12 million ($328.5-571.4) per square metre.

Similarly, Dai Phuc Group's Van Phuc Riverside City project in Thu Duc District covers an area of 198 ha, and has maintained a stable rate at VND15-16 million ($714.3-761.9) per square metre.

Kim Oanh Real Estate Co recently introduced The Mall City 2 project's 600 land lots covering an area of 125-300sq.m to the market. The land lots in Binh Duong New City invested in by Becamex IJC are selling at the price of VND2.8 million ($133.3) per square metre, which has remained steady.

In Long An, the Five Star International Corporation is offering Five Star Eco City project's Lucky Land land lots for VND6.8 million ($323.8) per square metre.

Do Hoang Duong, the company deputy director, said the selling price of Lucky Land will not go up following the new land pricing framework because the corporation completed compensation and site clearance for over 220ha land many months ago.

Furthermore, the price increase will not be applied to projects offered on sale in the future.

Anh Tuan Investment JS Co said it was ready to offer Lotus City land lot project in District 7 on sale. The project brokers said it would be about VND20 million ($952) per sq.m and the price would not increase during the selling period.

Duong said this year land projects in HCM City and neighbouring provinces could increase by 5-10 per cent, caused by the new land pricing framework and investors' future plans.

Duong said the increase of 5-10 per cent would be acceptable to people because of an improving economic situation and lower interest rates on loans.

Some investors in the apartment segment agreed with Duong that several projects that started this year will increase their selling prices.

Because luxury apartment buildings' land-use fees account for 40-50 per cent of total costs, the apartment price could soar under the new pricing framework.

Nguyen Van Duc, deputy chairman of HCM City Real Estate Association, said the property market would see two problems when applying a new pricing framework.

Firstly, if a business sells a house to a customer but the company has not yet paid the land use fee, then the company will have to pay out of its own pocket to make up for the increased land price.

Secondly, if a business has not yet sold houses to customers and must pay a high land use fee, only businesses with enough money will continue to invest; otherwise they will "give up" because of capital shortage.

According to experts, the newly issued land pricing framework has not had much influence on the market. In future, if the project costs have increased due to the pricing framework, investors should consider increasing selling prices. 

VNS