OVERVIEW OF FACTORS AFFECTING URBAN LAND PRICES

OVERVIEW OF FACTORS AFFECTING URBAN LAND PRICES

OVERVIEW OF FACTORS AFFECTING URBAN LAND PRICES

MSc. Vu Thanh Bao

National Economics University

Abstract:

Land is a vital resource for the economic and social development of all countries worldwide. Land is a special type of “commodity” asset, distinct from other types of assets – “commodities” – due to its natural, economic, social, and legal characteristics (Nguyễn Thị Hải Yến, 2022).

In the real estate market (RES), land use rights, particularly residential land, account for a significant proportion of total real estate commodities. Therefore, determining reasonable and scientific land prices with specific characteristics is of utmost importance. To reasonably and scientifically determine land prices, it is essential to clearly understand the specific characteristics, especially the factors affecting land prices, as an objective requirement for nations and land valuation organizations.

This paper provides an overview of the factors affecting urban land prices – a type of land with high economic value and a common exchange rate in the current market.

I. Theoretical Discussion on Factors Affecting Urban Land Prices

1. Concept of Influencing Factors

In philosophy, the objective world is the aggregation of things, phenomena, and conditions that affect these things, phenomena, and other activities. Things, phenomena, conditions, etc., are called factors, and the mutual influence of these factors is called influencing factors.

Therefore, influencing factors is a term combining the concepts of factors and influence. Here, a factor is one of the conditions combined to create a result; influence, in English, refers to an element or event that can have a positive or negative impact on people, objects, or other activities.

According to the Principle of Universal Connection, one must consider the objective existence of things and phenomena in their interconnected and mutual impact and influence on each other. Consequently, each objective thing or phenomenon has a connection with other things and phenomena. Hence, for any object or phenomenon, other objects and phenomena that have a direct relationship with them can be identified.

There are no arbitrary factors or groups of factors, but there are always factors or groups of factors affecting a particular subject of consideration. This relationship is causal, where the influencing factors are the causes, and the affected subjects are the results of this impact.

In this study, we examine the influence of factors on land prices.

2. Concept of Factors Affecting Urban Land Prices

Factors affecting urban land prices are the specific manifestations of influencing factors in general, but considered in the specific relationship with urban land.

In this context, factors affecting urban land prices are the combination of factors that objectively create urban land prices. It is crucial to understand these factors to form, manage, and use urban land prices effectively in economic and social development.

I. Classification of Factors Affecting Urban Land Prices

1. Group of Factors Related to the Location of the Plot of Land

The location of the plot of land is primarily and usually considered in terms of geographical coordinates. This refers to a point on the map identified by the intersection of two lines of longitude and latitude passing through that point. Depending on each location on Earth, natural and socio-economic conditions differ. Therefore, the location of the plot of land is not only considered in terms of geographical coordinates but also in other criteria.

For urban land, the location of the plot is also considered in terms of living conditions and socio-economic activities, such as whether it is on a main road, street, or in an alley. Even the type of main road or street and proximity to schools or hospitals are considered. All these conditions contribute to the utility value of the plot.

From this perspective, at any given time, each plot of land simultaneously possesses two types of positions: absolute position and relative position. In general terms, both types of positions play an important role in determining the value of urban plots. Plots located in the city center or a specific area have higher values than similar plots in suburban areas (relative position). Plots at intersections or on major roads have higher values than those in other locations (absolute position).

Land has unique characteristics, with each plot having a unique and distinct position that cannot be compared equivalently with other common commodities (Hoàng Văn Cường, 2019). Evaluating the positional advantages of a plot is extremely important, especially in determining land prices. Factors related to the location of the plot can affect land prices and include the following specific factors:

– Terrain of the Area:

Plots located in high, flat areas will have good drainage during the rainy season, be less affected by high tides, and be easier to design and construct buildings on compared to plots in low, uneven areas.

– Type of Road Adjacent to the Plot:

Plots adjacent to major roads will be convenient for commuting, transporting materials during construction, overall convenience and connection with the outside, the overall structure of the transportation network, road conditions and grades, public transportation status, and traffic network density.

Additionally, the use of the plot for business, profitability, and the quick accessibility of firefighting vehicles in the event of fire or explosion incidents are crucial considerations. The increase in income when converting from alley land to main road land leads to changes in the functions of land-related activities and subsequently increases land prices.

– Distance to Economic, Political, and Cultural Centers:

Alonso (1964), Asabere (1982), Ball (1973), and Medonos (2011) have pointed out that distance to the center is a major factor affecting residential land prices. Factors affecting land prices mainly refer to economic positioning, specific to each valuation object within the city.

This includes ranked land, distance to economic, political, and cultural centers, to densely populated centers, and the degree of influence these centers have on other areas of the city or types of land (Trịnh Hữu Liên and Tạ Ngọc Long, 2014).

– Distance to schools, workplaces, markets, supermarkets, medical facilities, parks:

Urban housing, besides being a place to live, requires convenience in traveling to workplaces, schools, markets, supermarkets, medical facilities, and parks. Finding a location close to one’s workplace, children’s schools, markets, supermarkets, medical facilities, and parks is a critical need for every household and urban resident.

– Distance to relatives’ homes:

According to Eastern customs and traditions, the bond within the community and with relatives is strong, with close-knit relationships providing support during difficult times and sharing joy in happy moments. Particularly within family relationships, parents, children, and relatives tend to choose residences close to each other.

– Fluctuations in location factors of the plot:

The fluctuation in the plot’s location over time may occur but is usually very small and almost negligible. However, in terms of natural, socio-economic conditions, the utility value of the plot always changes with an increasing trend.

These changes are largely due to urbanization, as well as industrialization and modernization. The impact of industrialization and modernization can turn land in normal locations into urban land or land adjacent to industrial areas capable of increasing revenue from service activities.

In this context, land prices will increase, and the actual determination of land prices through income assessment demonstrates the fluctuation and impact of these changes on land prices.

2. Group of Economic Factors

– Income and Consumption of People:

This factor reflects the ability to pay when accepting the increase in land prices and vice versa. It indicates the fluctuation in the demand for residential land. When demand increases, prices in general and the demand for urban residential land will rise. Indeed, as income levels increase, after addressing basic needs, people will have new consumption needs, reflected in higher demands for the quality, size of housing, and residential land.

When examining the real estate market based on changes in income levels and consumption levels, the following conclusions can be drawn: (1) the proportion of high-income families living in dedicated housing is relatively high; (2) the proportion of high-income families using newly built houses is relatively high; (3) the proportion of high-income individuals owning their homes is relatively high, while renters have relatively low incomes; (4) the average living area per capita in families is usually proportional to the average income per capita; (5) the proportion of high-income individuals with a demand for multiple real estate properties is high (Trịnh Hữu Liên and Tạ Ngọc Long, 2014).

– Supply and Demand of Real Estate in the Market:

This is an important factor affecting commodity prices in general and urban land prices in particular. Supply and demand interact, creating psychological pressure on buyers and sellers, causing land prices to fluctuate. Supply and demand can balance each other at any specific time. When other regulations remain unchanged at a certain time, any decrease in supply or increase in demand will cause land prices to rise and vice versa, any increase in supply or decrease in demand will cause land prices to fall.

In a broader context, the demand for land and financial capacity for land transactions in cities is higher than in rural areas. Therefore, the supply-demand relationship for residential land between urban and rural areas differs significantly. Moreover, this disparity is also evident between different areas within the same city with varying socio-economic development conditions (Hồ Thị Lam Trà and Nguyễn Văn Quân, 2006).

– Fluctuations in Deposit and Loan Interest Rates:

When bank deposit interest rates rise, individuals with money will deposit it in banks to earn interest. Consequently, the amount of money circulating in the market for land use rights transactions decreases because investors find it more profitable to deposit money in banks rather than transferring land use rights for profit. This, in turn, attracts people with reserve funds to save more, reducing investment in real estate.

Conversely, when deposit interest rates increase, bank loan interest rates also rise, leading businesses and individuals to limit borrowing from banks for investment and real estate transactions. On the other hand, when deposit interest rates decrease, capitalists tend to mobilize funds into land use rights transactions (Trịnh Hữu Liên et al., 2013). Bank interest rates determine land prices in general but do not influence the price disparity between urban and rural land.

Economists have summarized and formulated a method to determine land prices through the correlation between land rent and bank interest rates, specifically as follows:

Land Price = Land Rent / Bank Interest Rate

Real estate in general, and particularly urban land, holds significant value; therefore, banks often finance both the input and output of the real estate market. Simultaneously, real estate serves not only as an input for commercial banks but also as an output for banks as an investment product. Hence, both deposit and loan interest rates are critical factors in determining real estate prices and urban land prices.

– Inflation Rate:

Economic developments significantly impact the international livelihood and influence the international standing of each country. While governments actively pursue economic growth and stability, all civilian materials stabilize through the influence of economic policies.

In practice, governments aim to maintain macroeconomic stability and control inflation. When inflation rises, central banks often increase interest rates to draw money in, reduce the money supply, and lower overall demand to curb inflation (targeted inflation monetary policy).

When interest rates rise, asset prices, such as real estate in general and urban land in particular (capital deficit), will fall due to decreased demand. Therefore, inflation and interest rates have an inverse relationship.

– Business Environment:

This factor is considered in a narrow and specific scope related to the plot of land. For street areas with specific business sectors (banks, computers, pharmaceuticals, etc.) or areas near universities, large hospitals, parks, lakes, etc., exploiting business space in these areas will be quite convenient. Thus, the demand for leasing and transferring land use rights in these areas is more attractive than in others.

This factor creates varying profitability for plots with similar living conditions but linked to business potential, often including land on main streets, roads, alleys, etc. Streets with concentrated business sectors and products usually have high customer attraction, leading to higher incomes and potentially higher prices.

3. Group of Social Factors

Social factors also have a significant impact on real estate values in general and urban land prices in particular. Social factors include population density, the educational level of the residential area; the rate of urbanization in the area; security and order, social welfare issues, local customs and practices; and transparent information about land use, project investors, etc.

– Population Density:

Population density is a criterion considered based on the number of people per unit area, usually measured in persons/km². According to Forster (2006) and Guiling et al. (2009), the scale of residential land, the nearest settlement, and the local population affect land prices.

Indeed, when population density increases, the demand for residential land rises, leading to an increase in land prices (Hồ Thị Lam Trà and Nguyễn Văn Quân, 2006). In areas where population density suddenly increases due to mechanical population growth, real estate prices rise as the supply-demand balance is disrupted (Trịnh Hữu Liên and Tạ Ngọc Long, 2014).

Urban population expansion inevitably leads to increased housing demand. The growing housing demand may result in increased land demand. Since the land supply is limited and changes slowly, increased land demand will lead to rising land prices (Jiang et al., 2013).

Demographic factors play an important role in affecting housing demand, as people with different demographic characteristics will have varying housing demands. Each region has different demographic trends, leading to future differences in population changes in each region (Dennis J. McKenzie et al., 2011).

– Educational Level of the Area:

Areas with high educational levels (near schools, military zones, police stations, etc.) often have a good cultural environment. The residents there are well-educated, cultured, and live in a friendly and harmonious environment. They behave properly, creating a positive psychological impression for everyone. The demand for people seeking these areas increases, indirectly boosting the demand for land and consequently driving up land prices (Hồ Thị Lam Trà and Nguyễn Văn Quân, 2006).

According to Nguyễn Quỳnh Hoa and Nguyễn Hồng Dương (2015), areas with high educational levels are more attractive to those looking to buy homes because living in such areas positively impacts their lives and the lives of their family members in terms of work, interpersonal relationships, and raising children. Educational levels can be measured in degrees such as low, medium, and high.

– Urbanization Rate:

Urbanization is the expansion of urban areas, measured by the percentage of urban population or urban area relative to the total population or area of a region. It can also be measured by the rate of increase of these two factors over time. Urbanization is an inevitable development process for all countries during the transition of socio-economic activity structures.

The most prominent characteristic of urbanization is the concentration of population in urban areas and the spatial expansion of urban areas. An increased urbanization rate will lead to the growth of technical and social infrastructure. The synchronization of infrastructure helps enhance the urban appearance, and residential areas, thereby increasing land prices in these areas.

Land values increase due to urbanization, including urban positioning, technical infrastructure systems, and especially transportation (Trần Thái Yên and Nguyễn Thanh Trà, 2021).

In reality, in recent years, the urbanization rate in some localities across the country, such as Ho Chi Minh City, Hanoi, Bình Dương, Quảng Ninh, Nghệ An, Thanh Hóa, etc., has increased rapidly, leading to a vibrant real estate market with significant fluctuations in market prices over the past ten years.

In summary, this is an important indicator and a factor influencing land development and use orientation, thereby having potential impacts on land values.

– Security and Order in the Area:

This factor significantly impacts urban land prices. Whether for living or business purposes, good security and order make people feel safe, encouraging investment, buying, and residing, leading to increased land prices (Hồ Thị Lam Trà and Nguyễn Văn Quân, 2006). Conversely, if an area has poor security and order, frequent theft, fights, arguments, and high crime rates, potential buyers will be very cautious about choosing this area for residence or business due to concerns about their safety.

– Social Welfare:

In urban areas, social welfare policies are given more attention and priority, not just as local government policies but also in the budget allocated for social welfare activities, which is higher than in rural areas. Furthermore, socializing social welfare activities in urban areas is easier than in rural areas due to higher living standards and incomes of urban residents, with many agencies and units located in residential areas, making socialization efforts more feasible compared to rural areas.

– Age of Buyers:

Generally, young people tend to choose apartments to live in, while middle-aged and older individuals prefer adjacent houses. Additionally, contributions to adjacent house expenses are more limited compared to the costs associated with living in an apartment. Thus, this factor also somewhat affects urban land prices.

– Information about Land Users and Project Investors:

Land users and investors with high credibility attract those seeking to buy real estate from these reputable users and investors, and vice versa.

– Local Customs and Practices:

Urban areas with diverse and rich customs and practices attract people looking to buy real estate in these areas, leading to increased land prices in such regions.

4. Group of Infrastructure and Environmental Factors

The group of infrastructure factors (technical infrastructure and social infrastructure) and environmental factors also significantly impact urban land prices. These factors increase the utility value of the land, thereby increasing land prices.

Research overview on the impact of infrastructure development investment on land value shows that many studies have addressed the impact of infrastructure on land use and land prices. This is done by evaluating and measuring the accessibility of land to infrastructure (Henneberry, 1998), and assessing the impact of changes in landscape and environmental factors such as parks, pedestrian areas, etc., on increasing land and real estate values (Crompton, 2001, 2005; Sohn, Moudon, & Lee, 2012).

– Transportation System:

Most community activities are closely related to the transportation system with roads adjacent to one or both sides of residential areas (Olayiwola et al., 2005). Urban rail infrastructure projects significantly impact land and real estate values (Asadi Baglosee, Heshmati, Tavanna, & Di Caprio, 2017; Billings, 2011).

There is a considerable disparity between state-regulated land prices and market land prices. The difference coefficient increases from Type I roads to Type IV roads (Nguyễn Thanh Trà, 2003).

Adjacent roads can be classified by various criteria, such as structure, direction, grade, and width. Road structures can include asphalt roads, concrete roads, dirt roads, or gravel roads (Nguyễn Quỳnh Hoa and Nguyễn Thạch, 2013; Nguyễn Thị Mỹ Linh, 2011). Road directions include one-way, two-way, or roads with dividers (Nguyễn Quỳnh Hoa and Nguyễn Thạch, 2013).

According to the Vietnamese Road Traffic Law, road grades are divided into central roads, streets, main roads, alleys, and collector roads (Nguyễn Thị Bích Ngọc and Trần Thanh Hùng, 2013). Road width is very important in research areas in Vietnam in general and urban areas in particular.

Road width can be categorized into: accessible by car (roads or alleys wider than 3 meters) and not accessible by car (roads or alleys narrower than 3 meters) (Nguyễn Thị Bích Ngọc and Trần Thanh Hùng, 2013). For smaller categories than road grades, alleys can be further divided into Level 1 alleys, Level 2 alleys, remaining levels, or according to their nature, such as through alleys and dead-end alleys (Nguyễn Thị Bích Ngọc and Trần Thanh Hùng, 2013).

Research on factors affecting land prices in District 12, Ho Chi Minh City, has identified alley types as the most influential factor on land prices (Bùi Ngọc Toản, 2016).

– Electricity and Water Supply Systems:

The condition of electricity supply systems and water supply and drainage systems are technical infrastructure factors affecting land prices (Hồ Thị Lam Trà and Nguyễn Văn Quân, 2006; Lê Khương Ninh, 2011). The electricity and water supply systems also impact urban land prices (Kolowe, 2014).

Areas with good electricity and water supply systems generally have higher land prices. An area with a reliable electricity supply is one where the power source is stable under all conditions, whether during normal supply periods or peak times when supply is limited.

When the electricity supply is stable, all electricity usage needs are met. In contrast, during supply constraints (dry months for hydroelectricity, high input fuel costs for thermal power), demand for electricity increases, and the supply is insufficient, leading to rotational cuts in some areas, which affects users’ electricity needs.

Therefore, areas with stable electricity supply are a priority choice for those looking to buy houses or transfer land use rights in that area. A guaranteed water supply includes a stable water source that meets regulatory standards for drinking water, and the supply meets users’ needs well. Consequently, areas with good water supply systems also influence land prices in those areas.

– Drainage System:

In the past, when considering the selection of areas to buy houses or land, people did not pay much attention to the drainage system. This was because flooding and waterlogging occurred occasionally, but not as severely as in recent years.

Recently, the drainage issue has become quite complex in both scale and frequency, due to factors such as climate change, global temperature rise, and sea level rise (affecting areas like the Mekong Delta, Ho Chi Minh City, Cần Thơ, etc.).

Moreover, the increased urbanization (in cities like Hanoi, Hai Phong, Nam Dinh, etc.) has led to the burial or narrowing of natural drainage systems (ponds, lakes, canals), affecting drainage during the rainy season and causing severe flooding in some urban areas, impacting residents’ daily activities. Therefore, areas with good drainage systems are also a factor affecting urban land prices.

– Communication System:

The communication system includes infrastructure for internet networks, telecommunications signals, and cable TV. Urban areas with seamless, convenient communication systems that meet users’ needs well will impact land prices in those areas.

– Social Infrastructure Systems (Education, Healthcare, Culture, Sports:

Regarding public services in the area, the presence of schools, especially public schools, significantly impacts land value (Chin and Chau, 2003). The relationship between land prices and school factors is substantial, as many residents are attracted to living around universities and colleges (Kok et al., 2014).

Therefore, the presence of universities and colleges is identified as a major influence on urban land prices (Hu et al., 2016). For kindergarten, primary, and high schools, besides the distribution of educational institutions within administrative areas, choosing reputable and convenient educational institutions for picking up and dropping off students also impacts land prices in those areas.

Regarding healthcare infrastructure, hospitals are essential public utilities that increase land value. However, land areas too close to hospitals can significantly negatively impact land value. The presence of some hospitals or medical facilities can disrupt residents’ daily lives due to emergency sirens, traffic congestion, and some superstitious issues (Chin and Chau, 2003).

– Environmental Quality:

Environmental quality also affects land value. In these studies, researchers agree that the concept of urban accessibility, often part of quality urban parameters, significantly influences land value (Tạ Đình Phong et al., 2000; Bradbury et al., 2001).

A clean or heavily polluted environment, as well as a quiet or noisy one, directly affects urban land prices (Kolowe, 2014; Phạm Văn Tuấn and Trịnh Hữu Liên, 2014). Environmental quality affecting land prices is reflected in natural ecological environment forms, such as water, air, and noise environments surrounding the plot (Hồ Thị Lam Trà and Nguyễn Văn Quân, 2006; Nguyễn Thị Quỳnh Hoa and Nguyễn Thạch, 2013).

+ Air Quality:

Chattopadhyay (1999) conducted a study on buyers’ willingness to pay to reduce air pollution where they live and found that Americans are willing to pay to reduce dust and sulfur dioxide pollution levels. Air quality measurement can be categorized into: low pollution, heavy pollution, very heavy pollution (Lê Khương Ninh, 2011).

+ Water Quality:

Leggett and Bockstael (2000) indicated that water quality, measured based on the concentration of bacteria in waste, significantly impacts the area’s land value. Water quality can be categorized into: clean, low pollution, moderate, heavy, very heavy (Lê Khương Ninh, 2011). Kolowe (2014) suggested that clean water issues significantly affect urban land prices.

+ Noise Environment:

Studies on the impact of noise from roads and railways on land value have shown that excessive noise reduces land value (Nzau, 2003; Palmquist and Danielson, 1989). There is a negative relationship between airport noise and the prices of plots near airports.

However, responses to noise differ among demographic groups. Low-income groups are less willing to pay for quietness than high-income groups (Chin and Chau, 2003). The noise level measurement scale ranges from very good to poor (Ai, 2005).

Land value depends not only on the physical characteristics of a building but also on the surrounding built environment. When valuing any land, the function of land location, surrounding landscape, and accessibility are important factors influencing land value.

5. Group of Factors Related to State Policies and Laws

These factors primarily reflect the government’s intervention in land prices through the formation, regulation of influencing factors, and consideration of factors affecting land price management in socio-economic administration.

The government, considering the overall social benefit and from a macroeconomic development perspective, formulates relevant policies to either promote land transfer or restrict the use of certain types of land, thereby significantly impacting land prices.

Specific factors affecting land prices include policies on planning, land price policies, tax policies, and government budget allocations for agriculture (Hồ Thị Lam Trà and Nguyễn Văn Quân, 2006). The legal status of the plot, limitations on land use rights, building permit regulations, and height restrictions also influence residential land prices.

– Legal Status of the Plot of Land:

The status of the plot, also known as the land use status, is a term commonly used to refer to the condition of a plot.

Determining the status of the plot provides information such as: the coordinates on the cadastral map, shape, size, and area of the plot, the persons with land use rights, whether the land is disputed, whether the land is in the process of transferring use rights, the zoning plan, whether the plot has been issued a land use right certificate, ownership of house and assets attached to the land, the purpose of use, and whether the plot can change its use purpose.

These pieces of information are crucial and directly related to the plot, making the legal status of the plot significantly influential to its value.

The legal status of the plot is also reflected in whether the plot has complete legal documents or not (Nguyễn Thị Mỹ Linh, 2011). Additionally, restrictions on the duration of use impact the profit potential from the plot, directly affecting land prices (Hồ Thị Lam Trà and Nguyễn Văn Quân, 2006), land use coefficients, construction density, and building boundaries.

Land prices in our country are also influenced by hanging planning factors, especially in suburban areas. Land not utilized for profit and transactions only conducted unofficially reduces land prices in these areas (Lê Khương Ninh, 2011).

– Building Permit Regulations:

For plots where construction is prohibited (according to the 2014 Law on Construction) or where housing cannot be built on agricultural land (according to Article 10 of the 2013 Law on Land), or where new construction is not allowed on zoned land (according to Clause 33, Article 1 of the 2020 Amended Law on Construction); where construction is not allowed on disputed land (according to Article 122 of the 2015 Civil Procedure Code), or where there are height restrictions for buildings in areas that are runways for aircraft, or where the number of basement levels is restricted according to detailed construction plans approved by competent state authorities. These regulations also affect land prices in these areas.

– Land Price Policies:

Land price policies directly affect land price trends. High land price policies mean the government loosens management of land prices, promoting an increase in land prices; low land price policies involve various measures by the government to control the rise of land prices, thereby lowering land prices.

Additionally, land price management policies indirectly affect land prices through investors’ psychological investment mindset, influencing land prices (Hồ Thị Lam Trà and Nguyễn Văn Quân, 2006).

– Tax Policies:

The level of tax imposed, whether on businesses or individuals, has a significant impact on land prices. Higher taxes reduce the accumulation of parties involved in land use, lowering land prices, which in turn reduces social investment and lowers economic growth. Conversely, lower taxes increase accumulation, leading to higher land prices (Hồ Thị Lam Trà and Nguyễn Văn Quân, 2006).

– Credit Policies:

Increasing deposit interest rates leads to a larger amount of capital being saved in banks by people, and banks will subsequently increase loan interest rates. Consequently, individuals needing loans for real estate transactions in general, and the land use rights market in particular, will face high loan interest rates, thereby limiting real estate transactions.

Moreover, higher bank interest rates for deposits over longer terms reduce the cash flow in society, as investors with idle funds prefer to deposit in banks. Conversely, when bank interest rates decrease, people and businesses have more opportunities to borrow money to buy houses and undertake projects at lower interest rates. This helps businesses acquire capital to implement projects or individuals to borrow money to buy residential land, leading to an increase in land prices.

– Planning Policies:

In the development process, planning in general and land use planning always exist in countries and significantly increase land value in various ways (Jones, 2008). Studies highlight that the increase in land value due to planning is primarily due to changes in accessibility (infrastructure construction), land development potential, and control over land supply (Hannah, Kim, & Mills, 1993).

However, depending on the function of each type of plan and land use purpose, the impacts on value change differently for land and adjacent plots (Van Cao & Cory, 1982). If the plots after development attract more socio-economic activities and create many transportation connections, the value of land in the entire area tends to increase (Waddell, Ulfarsson, Franklin, & Lobb, 2007).

Conversely, if the land in the area is planned for new factories or incinerators, it may reduce the value of the land. In planning, regulations on land use, capacity ratios, and architectural density greatly affect land prices. For the same plot, land used for business has the highest efficiency, while land used for housing and industry has lower efficiency.

Specifying the land use purpose is incredibly significant for social and economic efficiency in land use (Hồ Thị Lam Trà and Nguyễn Văn Quân, 2006). The type of land or land use purpose is uniformly regulated nationwide and determined based on land use planning. The same area of land, with the same location type, will have different prices depending on the land type and use purpose, for example, agricultural land and residential land.

6. Unique Factors of the Plot of Land

The importance of plot characteristics has been acknowledged in many previous studies. Unique factors of the plot include:

– Shape of the Plot:

The shape of the plot is formed by the connected edges of the plot, enclosing its area. The ideal shapes are square or rectangular, whereas shapes like triangles, trapezoids, parallelograms, polygons, and irregular shapes are not favorable for residential purposes, thus affecting land prices (Hồ Thị Lam Trà and Nguyễn Văn Quân, 2006).

The order of shapes from most to least valuable is squares, rectangles, trapezoids with wide ends, and irregular shapes like polygons, L-shapes, and narrow-ended trapezoids (Nguyễn Thị Yến, 2011). The shape of the plot also affects the architectural design of houses on it; square and rectangular plots are more advantageous for architectural design compared to irregularly shaped plots.

– Area of the Plot:

The area of the plot is traditionally viewed as a crucial determinant of urban land value (Bao et al., 2014). Numerous studies have shown that plot area affects land value (Brownstone and De Vany, 1991; Chicooin, 1981; Colwell and Munneke, 1999; Pyykkonen, 2006). Furthermore, there is a logarithmic linear relationship between plot value and plot area (McMillen and Thorsnes, 1998).

Plots that are too large or too small are not convenient for use, related to the financial capacity of land users and ease of transactions, thereby affecting the plot price (Hồ Thị Lam Trà and Nguyễn Văn Quân, 2006; Nguyễn Thị Yến, 2011).

– Width of the Plot’s Frontage:

The width of the plot’s frontage is crucial. A narrow frontage affects the display, layout, and profitability for the land user, especially for commercial, business, and even residential purposes, thus impacting land prices (Hồ Thị Lam Trà and Nguyễn Văn Quân, 2006). For residential purposes, the optimal dimensions and area are a frontage width of 4-5 meters and a plot depth of 10-15 meters (Trịnh Hữu Liên and Phạm Tuấn Anh, 2014).

– Depth of the Plot:

A plot that is too shallow or too deep compared to the street or alley is not convenient for the land user and any intended use, thus affecting the plot’s land price (Hồ Thị Lam Trà and Nguyễn Văn Quân, 2006).

– Number of Frontages of the Plot:

Plots with more than one frontage have higher land values than plots with only one frontage because these plots have more versatile uses. For example, plots located at intersections or on major traffic routes, main streets, and planned streets have higher values than those in other locations (Trịnh Hữu Liên and Phạm Tuấn Anh, 2014).

– Orientation of the Plot:

Vietnamese people often choose plots facing south or near south (southeast or southwest) to avoid harsh sunlight in the morning and afternoon (Nguyễn Thị Yến, 2011). Not only in Vietnam, but some international studies also mention that the orientation affects the plot’s value (Demetrion, 2016b).

Summarized table of the factors affecting land prices

III. Conclusion

Urban land prices and the factors affecting them are areas with many shortcomings in legal regulations, law enforcement, and improving the expertise in land price determination for land management in general and land economy management in particular. This issue is of special interest to land management and policy-making officials. As a result, research on factors affecting land prices, especially urban land prices, has garnered attention from both global and Vietnamese authors.

Based on an overview study of factors affecting urban land prices, combined with quantitative research, this can serve as a basis for proposing improvements to policies related to land management in general and land pricing in particular. It can also provide valuable information to support decision-making processes for land policy makers, government agencies, advisory bodies, and professionals involved in land price determination.

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