Prime Minister Le Minh Hung has offered a straightforward explanation for one of the most pressing questions in Vietnam’s property market: Why are home prices so high? His answer puts land costs at the center of the problem.
Speaking during a National Assembly group discussion on August 19 on proposed amendments to the 2024 Land Law, the 2023 Housing Law and the Law on Real Estate Business, Hung said land prices are a fundamental input for property projects - and when that input becomes expensive, the cost eventually reaches buyers.
“Land prices are an input for every project and for the economy,” the prime minister said.
When land prices are high, developers must absorb those costs. They may also have to borrow money to finance projects, while land allocation and other administrative procedures can take a long time.
“All of those costs accumulate and push up the cost of the final product. That is why home prices are high,” he said.
Hung added that the amount collected by the state for land is ultimately reflected in the selling price, together with financing and other project expenses.
For that reason, he said, bringing housing prices under control requires a coordinated solution rather than addressing individual costs in isolation.
State role in controlling land costs
PM Le Minh Hung.
The government is proposing a significant change to Vietnam’s land-pricing framework as part of amendments to the Land Law.
Under policy directions presented to the National Assembly earlier on August 19, land prices would be determined by the state based on data and scientific methodologies, with requirements for openness and transparency.
Land databases would also be connected with other relevant sectoral databases, while measures would be introduced to prevent price manipulation and the creation of artificial land values.
Hung said state management is necessary to control land-related input costs.
“The state must regulate land prices and play a management role in order to control input costs,” he said.
But changing the pricing mechanism alone would not be enough.
Hung said it must be accompanied by simpler administrative procedures, transparent mechanisms for allocating land to investors and shorter approval processes.
“With such coordinated solutions, we can reduce input costs and control home and land prices,” he said.
The prime minister stressed that all costs should be clearly calculated and addressed through specific provisions in legislation or implementing regulations.
Years of procedures ultimately add to home prices
Administrative delays were another factor Hung singled out.
Land allocation, compensation and other procedures can take years in some projects. During that period, investors continue to incur expenses, including financing costs.
Those costs do not disappear.
“Every time land allocation and procedures drag on for years - even before considering other issues that may arise - all of those investment costs are eventually reflected in prices,” Hung said.
The government therefore wants administrative reform, digital transformation and greater decentralization to become important parts of the revised land framework.
The proposals include completing Vietnam’s national land database, simplifying administrative procedures and strengthening the responsibilities of local authorities while maintaining central government oversight.
Tackling speculation and artificial land prices
The government’s proposals also go beyond the immediate cost of developing housing.
Future reforms are expected to introduce financial mechanisms to encourage land to be put into productive use and discourage speculation or land being left idle.
The proposed land-pricing framework is also intended to prevent manipulation and artificial prices while allowing the state to regulate increases in land value.
The government is considering appropriate policies on land-use fees and land rents for production and business activities, as well as land used for rental housing projects.
It is also looking at tax and land-related incentives for eligible groups and sectors, including low-income people and those owning only one home.
The National Assembly’s Economic and Financial Committee, meanwhile, has called for a clear and workable mechanism governing land price tables, adjustment coefficients and applicable ratios.
It said these mechanisms should be capable of being adjusted upward or downward according to socioeconomic development needs at different stages.
The committee also recommended separating the mechanism used to determine land prices from those governing compensation, assistance and resettlement.
Making land available more quickly
Another part of the proposed reform seeks to simplify Vietnam’s land-use planning system.
The government wants to reduce the number of overlapping plans and move toward a more integrated system, eventually aiming for a single planning framework within an administrative unit.
Hung said Vietnam currently has national master planning, urban and rural planning, sectoral plans and other plans under different authorities.
The aim is to integrate these as much as possible, making implementation easier for local governments.
At the same time, he warned that strict criteria and oversight would be necessary to prevent arbitrary changes to land-use plans or changes in the intended purpose of land.
The government also wants clearer rules governing land allocation, leasing and changes in land-use purposes.
The principle, Hung said, should be openness, transparency and competition, with land going to investors that have sufficient capacity and credible plans to use it efficiently.
Legislation would more clearly define when land-use rights must be auctioned, when projects involving land require competitive bidding and when direct land allocation is permitted.
From compensation to rebuilding people’s lives
Minister of Agriculture and Environment Trinh Viet Hung presents the government’s policy directions for amendments to the 2024 Land Law. Photo: National Assembly
The reforms also propose a change in thinking about what happens when the state recovers land.
Instead of focusing primarily on “compensating for recovered assets,” Hung said the system should move toward “rebuilding people’s lives when the state recovers land.”
The objective is not merely to compensate affected residents but to improve their living conditions.
The government has proposed prioritizing residential land or housing at the same location for people whose residential land is recovered.
At the same time, the National Assembly’s Economic and Financial Committee has urged caution over proposals allowing land to be recovered before compensation and resettlement arrangements are completed.
It said such cases should be carefully defined and limited to circumstances that are genuinely necessary and urgent and serve the public interest, with safeguards for the legitimate rights of land users.
A broader answer to Vietnam’s housing affordability problem
The government’s proposed changes encompass seven policy areas, ranging from land-use planning and allocation to pricing, compensation, digitalization and enforcement.
But Hung’s comments brought those complex reforms back to a problem experienced directly by homebuyers.
His argument is that housing prices are the end result of a chain of costs.
Expensive land raises the starting price of a project. Long administrative procedures add time and expenses. Borrowing adds financing costs. Government land charges and other development costs accumulate along the way.
By the time a home reaches the market, those costs have been built into its price.
The government’s proposed answer is therefore equally broad: control land-related input costs, make pricing more transparent, prevent artificial land values, shorten procedures and reduce the financial burden created by prolonged project development.
Whether those reforms can translate into more affordable homes will ultimately depend on how the new mechanisms are written into law and implemented.
But Hung made the government’s diagnosis clear: to address high home prices, Vietnam must first tackle the costs accumulating long before a home reaches the buyer.
Vietnamnet.vn
Podcast
.svg){kind=icon}
