Hanoi tightens subdivision and land division: Will housing prices increase?

According to Decision 61/2024/QD-UBND dated September 27, 2024 of the Hanoi People's Committee, from October 7, Hanoi will apply new regulations on minimum residential land area for land division.

Accordingly, residential land located in wards and towns to be divided into plots of land must have an area of not less than 50m2, a length of over 4m and a width adjacent to a traffic road of 4m or more. For communes in the plains, the minimum area for division into plots is 80m2, for communes in the midlands it is 100m2, and for communes in the mountains it is at least 150m2.

Mr. Nguyen The Diep, member of the Vietnam Real Estate Association, commented that in the long term, this is an inevitable trend that will be applied synchronously in many countries, aiming to improve market transparency. Tightening the subdivision will not only affect small groups of people. Because not only in Hanoi but also in type II and III cities, the number of investors participating in the land market is very large. Because this type of land has good liquidity and high demand, some investors "hoard" goods and resell them at high prices.

However, in addition to the benefits, experts believe that this regulation may reduce the supply of real estate in Hanoi and cause real estate prices to continue to increase. Specifically, with the new regulation, the supply of small, affordable apartments will be limited, thereby contributing to pushing housing prices to be difficult to decrease, or even increase.

Many people are concerned that land prices will increase after the new regulations. (Illustration photo: Chau Anh).

Sharing the same view, Mr. Dinh Minh Tuan, Director of PropertyGuru Vietnam in the Southern region, said that tightening the subdivision and sale of land plots helps ensure the rights of real estate buyers as well as contributes to improving the transparency of the real estate market, thereby creating momentum for sustainable development steps in the future. However, Mr. Tuan also noted that the new regulation above may cause the land market to be affected in both supply and selling price.

Currently, more than 90% of the supply of land for sale is products that individuals divide and separate plots, then set up projects to sell. Therefore, tightening according to new regulations can reduce the situation of rampant subdivision, but the supply to the market will also "shrink", causing the selling price to increase.

According to Mr. Nguyen Van Dinh, Chairman of the Vietnam Real Estate Brokers Association, the demand for land is always very high while the market lacks supply from official projects. Therefore, this regulation to tighten the subdivision and sale of land, although necessary, will cause the land market to have many strong fluctuations in the next year because the supply becomes scarce and prices may be pushed up.

Not only the price increase, Hanoi's new subdivision regulations also force buyers to spend a much larger amount of money to be able to buy a house in Hanoi. For example, with a 30m2 house, priced at 150 million VND/m2, the buyer needs 4.5 billion VND. But if the minimum plot of land is 50m2, with the same price, people need 7.5 billion VND to buy.

Mr. Pham Duc Toan, CEO of EZ Property, also said that plots of land with an area of 30-40m2 are a popular segment for many people because they are affordable and can be built on multiple floors to increase the usable area. Recently, many investors have invested in buying plots of land with an area of 90-120m2 and then subdividing them, dividing them into many small plots to sell, earning large profits. When the minimum area for subdividing plots is increased, they will have to spend a lot of effort and capital to buy a large enough plot of land, which will lead to higher prices for plots of land after being subdivided and divided.

" This regulation may reduce land trading activities in the short term, limit supply in the market, and push up the price of existing subdivided land. In addition, it may also create great pressure for people in need of housing and land, especially in the context of real estate prices in Hanoi that have increased sharply and remained high in recent times ," Mr. Toan predicted.

Chau Anh

Source