HOUSING MARKET IN THE CONTEXT OF AMENDMENTS TO THE LAW ON LAND, HOUSING AND REAL ESTATE BUSINESS 2025
HOUSING MARKET IN THE CONTEXT OF AMENDMENTS TO THE LAW ON LAND, HOUSING AND REAL ESTATE BUSINESS
Dr. Le Thi Thuy Ha
Banking Academy
Abstract: In recent times, the housing market, particularly housing for low-income individuals, has been a focus of the Government, which has facilitated its development. However, under the old legal framework, there were numerous shortcomings in developing these conditions. For instance, many projects were delayed or neglected, making it difficult for homebuyers to access housing.
Those in need often did not meet the requirements to purchase homes, while many apartments were bought for speculation. Additionally, many housing developers exploited legal loopholes for capital misuse and improper business practices.
As of August 2024, three laws—namely, the 2024 Law on Land, the 2024 Law on Housing, and the 2024 Law on Real Estate Business—were amended and approved to address these bottlenecks. The author’s study below analyzes, compares, and evaluates the changes in these three laws to understand the prospects of the housing market from a sustainable development perspective in the near future.
Keywords: Real Estate, Projects, Housing, Developers, Real Estate Law, Legal Framework.
Introduction
For many years, the housing demand of the population has significantly increased, especially in major cities and industrial areas. However, housing and real estate prices have been constantly skyrocketing, making it challenging for those in need to fulfill their desires to purchase properties.
Additionally, the procedures are complex and problematic. Housing developers also face numerous difficulties, with many projects being abandoned. The 2024 Law on Land, the 2024 Law on Housing, and the 2024 Law on Real Estate Business have been implemented to address legal bottlenecks, particularly regarding procedures and project investment processes.
These amendments aim to enhance the supply of housing and land, increase market competitiveness, and resolve overlapping, inconsistent issues that have previously hindered business and investment activities.
Clear procedures and shortened timeframes may allow for product prices to be adjusted to reasonable levels. With abundant supply, housing developers must also reconsider their prices to match the income levels of homebuyers.
The completion of the government’s amendments to the legal framework for the real estate market, including these new laws, will help developers secure necessary legal approvals for developing and commercializing new projects. These laws will guide developers to finance their projects cautiously and improve the supply of new homes to meet market demands.
Research Overview
The three laws that were recently supplemented, amended, and implemented from August 1, 2024, have been in effect for just over a month. Consequently, research on the impact of these laws on the real estate market in general, and the housing market in particular, is not yet available, as time is needed for the laws to be applied.
However, existing research primarily focuses on the real estate market immediately preceding the implementation of the new laws, preparing for a comparison of the impact of the new laws with the old ones and predicting the effects of the new laws on the market.
The study “Vietnam Housing Real Estate 2023” by the real estate sector research team from Kirin Capital Investment and Development Joint Stock Company and other studies based on survey data from batdongsan.com.vn share a common conclusion.
– Year 2022:
Supply was scarce, mainly consisting of high-end and investment products. The market supply reached approximately 48,500 products, equivalent to 90% of the total products offered in 2021 and only 28% compared to 2018 (180,000 products).
Very few new projects were approved in 2022. Among the few approved projects, there were no housing projects, only service-related projects. The market lacked affordable housing options for the majority of the population. The supply of high-end apartments increased significantly over the years, while the supply of mid-range and affordable apartments decreased by 90% and 79% respectively compared to 2019.
Transaction volume declined, particularly in the fourth quarter of 2022: The total transaction volume for the year decreased by 31% compared to 2021, equaling only 17% of the transaction volume in 2018.
Since the end of May 2022, rising interest rates, economic instability, and various credit and corporate bond tightening policies caused widespread market apprehension, delaying all transactions.
In Q4 2022, speculative demand was nearly eradicated, with almost no transactions involving urban villas or townhouses. In the last months of 2022, despite high real demand, transaction volume remained low due to a lack of supply.
Selling prices were adjusted to reflect real value: At the beginning of 2022, easy capital flow into the market, a surge in F0 investors, and scarce supply pushed selling prices up. By the end of 2022, a wave of “cut-loss” emerged in the real estate market due to fiscal policy impacts and macroeconomic factors.
Real estate prices were adjusted to real value, almost returning to the state at the end of 2021, before the land fever. However, the housing segment, particularly condominiums, did not follow the price reduction trend.
Projects that met real housing needs, had full legal status, and good liquidity showed signs of price increase, along with flexible payment programs offering interest support, principal grace periods, and attractive discounts to attract investors.
– Year 2023:
+ Hanoi and Northern Real Estate Market: At the beginning of 2023, interest in condominiums slightly decreased compared to 2022, but prices increased in the mid-range segment.
+ Ho Chi Minh City and Southern Real Estate Market: At the beginning of 2023, the level of interest in condominiums remained steady, but prices were almost flat compared to 2022.
+ Inventory: Focused on the mid-range segment.
+ Land-attached Housing: Abundant new supply in Hanoi from urban area projects.
+ Secondary Market Prices: Compared to Hanoi, Ho Chi Minh City’s condominiums had a slower price growth and lower rental yield (46% and 41% respectively in 2022, 43% and 41% in 2021, 51% and 49% in 2020).
I. Theoretical Basis
- The 2024 Law on Land
The 2024 Law on Land consists of 16 chapters and 260 articles, an increase of 2 chapters compared to the 2013 Law on Land (which includes an additional chapter on land fund development and separates the chapter on land recovery, requisition, compensation, support, and resettlement into 2 chapters).
In total, 180 articles were amended and supplemented, 78 new articles were added, and 30 articles were removed (due to the merging of 13 articles, removal of 13 articles, and separation of 4 articles).
The primary focus of this research is Chapter XI: Land Finance and Land Prices (comprising 10 articles, from Article 153 to Article 162). Here, the law introduces a new market-oriented approach to land valuation and provides detailed guidelines for investors to follow and ensure legal approvals.
– On the Land Price Framework:
The law abolishes the use of the land price framework in land valuation, eliminating the minimum-maximum land price mechanism.
– On the Provincial Land Price Table:
The law revises the Provincial Land Price Table to be updated annually by local authorities and applicable for 11 purposes instead of the previous 6.
– On Land Valuation Methods:
The 2024 Law on Land specifies four land valuation methods and their corresponding applications, as illustrated in the table below.
Table 1. List of Valuation Methods and Their Application Cases
Valuation Method | Description | Application Case |
Comparison | Adjusts the prices of land plots with the same purpose that have been transferred on the market | Applied when there are at least 3 land plots with the same land use purpose and certain similarities |
Surplus | Takes the estimated total development revenue and subtracts the estimated total development costs of the land plot or area | Applied when the total development revenue and total development costs can be estimated |
Income | Takes the average annual net income per unit area of land divided by the average savings deposit interest rate over a 12-month period | Applied when the land plot or non-residential agricultural land does not qualify for the comparison method but can determine income and costs from land use |
Land Price Coefficient | Takes the land price from the land price table and multiplies it by the land price adjustment coefficient | Applied when the State recovers land in the case of multiple adjoining land plots with the same use purpose, as specified in the land price table |
Source: 2024 Law on Land, Vietnam Investor Services
- The 2023 Law on Housing
On June 29, 2024, the National Assembly passed the 2023 Law on Housing, which took effect on August 1, 2024. The new provisions of the 2023 Law on Housing are as follows:
- Mini-apartments will be issued a certificate of homeownership (Article 57).
- There is no longer a regulation on the ownership term of condominiums (Article 58).
- Provisions on the compulsory relocation from condominiums subject to demolition (Article 74).
- Expanded eligibility for purchasing social housing (Article 76).
- Amended and supplemented principles for selling, leasing, and leasing-purchase of social housing (Article 89).
- Development of social housing land funds within commercial housing projects (Article 83).
- Incentives for social housing developers to further promote this type of housing (Article 85).
- Construction of accommodation for workers in industrial zones (Clause 8, Article 2).
In our research, we primarily focus on the following new points:
– On Condominium Promotion:
+ Issuance of homeownership certificates for mini-apartments that meet regulatory standards.
+ Exemption from land use fees for old condominium renovation projects.
+ Priority development of condominiums in special urban areas and first-class urban areas.
– On Encouraging Social Housing:
+ Developers are exempted from the procedures for determining land use fees when implementing social housing projects.
+ In a social housing project, developers enjoy a 10% profit margin for building the social housing area and full profit from the commercial area, which can account for up to 20% of the project’s total area.
+ Elimination of the requirement to lease 20% of the total floor area, as it is practically difficult to lease this total floor area.
– On Curbing Speculation:
+ Additional restrictions on the transfer prices of social housing intended for commercial purposes within five years.
+ Restrictions on land subdivision (land plot projects) in special urban areas and first, second, and third-class urban areas.
- The 2023 Law on Real Estate Business
The new provisions of the 2023 Law on Real Estate Business, effective from August 1, 2024, include:
- Only up to 5% of the future housing sale price can be collected as a deposit (Clause 5, Article 23).
- Reduction in the advance payment amount for leasing future-formed housing (Article 25).
- Project investors and real estate business enterprises must receive payments through banks (Clause 2, Article 48).
- New changes regarding conditions for real estate brokerage business (Article 61).
- Real estate brokers cannot practice independently from August 1, 2024 (Clause 2, Article 61).
- Real estate brokerage commissions and fees must be transferred via bank (Clause 2, Article 48).
- Stricter regulations on land subdivision and sales even in third-class urban areas (Clause 6, Article 31).
In our research, we focus on the following changes:
– Conditions for Project Commercialization:
According to the new law, investors must fulfill financial obligations related to land before commercializing real estate.
– Payment Schedule:
+ Deposit cannot exceed 5% of the sale price in real estate transactions.
+ The first payment installment, including the deposit, cannot exceed 30% of the contract value.
– Project Disclosure Requirements:
+ Expanded disclosure requirements for different types of real estate assets: real estate projects, land use rights in projects, future-formed housing/building structures, and existing housing/building structures.
+ Eighteen (18) mandatory information types replace the previous nine (9) types.
– Bank Guarantees for Project Implementation:
+ Investors must provide a bank guarantee letter to homebuyers within 10 days from the date of signing the house purchase contract.
+ Investors can only receive payments under the contract after the customers have received the relevant bank guarantee letter.
- Research Methods and Data
– Document Review Method: Researching new policies, laws, and previous policies and laws, combined with relevant documents to gain a deeper understanding of the issues.
– Analysis, Comparison, and Evaluation Method: Theoretically analyzing, comparing, contrasting, and evaluating, in conjunction with data from policy research to provide insights and accurate perspectives on the three laws, drawing conclusions on their potential impact in the future.
I. Research Results
- The new Law on Land introduces a market-oriented approach to land valuation and provides detailed guidelines for investors to follow and ensure legal approval
The difficulty in determining land prices applicable for land use tax has been one of the main obstacles causing delays in legal approvals for real estate projects over the past five years, accounting for more than 50% of the legal delays in real estate projects nationwide, and 60-70% of the 156 delayed real estate projects in Ho Chi Minh City.
Compared to the 2013 Law on Land, the 2024 Law on Land provides more market-oriented and detailed guidelines on land valuation. This will help regulatory authorities and investors determine acceptable land prices, expedite the legal approval process for projects, and allow qualified real estate projects to access capital, particularly from banks, which have been negatively impacted by legal delays over the past five years.
Table 2. Key Highlights of Detailed and Market-Oriented Land Valuation Guidelines in the 2024 Law on Land
Content | Before the New Law | Before the New Law | Significance of the New Law |
Land Price Framework | – Regulations on minimum and maximum prices for different types of land in various economic regions. Based on this, provincial authorities issue provincial land price tables. – Issued by authorities every 5 years. | Abolished the use of land price framework in land valuation. | Removed the minimum-maximum land price mechanism, allowing land prices for land use tax to align with market prices during land valuation. |
Provincial Land Price Table | – Updated by local authorities every 5 years – Applicable for 6 purposes of use. | – Updated annually by local authorities. – Applicable for 11 purposes of use. | – Land use tax determinations will be more market-oriented. – The new law provides more detailed guidelines for implementing this mechanism. |
Land Valuation Methods | – Not mentioned in the 2013 Law on Land. – Land valuation methods specified in Decree 44/2014 include 5 methods: (1) Direct comparison, (2) Income, (3) Land price coefficient, (4) Deduction, (5) Surplus. | The 2024 Law on Land specifies four specific land valuation methods and their corresponding applications. | The new law provides additional details on land valuation methods and their applications. |
Source: 2013 Law on Land, 2024 Law on Land, Vietnam Investor Services
- The new 2023 Law on Housing will encourage investors to build more social housing and improve the supply of new housing to meet the country’s growing demand
In recent years, the new housing supply in Vietnam has skewed towards the high-end and speculative segments of the market, while new affordable housing projects for owner-occupiers have been difficult to find and significantly lower than market demand and government plans.
Since the beginning of 2023, the government has demonstrated a strong commitment to developing social housing by increasing project approvals.
This indicates that the enactment of the 2023 Law on Housing will accelerate this development, as the new law introduces several mechanisms to support the development of affordable social housing and imposes restrictions on speculative activities. As a result, we can expect more social housing projects to commence in 2024.
Table 3. Key Highlights of New Provisions Aimed at Reshaping Housing Supply
Content | Before the New Law | Key Changes in the New Law | Significance of the New Law |
Condominium Promotion | – No mention of issuing homeownership certificates for mini-apartments. – No support for renovating outdated condominium buildings. | – Issuance of homeownership certificates for mini-apartments that meet regulatory standards. – Exemption from land use fees for old condominium renovation projects. – Priority development of condominiums in special urban areas and first-class urban areas. | The new law supports the development of affordable condominiums in major cities. |
Encouraging Social Housing | – Although exempt from land use fee payments, developers must complete land use fee determination procedures. – No specific profit incentives for social housing developers. – Developers must allocate 20% of the total floor area in social housing projects for rental purposes. | – Developers are exempt from the procedures for determining land use fees when implementing social housing projects. – In a social housing project, developers enjoy a 10% profit margin for building the social housing area and full profit from the commercial area, which can account for up to 20% of the project’s total area. – Elimination of the requirement to lease 20% of the total floor area, as it is practically difficult to lease this total floor area. | – The new law provides more support for social housing investors regarding legal approval procedures and profits. – The elimination of rental requirements will improve project efficiency. |
Curbing Speculation | – Some restrictions on transferring social housing within 5 years. – Land subdivision restrictions (land plot projects) only apply in special urban areas and first-class urban areas. | – Additional restrictions on transfer prices of social housing intended for commercial purposes within five years. – Land subdivision restrictions (land plot projects) in special urban areas and first, second, and third-class urban areas. | – Ensures that social housing serves genuine needs. – More restrictions on speculative segments in second and third-class cities. |
Source: 2014 and 2023 Laws on Housing, 2014 and 2023 Laws on Real Estate Business, Vietnam Investor Services
Table 4. Selected Social Housing Projects to be Implemented in 2024
Developer | Project Name | Location | Project Scale | Progress |
Nam Long | EhomeS Nam Sai Gon Block C | Binh Chanh, Ho Chi Minh City | 250 units | Under construction, to be sold in 2024 |
Vingroup | Happy Home Cam Ranh | Cam Ranh, Khanh Hoa | 3,600 units | Groundbreaking January 2024 |
Vingroup | Happy Home Star City, Thanh Hoa | Dong Huong, Thanh Hoa | 3,100 units | Groundbreaking in 2024 |
Vingroup | Happy Home Nam Trang | Cat Hai An, Hai Phong | 5,000 units | Groundbreaking January 2024 |
BIC Viet | Rice City To Huu | Nam Nam Tu Liem, Hanoi | 711 units | Groundbreaking in 2024 |
BIC Viet Nam | Rice City Long Bien | Long Bien, Hanoi | 600 units | Groundbreaking in 2024 |
Newland | Tan Phu Hung | Hai Duong | 1,260 units | Groundbreaking in 2024 |
HUD | Social Housing Dong Van | Dong Van, Ha Nam | 564 units | Under construction, to be sold in 2024 |
Source: Company Announcements, Vietnam Investors Service
- The new 2023 Law on Real Estate Business will help limit excessive leverage by developers and protect homebuyers’ rights during project development
When new projects are funded prudently, homebuyers’ confidence will strengthen, leading to increased new transactions and stable cash flow for developers. Under the new law, developers need to be more cautious in project funding and better manage their leverage and cash flow. These improvements will gradually support the sustainable growth of the entire real estate market.
The 2023 Law on Real Estate Business requires the government to establish regulatory ratios for debt (loans and bonds) to total equity. Developers with high leverage will need to adjust to the upcoming conditions. Referring to China’s policy, developers with debt-to-equity ratios exceeding 100% will face borrowing restrictions.
The equity requirement during project implementation is set at 20% and 15% of total investment costs for projects with areas under 20 hectares and over 20 hectares, respectively; significantly higher than the previous VND 20 billion equity requirement.
Simultaneous project implementation will increase the burden on investors in accessing and mobilizing sufficient equity to meet new equity financing requirements. Therefore, investors will need a strong capital base to deploy multiple projects simultaneously.
The new law provides mechanisms to protect homebuyers’ rights and prevent risks in transactions with developers, such as incomplete legal status, excessive installment debt collection, construction delays, or delays in obtaining land use rights and housing certificates.
Homebuyers will benefit from new legal requirements applied to developers, such as completing all financial obligations related to land acquisition before commercialization, providing homebuyers with bank guarantee letters, and capping the initial deposit at 5% of the sale price. These developments will help strengthen homebuyer confidence and restore housing demand in the coming years.
Table 5. Key Highlights of Legal Changes to Better Protect Homebuyers
Content | Before the New Law | Key Changes in the New Law | Significance of the New Law |
Conditions for Commercial Projects | No regulation on the timeline for completing financial obligations to the State. | Investors must complete financial obligations related to land before commercializing real estate. | Ensures legal procedures are completed before project commercialization. |
Payment Schedule | No regulations related to deposit amounts. | – Deposit cannot exceed 5% of the sale price in real estate transactions – The first payment installment, including the deposit, cannot exceed 30% of the contract value. | Prevents investors from collecting money without ensuring project construction progress as committed. |
Project Disclosure Requirements | Disclosure of common real estate assets currently being commercialized, with 9 mandatory information types. | Expanded disclosure requirements for different real estate assets: real estate projects, land use rights in projects, future-formed housing/building structures, and existing housing/building structures, with 18 mandatory information types. | Aims to enhance market transparency and help homebuyers avoid problematic projects. |
Bank Guarantees for Project Implementation | No requirement to provide bank guarantee letters to homebuyers. | – Developers must provide bank guarantee letters to homebuyers within 10 days from the date of signing the house purchase contract. – Developers can only receive payments under the contract after customers have received the relevant bank guarantee letter. | Provides greater protection for homebuyers against potential violations by developers. |
Source: 2014 and 2023 Laws on Housing, 2014 and 2023 Laws on Real Estate Business, Vietnam Investor Services
III. Conclusion and Recommendations
In recent times, the real estate market has undergone a purification process, enhancing the internal health and resilience of enterprises. The enactment of the three real estate-related laws—the 2024 Law on Land, the 2023 Law on Housing, and the 2023 Law on Real Estate Business—signals a positive outlook for the market.
Investors are placing their trust and expectations on preparations for a new development cycle. However, for the market to make a breakthrough, more time is needed. The recovery of the housing segment in major urban areas will generate liquidity and drive the market.
Although the three laws will soon take effect and banks have lowered mortgage interest rates, the real estate market still needs time for government policies to “sink in.” Enterprises also need time to recover after restructuring, requiring at least three years from the enactment of the new laws to address issues and complete projects. Therefore, the market will not see significant short-term impacts.
Currently, the main issue for enterprises is the slow appraisal of land use fees in provinces, making it difficult for them to develop and sell projects. It is expected that with the implementation of the 2024 Law on Land, the appraisal of land use fees for projects will be expedited.
Additionally, one of the challenges for real estate businesses during this period is the transition period for the effectiveness of laws and related regulations and guidelines. Each law requires at least two government-issued decrees and related guiding circulars from the Ministry of Natural Resources and Environment, the Ministry of Construction, and the Ministry of Finance.
Particularly, the development and issuance of land price tables in localities, serving as a basis for determining financial obligations for previous and new development projects, is crucial. Thus, the early issuance of detailed regulations and guidelines will help bring the laws into practice, which is what enterprises and the public expect.
The application of digital technology in managing the real estate market and public services for citizens needs to be promoted to enhance transparency, openness, and healthy competition.
Furthermore, there is currently a legal gap in the operation and management of condominiums. This area is fraught with risks, conflicts of interest, and legal disputes that directly affect the legitimate rights and quality of life of condominium residents. Therefore, issuing legal documents to regulate relationships among condominium stakeholders, harmonize interests, and promote democratic spirit is an urgent need.
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