In Vietnam, there have been some major new changes in the land price bracket – one of the most important aspects of real estate transactions. In this article, ASL LAW will detail the changes that all citizens own, or plan to own real estate in Vietnam need to concern about.
Resolution 18/NQ-TW in 2022 issued by the Central Executive Committee has stipulated the “Abolishment of the land price bracket, adopt a mechanism and method for determining land prices according to market principles, and prescribe the functions, tasks, and responsibilities of the agency in charge of land price determination. The Central Government shall develop criteria and procedures for inspecting and supervising localities in formulating land price lists. Provincial-level People’s Councils decide, inspect and supervise the implementation of land prices, etc.”
Previously, the land price bracket is the land price stipulated by the Government for each specific region every 5 years. The land price bracket’s main purpose is to prevent the fraud exchange between parties regarding the price of land in transactions.
The bracket is the basis for the People’s Committee of the province for formulating and announcing the land price list in each locality and applying it. Accordingly, localities are not allowed to set land prices outside the framework.
Although the land price bracket has served its purpose, however, in today’s market, the land price bracket is still too low when compared to the price agreed by the seller and buyer in a land transaction.
Therefore, the land price bracket has slowly become more of a formality, not a strong model to look up to.
Therefore, the policy mentioned above has been officially included in the new draft of the Land Law to replace the 2014 Land Law.
Instead of supplement, the change is more like the exclusion of the land price bracket in the old law.
The removal of the land price bracket system
The removal of the land price bracket means that the Vietnamese government will no longer apply the minimum and maximum prices for each type of land.
Instead, when issuing the land price list of each locality, the provincial People’s Committee will base on the principles, methods of land pricing, land prices, and standards, and the fluctuations in actual land prices in the market to build a land price list.
After completing the construction of the land price list, it will be submitted to the Provincial People’s Council before approval.
Therefore, instead of the complete removal of the land price bracket, the land price bracket still exists in some kind but is now closer to the actual price in the market.
The change in the method of determining the land price bracket will greatly improve the current real estate crisis in Vietnam, preventing or delaying the possibility of a potential real estate bubble.
This is because with the land price bracket closer to the real market, there are the following basic, most obvious benefits:
Increase in the Government’s budget revenue
The main reason why buyers and sellers fake the actual land price transaction is to reduce the tax they have to pay to the Government. With the true land price bracket, this will not be the case anymore and the Government will gain more revenue from the transactions.
However, it should also be noted that as transactions don’t have as many favorable conditions as before, the number of transactions will also be lower in the short period. But if compared this minor disadvantage to the future of the real estate industry in Vietnam, it can be temporarily ignored.
Reduce the current skyrocketing price of land
Although the possibility of a real estate bubble is far, many experts see that Vietnam is currently at the peak of land price to allow such a bubble to burst.
Therefore, with the lower transactions mentioned above, the price of land will slowly be reduced as buyers will not be so interested in buying anymore, stabilizing the land price market.
Reclaim benefits for the citizens who are forced to contribute their land to the Government
Vietnam is currently on the path of massive remodeling its landscape, to open road, build bridge, school, etc. – public property endorsed by the Government.
Therefore, if a citizen’s house stands in the way of a Government project, they will be forced to contribute their land to the Government and receive compensation close to the old land price bracket.
As the previous price is low, this will dramatically affect the citizen’s rights.
The low compensation for the citizens has led to more and more disputes and lawsuits. In some case, if the citizen was a war hero, or their ancestor receives many honorable medals for protecting the country, the Government can’t force them to relocate. This has created many situations in which house grows in the middle of a busy intersection.
Consequently, the new price bracket with a more suitable price to the market will protect the citizen’s benefits.
ASL LAW is the top tier Real Estate law firm in Vietnam. If you need any advice, please contact us for further information or collaboration.