FACTORS AFFECTING RESIDENTIAL LAND PRICES: SCIENCE AND PRACTICE 2025

FACTORS AFFECTING RESIDENTIAL LAND PRICES: SCIENCE AND PRACTICE 2025

FACTORS AFFECTING RESIDENTIAL LAND PRICES: SCIENCE AND PRACTICE

Nguyen Thi Minh Phương

Nguyen Van Bao Ngooc

Nguyen Minh Chau

Bui Thi Dieu

Marketing Department, National Economics University

Abstract: Land prices and the factors influencing them have been the subject of research by many scientists and have been codified into law. Numerous studies have been conducted in various provinces across Vietnam to identify the factors that affect residential land prices.

The first part of this paper summarizes and highlights relevant research. Next, the study examines current legal regulations to see how these factors have been codified and applied in practice.

The research shows that information and data on the “factors affecting land prices” are crucial for the accuracy and reliability of the comparative method in land valuation. However, the adjustment levels for these factors in some provinces currently show a significant disparity, warranting closer scrutiny.

Finally, the study identifies the ongoing issues in determining the factors affecting land prices, which still have many limitations and obstacles that need further research and improvement in the future.

Keywords: Land, Land Prices, Affecting Factors.

1. Introduction

The revised Land Law of 2024 has been passed and will take effect from August 1, 2024. It provides detailed regulations on important issues regarding land prices, land valuation, land appraisal, and the methods for land valuation and appraisal. The comparative method remains an important and reliable method in land valuation and appraisal. However, the reliability of this method depends on the information collected on the factors affecting land prices and the disparity levels when comparing these factors between the land parcel needing valuation and the comparison parcel.

From a scientific perspective, many researchers in Vietnam have studied the factors influencing land prices. However, with the introduction of the 2024 Land Law and the rapid and volatile development of the economy, land prices in Vietnam have experienced significant changes, showing a clear upward trend compared to previous periods and the rate of income growth of the population.

As a result, many factors influencing land prices may not have been fully researched or assessed in terms of their impact on land prices. Some studies have been conducted to explore and measure the influence of factors on urban land prices in provinces such as Hanoi, Hai Duong, Bac Ninh, Nghe An, and Can Tho.

However, due to regional differences, sample sizes, and the development conditions of each locality, fully researching the factors and their impact on land prices remains challenging.

Therefore, through this paper, the authors compile and analyze research works related to the factors influencing residential land prices and also examine the current legal regulations on these factors in Vietnam. Based on this foundation, the authors propose further comprehensive and in-depth research on these factors and a more thorough examination of the factors currently adjusted using the comparative method.

2. Research Methodology

This study primarily employs desk research. Data sources are collected from reputable specialized journals and current legal documents. After compiling relevant studies from both domestic and international sources, the authors review and select works significant to the research issue. From there, the study proceeds to summarize, analyze, contrast, and compare the research results while also developing a research model scale.

3. Overview of Studies on Factors Affecting Residential Land Prices in Vietnam

Currently, land prices and land valuation are quite complex issues that attract significant attention, especially in the context of rapid urbanization. Residential land prices are always fluctuating due to various influencing factors such as location, infrastructure, legal policies, and socio-economic and political conditions. In Vietnam, a relatively large number of studies have identified the impact of these factors on residential land prices. Based on research results, the authors have highlighted the varying degrees of influence of different groups of factors on land prices.

Ho Thi Lam Tra et al. (2020) asserted that the infrastructure factors had the most significant impact on residential land prices in Chi Linh City, Hai Duong Province, with an influence level of 24.11%. Additionally, individual factors, legal factors, social factors, economic factors, and location factors also had certain impacts on land prices in Chi Linh City, with corresponding levels of 21.18%, 11.18%, 10.76%, 19.43%, and 13.34%.

Pham The Trinh et al. (2020) studied some factors affecting residential land prices in Ung Hoa District, Hanoi City, and arranged the influence levels of six groups of factors on land prices in descending order: infrastructure factors (20.4%), legal factors (20.24%), location factors (18.42%), individual factors (14.23%), social factors (13.27%), and economic factors (13.27%).

Tran Thai Yen and Nguyen Thanh Tra (2020) collected data from various departments, surveying 181 individuals involved in land valuation, and used a linear regression model to conclude the factors affecting residential land prices in Vinh City, Nghe An Province. The model indicated that residential land prices in Vinh City were affected by nine groups of factors, with the three most influential being the supply-demand for land use rights (17.23%), location factors (14.86%), and urbanization factors (13.66%). Other influencing factors included individual factors (12.6%), economic factors (12%), infrastructure factors (10.62%), legal factors (7.72%), environmental factors (6.88%), and social factors, which had a relatively small influence (4.43%).

Nguyen The Huan et al. (2021) conducted a study on factors affecting land prices and found that residential land prices in Dien Bien Phu City from 2017 to 2019 were influenced by five factors: location, legal status of the land plot, planning, individual factors, and policy factors. Among these, location had the greatest impact, while policy factors had the least impact on land prices. The research results suggested several areas that need further in-depth study.

In 2021, also in Bac Ninh Province, Pham Thi Thanh Huyen et al. conducted a study on factors affecting residential land prices in Luong Tai District. Their research indicated that 63.619% of the variation in land prices could be explained by 25 factors across 6 independent groups. Through data analysis methods and multivariate regression models, the study showed that location factors (22.53%) had the greatest impact on land price volatility, followed by infrastructure factors (16.63%), legal factors (16.33%), economic factors (16.09%), social factors (15.49%), and individual factors had the least impact on land prices (12.93%).

Pham Thanh Thao and Phan Trung Hien (2021) identified factors affecting land prices in Can Tho City by surveying 328 land users in Can Tho City and applying exploratory factor analysis and multivariate linear regression models. The study found that land prices in Can Tho City were influenced by 6 independent groups of factors, including natural factors, economic factors, social factors, infrastructure factors, legal factors, state policies, and other factors.

Among these, natural factors (12.86%) had the greatest impact on land price volatility. The influence levels of the other factors, economic factors, infrastructure factors, legal factors, state policies, and social factors, were 10.8%, 10.61%, 10.16%, 10.12%, and 6.45% respectively. Notably, compared to previous studies, this group of authors did not examine the influence of location factors on urban residential land prices.

Tran Van Giang et al. (2022) conducted research on factors affecting land prices in Dong Trieu Town, Quang Ninh Province. The study used a linear regression model to analyze and evaluate the impact levels of these factors on land prices. The research results showed that land price fluctuations were influenced by 22 variables across 6 independent variable groups. The authors confirmed that location factors had the most significant impact on land prices (22.88%). The remaining factors, such as infrastructure factors, economic factors, social factors, and individual factors, had influence levels of 22.39%, 17.50%, 12.85%, and 11.28% respectively. Legal factors had the least impact on land prices, with a rate of only 11.11%.

Pham Thanh Que et al. (2024) conducted a study on the factors affecting land prices in Kong Chro District, Gia Lai Province. The research team selected representative areas and interviewed 144 households that had land use rights transfer transactions from 2020 to 2022. Using exploratory factor analysis and multivariate regression models, the study found that 60.711% of the variation in land prices could be explained by 25 factors across 6 distinct groups. The study emphasized the significant influence of location factors (24.76%) and infrastructure factors (21.79%) in land valuation. Following these were economic factors (20.37%), individual factors (12.92%), social factors (11.23%), and legal factors, which had the least impact on residential land prices (8.93%).

Khuong Manh Ha et al. (2024) identified the factors affecting residential land prices through their study on the status of land prices and influencing factors in Tien Du District, Bac Ninh Province. The authors asserted that residential land prices in this area were influenced by six major groups of factors: location factors, economic factors, individual factors, social factors, legal factors, and infrastructure factors. Among these, location factors had the greatest impact on land prices, with an influence level of 27.07%, followed by infrastructure factors (18.47%), social factors (15.68%), individual factors (15%), legal factors (12.9%), and economic factors (10.88%).

Table 01: Summary of factors affecting land prices through the above studies

(Source: Compiled by the authors)

Table 02: Summary table of scales of the above studies

(Source: Compiled by the authors)

The synthesized results from the aforementioned studies indicate that numerous groups of factors affect land prices, including (1) economic, (2) social, (3) location, (4) infrastructure, (5) legal, (6) individual, (7) natural, (8) supply-demand, (9) urbanization, (10) environmental, and (11) other factors. Specific factors within each group have been highlighted, as mentioned in Table 02.

Economic, location, and infrastructure factors seem to have the most significant impact on land prices in various localities. However, natural, supply-demand, urbanization, environmental, and other factors have not been extensively studied.

The research covers various localities across the country, including Bac Ninh, Hai Duong, Hanoi, Nghe An, Can Tho, Quang Ninh, and Gia Lai. This shows the comprehensive and representative nature of the research across different geographic regions, contributing to the overall completeness of the results.

However, due to the different timing of the studies and the varied economic and social development characteristics of each locality, comparing the data is only relatively valid.

One of the factors with the greatest impact on land prices, infrastructure, is reflected in the significant growth rates in many localities. Good infrastructure facilitates connectivity, promotes economic development, and attracts investment, thereby increasing land prices.

The studies also reveal discrepancies in the impact of infrastructure development in different areas. For example, in Kong Chro (Gia Lai), infrastructure accounts for 24.76%, and in Tien Du (Bac Ninh), it accounts for 27.07%, indicating that investments in infrastructure such as transportation, electricity, and water have a significant impact on land values. Meanwhile, in other localities like Vinh (Nghe An), the impact of infrastructure is considerably lower at 14.86%.

This reflects the disparity in investment and economic development between regions affecting land prices. Many studies do not provide specific information on social, legal, supply-demand, and environmental factors, which may indicate gaps or limitations in the analysis of these factors.

Overall, these studies provide insights into the economic, social, and infrastructure development in specific localities. However, the lack of information on some critical factors such as supply-demand and environmental aspects may need to be addressed in future studies for a more comprehensive view of regional development.

4. Current Legal Provisions on Factors Affecting Land Prices

The 2024 Law on Land has been effective since August 1, 2024. Article 158, Clause 5, of the 2024 Law on Land, outlines the comparative method in land valuation as follows:

“The comparative method is implemented by adjusting the prices of land parcels with the same land use purpose and certain similarities in factors affecting land prices that have been transferred on the market and successfully auctioned for land use rights. The auction winner has completed financial obligations according to the auction decision by analyzing and comparing the factors affecting land prices after excluding the value of assets attached to the land (if any) to determine the price of the land parcel to be valued.”

Thus, the comparative method is carried out by adjusting the prices of land parcels with the same land use purpose and certain similarities in factors affecting land prices that have been transferred on the market and successfully auctioned for land use rights. The auction winner must have completed financial obligations according to the auction decision.

Land valuation is conducted through the analysis and comparison of the factors affecting land prices after excluding the value of assets attached to the land (if any) to determine the price of the land parcel to be valued. Therefore, information and data on “factors affecting land prices” are crucial determinants of the accuracy and reliability of this method.

Decree 71/2024 specifies the procedures and contents for determining land prices according to the four methods outlined in the Land Law of 2024. Additionally, Article 8, Clause 1, of Decree 71/2024/ND-CP, issued by the Government on June 27, 2024, clearly defines the typical factors affecting land prices as follows:

“Article 8. Factors Affecting Land Prices

1. Factors affecting land prices for non-agricultural land include:
2. a) Location and site of the land parcel or land area;
3. b) Traffic conditions: road width, road surface structure, adjoining one or multiple roads;
4. c) Water supply and drainage, electricity supply conditions;
5. d) Area, dimensions, and shape of the land parcel or land area;
6. e) Factors related to construction planning include land use coefficient, construction density, building alignment, height limits of construction works, and the number of basements allowed according to the detailed construction planning approved by the competent state authority (if any);
7. f) Environmental and security conditions;
8. g) Land use term;
9. h) Other factors affecting land prices suitable to actual conditions, cultural traditions, and customs of the locality.”

Since Decree No. 71/2024/ND-CP issued by the Government took effect on August 1, 2024, over a month has passed. Provinces across the country have begun making decisions on determining the factors affecting land prices and the adjustments for differences between the valued asset and the comparison asset. Specifically, as of now, the following provinces have issued decisions:

– On August 1, 2024, the People’s Committee of Ha Nam Province issued Decision No. 33/2024/QD-UBND on “Regulating certain criteria when applying the land valuation method according to Decree 71/2024/ND-CP dated June 27, 2024, of the Government in Ha Nam Province,” which includes identifying factors affecting land prices in land valuation.

– On August 2, 2024, the People’s Committee of Binh Duong Province issued Decision No. 22/2024/QD-UBND on “Regulating certain factors estimating development revenue, development costs of the land parcel or land area to be valued according to the surplus method, and factors affecting land prices in determining specific land prices in Binh Duong Province.”

– On August 30, 2024, the People’s Committee of Bac Giang Province issued Decision No. 21/2024/QD-UBND on “Regulating certain criteria when applying the surplus method to determine specific land prices and factors affecting land prices, the maximum discrepancy of each factor affecting land prices in Bac Giang Province.”

On September 6, 2024, the People’s Committee of Hanoi City issued Decision No. 55/2024/QD-UBND on “Regulating certain contents under the authority of the City People’s Committee on determining specific land prices in Hanoi City.” According to this decision, there are 9 main factors affecting land prices, criteria forming factors affecting land prices to analyze, determine the relative similarity, and adjust for each factor affecting land prices between the valued asset and the comparison asset for non-agricultural land.

The aforementioned documents regulate factors affecting land prices and specify the maximum discrepancy of each factor, and the adjustment method for each discrepancy level of factors affecting land prices. This content is implemented according to Clause 3, Article 8 of Decree No. 71/2024/ND-CP dated June 27, 2024, of the Government.

These factors and criteria for factors affecting land prices are meant to analyze, determine the relative similarity, and adjust each factor affecting land prices between the valued asset and the comparison asset for non-agricultural land, including residential land.

Table 03: Comparison of adjustment levels of factors affecting land prices

(Source: Compiled by the authors)

5. Research Results

As analyzed above, the topic of factors affecting land prices has been extensively studied. However, due to regional differences, the economic development levels of various countries, and cultural and social distinctions, some factors have not been thoroughly researched.

Based on the overview of research results, an analytical model of the factors influencing land prices was constructed with 11 groups of factors, comprising numerous specific factors. The degree of influence of each group of factors on land prices varies significantly.

Economic, location, and infrastructure factors seem to have the greatest impact on land prices in different localities. Natural, supply-demand, urbanization, environmental, and other factors have not been extensively studied.

Article 8, Clause 1, of Decree 71/2024/ND-CP issued by the Government on June 27, 2024, clearly defines eight typical groups of factors affecting land prices. However, it can be understood that these identified groups of factors are intended for adjusting the differences between the valued asset and the comparison asset in the comparative method.

According to the comparative method, many factors like economic and social factors of the comparison and valuation assets are considered identical and do not require adjustment.

The condition for applying the comparative method in land valuation currently is as follows: “The comparative method is applied to determine land prices in cases where there are at least three land parcels with the same land use purpose, certain similarities in factors affecting land prices that have been transferred on the market, and successfully auctioned for land use rights, with the auction winner having completed financial obligations according to the auction decision.”

In practice, there may be cases where comparison assets meet the conditions for applying the comparative method, but the economic and social conditions of two adjacent areas are very different. Specifically, two factors, “educational level” and “income of residents,” are very different.

These two factors are among the factors that research results show have a relative impact on land prices. Therefore, the factor groups should be carefully studied when included in the Law to cover all factors affecting land prices.

The following table presents the factors affecting land prices as regulated in Article 8 of Decree 71/2024/ND-CP and compares the three localities: Ha Nam Province, Bac Giang Province, and Hanoi City, and the adjustment levels for discrepancies between the factors affecting land prices of the valued asset and the comparison asset.

The adjustment figures for Bac Giang appear to be excessively high compared to the adjustment levels of other provinces like Ha Nam and Hanoi, with some factors being 10 times higher. Specifically, the location and site of the land parcel: Ha Nam Province has a maximum adjustment level of 15%, Hanoi only 5%, but Bac Giang has a maximum discrepancy adjustment level of 50%.

Conditions for water and electricity supply: Ha Nam and Hanoi have the smallest adjustment levels (not exceeding 5%), while Bac Giang has a discrepancy adjustment level up to 50%. The adjustment levels of other factors in Bac Giang are also very high.

The question here is whether the discrepancy levels of factors affecting land prices truly reflect the actual differences. And when the adjustment levels are excessively high, the results may not be accurate.

6. Conclusion

Fundamentally, the legal provisions have relatively clearly listed the factors affecting land prices. However, depending on the specific characteristics of the research area, the currently regulated factors may not fully reflect all the factors affecting land prices. The factors affecting land prices and the adjustment levels of each factor between the valued asset and the comparison asset for residential land, as regulated by some provinces, show significant discrepancies. These need to be reviewed more carefully.

References

1. Nguyen The Huan, Vu Thi Thanh Thuy & Tran Quoc Long. (2021). Study of some factors affecting residential land prices in Dien Bien Phu City from 2017 to 2019. TNU Journal of Science and Technology, 226(18), 203-210.
2. Tran Van Giang, Ho Thi Lam Tra & Hoang Phuong Anh. (2022). Study of factors affecting land prices in Dong Trieu Town, Quang Ninh Province. Forestry Science and Technology Journal(6), 086-094.
3. (2024). Decree 71/2024/ND-CP regulating land prices.
4. Ho Thi Lam Tra, Nguyen Van Quan, Trinh Thi Mai & Pham Anh Tuan. (2020). Study of residential land prices and factors affecting residential land prices in Chi Linh City, Hai Duong Province.
5. Khuong Manh Ha, Xuan Thi Thu Thao & Tran Thi Mai Anh. (2024). Status of residential land prices and factors affecting residential land prices in Tien Du District, Bac Ninh Province. Forestry Science and Technology Journal, 13(2), 123-134.
6. Pham Thanh Que, Huynh Hoai Vu, Vu Thi Quynh Nga & Phung Van Hao. (2024). Study of some factors affecting residential land prices in Kong Chro District, Gia Lai Province. Forestry Science and Technology Journal, 13(1), 144-153.
7. Pham Thanh Thao & Phan Trung Hien. (2021). Identifying factors affecting land prices in Can Tho City. Can Tho University Science Journal, 57(1), 8-15.
8. Pham The Trinh, Nguyen Ba Long, Pham Quy Giang & Pham Thi Thanh Mung. (2020). Some factors affecting residential land prices in Ung Hoa District, Hanoi City. Forestry Science and Technology Journal(1), 162-170.
9. Phan Thi Thanh Huyen, Pham Thanh Que, Vu Thanh Bien & Nguyen Manh Tien. (2021). Study of some factors affecting residential land prices in Luong Tai District, Bac Ninh Province. Forestry Science and Technology Journal(1), 171-178.
10. Tran Thai Yen & Nguyen Thanh Tra. (2020). Factors affecting residential land prices in Vinh City, Nghe An Province. Vietnamese Journal of Agricultural Sciences, 19(1), 119-128.
11. Hanoi City People’s Committee. (2024). Decision No. 55/2024/QD-UBND on regulating certain contents under the authority of the City People’s Committee on determining specific land prices in Hanoi City.
12. Bac Giang Province People’s Committee. (2024). Decision 21/2024/QD-UBND on regulating certain criteria when applying the surplus method to determine specific land prices and factors affecting land prices, the maximum discrepancy of each factor affecting land prices in Bac Giang Province.
13. Binh Duong Province People’s Committee. (2024). Decision No. 22/2024/QD-UBND on regulating certain factors estimating development revenue, development costs of the land parcel or land area to be valued according to the surplus method, and factors affecting land prices in determining specific land prices in Binh Duong Province.
14. Ha Nam Province People’s Committee. (2024). Decision 33/2024/QD-UBND on regulating certain criteria when applying the land valuation method according to Decree 71/2024/ND-CP dated June 27, 2024, of the Government in Ha Nam Province.

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