Hanoi: City’s new land price frame to ignite new price hike

VietNamNet Bridge – Hanoi authorities have released the new land price frame for 2008 with the increase of 20% on average over 2007, which is believed to trigger a new land price increase on the market.

Every year, the city’s authorities release a new land price frame, which state agencies would refer to when they calculate the money to pay for compensating for site clearance, or calculate the tax sums in real estate assignments deals.

Analysts said that the higher land price frame announced by the city’s authorities would give the reason to real estate traders to push prices up further.

Currently, the land in the centre of Hanoi, including the areas of Hang Bong, Hang Ngang and Hang Dao streets is trading at VND120-150mil/sq m ($7,500-9,375).

The analysts do not believe that the progressive tax on land, which the Government plans to apply, would help cool the real estate market down. They said that the progressive tax can be used as the tool to ease the fever, but it would not be able to stabilize the market. The short supply is the main reason behind the real estate fever, while the progressive tax is not the right remedy for this.

The analyst said that the main culprit in the skyrocketing real estate price is the real estate investors, who have been pushing the prices up as they wish. At the end of 2006, the investors sold apartments at VND5-6mil/sq m. Now the investors, reasoning the construction material price increases, sell apartments at VND17-18mi/sq m. Meanwhile, constructors said that with such high prices of construction materials, the construction cost is VND5-6mil/sq m at maximum.

According to real estate firms, the only solution to the current problem is to improve the supply. In order to do that, the state should apply the measures that force real estate investors to implement projects and deliver apartments soon. Currently, the implementation of projects has been going very slowly. In Hanoi, a lot of apartment projects have been left idle, though the investors were given land several years ago.

Hanoi authorities, for example, assigned an investor to build four apartment blocs in the Trung Hoa – Nhan Chinh urban area. However, the only thing the investor did was organizing the ground breaking ceremony. The project execution has been halted as the investor is busy seeking financially capable partners. The same situation is occurring with An Khanh urban area.