Provincial mergers – Opportunities for the residential real estate market

Vietnam has been accelerating administrative reform and innovation to build a streamlined, effective, and efficient state apparatus that better meets socio-economic development and international integration goals. Merging provincial and municipal administrative units is not a new concept globally. Many countries such as China, Japan, South Korea, Germany, France, and Denmark have successfully implemented similar policies.

In Vietnam, there have been previous cases of mergers such as Ha Tay and Me Linh being merged into Hanoi (2008), or Lai Chau merging with Dien Bien (2004). However, the current context calls for a more systematic and comprehensive approach, requiring thorough preparation and appropriate strategies to ensure long-term economic benefits.

The Vietnamese government is considering merging provinces, potentially reducing the current 63 provinces and cities by about 50%, and eliminating the district-level administrative unit. The mergers are expected to be completed by August 30, 2025, with the new administrative units taking effect on September 1, 2025.

Short-term Impacts and Challenges

In the short term, the market may experience speculation and artificial price hikes due to FOMO (fear of missing out) sentiment. Notably, real estate search interest has surged in certain areas—Nhon Trach District (Dong Nai) up 41%, Thuan An (Binh Duong) up 26%, and Di An City (Binh Duong) up 23%.

In the past, when Ha Tay and Me Linh merged into Hanoi in 2008, many small investors expected prices to rise significantly post-merger. However, only land prices in Ha Dong Town (part of the merged Ha Tay) saw a substantial increase along the Cat Linh – Ha Dong metro line, rising from 12–15 million VND/m² in 2008 to 45–50 million VND/m². Other areas did not experience significant price growth after the initial land fever.

Based on research and observations of China’s provincial merger process, land prices in merging areas often show signs of early increases due to rumors or insiders accessing planning information. Prices then cool off for at least two years and start rising again when infrastructure and amenities begin to take shape.

The transition process will come with challenges such as adapting to new administrative mechanisms, integrating and training personnel, and managing additional costs. These are common issues with large-scale administrative reforms and are expected to be temporary.

Long-term Outlook

District-level administrative units often play a limited role in decision-making and can hinder efficiency if poorly managed. Eliminating these and merging provinces can reduce delays, streamline administration, cut budgetary waste, and enable faster and more coordinated approval of infrastructure projects. It also reduces unhealthy competition between localities.

Provincial mergers help expand geographic areas, which makes it easier to plan transport infrastructure projects (ring roads, metro TOD networks, expressways) and public infrastructure (hospitals, schools). Improved public transport can help disperse population density and increase housing supply in the newly merged areas as amenities and infrastructure improve.

Moreover, the increase in land reserves makes it easier to develop mega-urban projects. With greater land supply and rising demand for affordable housing in merged areas, primary housing prices may decrease. Real estate markets typically exhibit "easy to rise, hard to fall" behavior, with buyers rushing in when prices increase and holding back when prices fall. As a result, primary housing prices are usually higher than secondary prices. While prices in merged areas are expected to gradually rise from a lower base to match central urban levels, the ample supply could drive down overall primary prices.

Additionally, the increased land availability post-merger will enable the government to more easily plan and implement social housing projects, especially as changing socio-economic conditions create more jobs. Reforms will also enable faster project implementation and avoid overlapping regulations.