Land Prices in Many Places Set New Peaks

9:50:17 AM | 2/6/2021

According to experts from Savills Vietnam, recently, the trend of cash flow into land has increased, house prices in many areas which have not appreciated before, have increased to a reasonable threshold, however, there are also many areas whose prices increased beyond the actual value.

Land prices in many localities galloped in the first quarter of 2021. For example, in Hanoi, before the announcement of the approval of the Red River subdivision planning, places around the Red River such as Me Linh, Dong Anh districts, etc. had a stable land price but it increased rapidly in a short time. In some places it doubled against the previous time.

Not only around the center of Hanoi, many other localities in the North also have a fever in land prices. In the face of the crazy land fever in March and April 2021, the Ministry of Construction, the Ministry of Natural Resources and Environment and a series of provinces and cities such as Hanoi, Hai Phong, Thanh Hoa, Quang Ninh, Bac Giang and Can Tho have issued a document requesting localities to strengthen the management of area real estate markets, and strictly handle those who spread rumors and push real estate prices. After the warnings, the fever in many localities has cooled down.

Up to now, land prices in many areas are stable after a hot increase. There are some areas where the virtual increase has decreased to a reasonable level, such as in Bac Giang and Thanh Hoa provinces. However, land prices in many places are still "standing" on the top when the land fever passes. But in fact, only transactions have cooled down, prices in many places are still flat.

A recent report by the Ministry of Construction in May 2021 showed that the price of land plots in residential areas in the second half of the first quarter of 2021, especially after the Lunar New Year holiday, increased hotly in many locations across the country. However, there are very few official transactions recorded in reality. The land price fever occurred for a short time in many localities, but then subsided when the ministries and agencies stepped in.

For example, the land fever in Yen Dung or Luc Nam districts in Bac Giang has caused the land price to increase day by day. The land price reached about VND30 million /m2, but after the fever passed, the land price has turned around and retreated to about VND25-26 million /m2.

In the area of Tang Tien and Quang Chau communes (Viet Yen), the price of land was at the peak of VND3.4 - 3.5 billion /lot of 105 m2 area, but it is down to VND3.2 billion now and in some places, it is only VND1.8 - 2.1 billion /lot.

According to the business circle, from the beginning of the year until now, the price of land in Thanh Hoa has increased by about 50-60% compared to the end of 2020 during the land fever. Currently, land prices in urban and coastal areas in Thanh Hoa fluctuate from VND12 to 15 million/m2, prices in some places are over VND20 million /m2, 2-3 times higher than the market price in the same period last year, and many times higher than the land price prescribed by the state.

After the land fever cooled down, many virtual increases have also fizzled, for example, the prices of some plots in coastal Quang Xuong which increased from 300-500 million dong now return to the old price.

According to Mr. Matthew Powell, Director of Savills Hanoi, after the land fever, the market needs time to rebalance between real supply and demand, a new price base can be established. He expected the new price level would stabilize again, and it would take time for the price level to adjust again. Obviously, in markets where there has been an increase in price transactions, the adjustment to the equilibrium price will take longer.

Ms. Do Thu Hang, Senior Director, Advisory Services at Savills Vietnam, said that over the past time, in the context of the COVID-19 pandemic, many types of real estate have faced difficulties in business operations. However, the market already has a large amount of money coming from securities investment, leading to the fact that land or real estate attached to land attracts considerable attention from investors.

In some areas where real estate has not appreciated before, real estate prices have increased to a reasonable threshold. However, there is also the phenomenon that real estate prices increase beyond the actual value, causing some areas of the price to exceed the real value, becoming a virtual value. The emergence of virtual value leads to risks for investors, while also causing consequences for larger institutions and economic activities.

Ms. Hang said looking at the previous reality, when the land prices exceeded the real value, investors themselves also realized that they need to adjust. They could not afford riding on a high "wave" and taking a lot of risks, not to mention the current cash flow into real estate is also controlled, related to regulations on short-term and long-term capital investment and some other tools for managing real estate business activities.

Source: Vietnam Business Forum