The agency on July 29 held a press conference to provide information about the draft of a decision on adjusting the 2020 land price framework.

Nguyen Toan Thang, Director of the HCM City Department of Natural Resources and the Environment, said the land price framework released by provincial people’s committees in accordance with the old law will be applied until the end of 2025. If necessary, provincial people’s committees have the right to adjust the land price framework to make the price levels suitable to real conditions.

The HCM City People’s Committee found that the 2020 land price framework no longer truly reflected the real situation of the market. Also, it believed that it was necessary to issue land price levels in accordance with new laws on land and real estate.

Therefore, in early July, the committee assigned the department to work with relevant agencies to build a new land price framework.

Thang said his department will no longer set adjustment coefficients, and instead will have only one price framework.

Asked why the HCM City Department of Natural Resources and the Environment opened the framework for public opinion for only nine days, when it takes effect on August 1, Thang said the department is following a simplified procedure approved by the HCM City People’s Committee.

He said the new land price framework is based on data about land transactions in the market. The data have been collected from taxation agencies and land registration offices, and the draft agency will have to consult with relevant agencies. 

Regarding the impact on the market, Thang believes the new framework will create more convenience. The compensation to people whose land is taken for projects and resettlement land prices will be determined based on the new price framework. 

Thang believes the new framework will help make real estate transactions more transparent and help the state avoid revenue losses.

Commenting about the new land price frameeotk, analysts said it would have direct impact on the real estate market and lead to housing price increases. Once the land prices set by the local authorities increase, people will have to pay higher land use fees.

Currently, the land use tax that people and organizations have to pay is 0.03 percent of the land prices shown in the framework released by local authorities. In the future, as land prices shown in the framework are higher, the amount of tax that land users will have to pay will be higher.

Land price frameworks set by local authorities are used in many situations. They are referred to when calculating land use fees and fines on administrative violations related to land; when calculating compensation that involved parties have to pay to the state when they cause losses in land use and management; and when calculating land use fees when selling state-owned houses to tenants. 

Le Ba Chi Nhan, a respected economist, said he supports the HCM City authorities’ decision on adjusting the land price framework, because it will bring significant benefits. The state can increase tax collections, the market will become more transparent, and the interests of involved parties in real estate transactions will be harmonized.

Nhan said the first beneficiaries from the land price adjustment will be people who have to give back land to the state to make room for development projects. They will receive more reasonable compensation than previously. 

Asked if the adjustment would make housing prices escalate, Nhan said prices would increase but inconsiderably. Once land prices set by local authorities are closer to market prices, real estate transactions will become more transparent.

Le Hoang Chau, chair of the HCM City Real Estate Association, said the adjustments would immediately impact the real estate market. Housing prices are determined based on many factors, including the cost to fulfill financial duties. The property price increase will reduce total demand for affordable housing, because many customers no longer have the financial capacity to buy a house.

However, the HCM City Department of Natural Resources and the Environment said the land price frame adjustment will not cause real estate market prices to increase. It said the new price framework won’t affect input costs of projects, so it won’t cause the property price to increase.

Anh Phuong