Tightening land subdivision regulations: The real estate market will alter

The modified Real Estate Business Law, which was enacted on November 28, will go into effect on January 1, 2025, limit ing the transfer of land use rights for individual self-built dwellings or self-subdivided lots in Type I, II, and III special urban districts.

Changing the "game"

Experts are attentively examining the new laws, which are likely to impact the dynamics of the whole real estate market, particularly the land segment in 105 cities and towns across the country (which were previously unaffected by limit s). Buyers' fears about legal risks are projected to dampen demand for land in the medium term.

Many investors have been hunting property parcels with areas ranging from a few hundred square meters in recent years, with the intention of subdividing them for sale to individuals with legitimate requirements. Individuals who subdivide their properties and establish projects for sale are the primary source of land in the market.

Subdivided property is widely available and meets the financial needs of many customers, with a wide range of prices, places, and suppliers. This sort of property is frequently developed in conjunction with infrastructure or routine projects, and it typically has cheaper pricing than completely planned land projects. As a result, both sellers and purchasers prefer subdivided land to standard land developments.

As a result, aberrant land fever outbreaks in the real estate market have arisen, with some plots assuming commercial names similar to genuine enterprises to entice purchasers, raising prices and producing market pandemonium in several regions. Many landowners have reaped enormous benefits from the subdividing and selling plan.

Mr. Le Hoang Chau, Chairman of the Ho Chi Minh City Real Estate Association (HoREA), comments on the tightened regulations on land subdivision, stating that while allowing land subdivision previously eased difficulties in the real estate market during the 2008-2013 period, it also had many drawbacks. For example, rampant land subdivision misuse resulted in land use distortions, interrupted urban development planning, squandered land resources, and produced a real estate speculative crisis.

Mr. Chau notes that "squeezing" land subdivision may temporarily restrict land transactions and raise the cost of subdivided property, but in the long run, it will help the market grow openly and sustainably, preventing speculation and land fever that has been occurring for many years.

Transactions will soon resume

According to Mr. Bach Duong, CEO of Batdongsan.com, there is a consistent desire for real estate ownership among Vietnamese people. Land is the most desired property type in the first half of 2024, according to the Consumer Sentiment Survey (CSS) on real estate psychology and consumption patterns.

Meanwhile, Mr. Nguyen Quoc Anh, Deputy CEO of Batdongsan.com.vn, feels that the market is dependent on certain adjustments and will continue to be so. Buyers and investors are becoming more strict in terms of project quality and legality, depending on data to make decisions.

"As clients grow more educated, property developers and real estate enterprises must depend more on data and market research to provide great products at reasonable rates," Mr. Quoc Anh explains.

Mr. Dinh Minh Tuan, a Southern real estate specialist, forecasts a substantial decrease in land demand in the coming months owing to buyer fears about legal dangers. Land prices will be reduced as well, particularly for bigger parcels. However, selling will be difficult since subdivided land frequently has big expanses, high values, limit ed client variety, and understands how to "push prices."

Nonetheless, land values may grow more in the long run, and transactions may restart. "Real estate prices are affected by a variety of factors, including infrastructure development, economic growth, and people's incomes. Meanwhile, due to its diversity in size, price, and location, land is a sort of investment that every market player may engage in. These lands will continue to increase in economically thriving areas," Mr. Tuan predicts.

Real estate experts also advise that for amateur investors, it is crucial to check the project planning from competent authorities when purchasing land in any area. Every contract between the buyer and the seller must have clearly defined terms. Therefore, buyers need to be vigilant and thoroughly research before making decisions.