Increasing land prices close to market value - challenges for businesses?

DNHN - In the real estate market, there has been a trend of increasing land prices close to the general market value. This price increase brings challenges for businesses, especially those heavily dependent on real estate.

In recent years, land prices in many areas have increased significantly, particularly in areas near urban centers and rapidly developing regions. This price increase can be explained by rising demand from investors and buyers, coupled with limited land supply.

Businesses heavily dependent on real estate may face several challenges due to rising land prices. The increase in land costs can raise investment expenses for businesses, particularly when purchasing land for new projects. This can affect the profitability and feasibility of projects.

Rising land prices can also pressure the selling prices of businesses' real estate products. If selling prices do not keep pace with land price increases, businesses may struggle to ensure profitability from their real estate projects.

Additionally, rising land prices can increase risks for businesses. When land prices rise suddenly and are unstable, businesses may find it difficult to make appropriate decisions that align with market conditions.

In the context of rising land prices, businesses can adopt several strategies to cope with these challenges. First, businesses can seek land areas with potential for future development, where land prices are still reasonable and have the potential to increase.

Second, businesses can research and apply efficient construction and management methods to reduce investment costs and increase land use efficiency.

Third, businesses need the ability to predict and evaluate the market accurately. This requires businesses to grasp market factors, development trends, and the potential of land areas to make reasonable investment decisions.

Regarding this issue, at a recent seminar titled "Land Law 2024: Legal Foundation for a New Development Phase of Vietnam's Real Estate Market" Mr. Nguyen Quoc Hiep, Chairman of the Vietnam Association of Construction Contractors, expressed significant expectations from businesses regarding the amended Land Law, and he assessed that this law brings many advancements.

The most difficult issue currently is land pricing. Mr. Hiep stated that increasing land prices close to market value brings the greatest benefit to the state due to increased budget revenues, followed by benefits for the people. However, businesses are the most negatively affected group.

Currently, there are two main considerations regarding market value-based land pricing.

First, market value-based pricing requires careful consideration of the method used. Mr. Hiep emphasized that creating a land data map with nationwide prices and using the comparative method is the most accurate approach. However, he also noted that land price information can vary depending on the size and location of the plot, so the application of the comparative method also needs careful consideration.

Second, in market value-based pricing, Mr. Hiep raised a concern from businesses. He pointed out that currently, government agencies often do not reduce land prices but only maintain or increase them. This leads to continuous land price increases, causing land disputes and driving up land prices. He also highlighted the issue of compensation and site clearance, where some residents intentionally delay land handovers to receive higher land prices in the future.

Recognizing these difficulties, Mr. Hiep posed the question of how businesses can operate in the context of continuously rising land prices. He also expressed concerns about the challenges in implementing the regulations of the Land Law 2024, especially regarding land pricing and compensation for site clearance.

Nhan Ha Phan