Consequences of the two-price system for land in the land and housing market in Ho Chi Minh City, Vietnam

Abstract

In Vietnam, land is acquired from land-use-right certificate holders and allocated to developers of real estate projects by the State, based on a government imposed land-price framework that does not adhere to market principles. Once developed, land is transacted between developers and buyers based on the prevailing market price. This separate price system on land is intended to encourage capital from investors to flow and stimulate economic development. In reality, this policy has led to prolonged conflicts over land acquisition. The conflicts in turn have led to insufficient supply of land for developing residential projects in Ho Chi Minh City. Despite the unbalanced demand and supply of land, the land and housing market in Ho Chi Minh City is in a ‘thriving condition’. The study finds that the thriving condition is due to fierce speculation on already available land lots and partially or fully completed housing units in the market. Employing a market survey of 494 residential projects, this study examined the underlying causes of that ‘thriving condition’. It seems that the Government is trapped by a peculiar two-price system that favours the developers over the public in general.