1/ In your opinion, what are the biggest problems in the current process for valuing land prices?
[DMVN] The biggest problem is that the regulatory framework for valuing land prices is inconsistent. The process of valuation may involve various subjective factors, leading to inconsistent and non-standardized valuations. The hierarchical system also leads to complicated legal procedures and inconsistent national cadastral maps. In addition, proper classification of land use is essential for accurate valuation, but land use regulations are inconsistent, which leads to uncertainties in valuation.
2/ The Government has just issued Official Dispatch 634 on removing difficulties in valuing land prices. The dispatch emphasises adjustment of land price list, specific land valuation and consultancy on land price determination. What do you think about this new Dispatch? Has the Dispatch been effective in removing current difficulties in land valuation?
[DMVN] The new Dispatch directs the competent state agencies to remove difficulties and obstacles in land valuation under their authorities. I think the Dispatch has been really effective in urging to solve local problems in terms of authority, order and procedures, leading to very slow land valuation, which affects the implementation progress of investment projects. However, we will have to wait for the amended regulations to further assess the effectiveness of this Dispatch.
3/ How will the abolition of the land price bracket affect the development of the real estate market?
[DMVN] Removing the land price bracket system can lead to greater transparency in land valuation. Instead of being confined to predetermined price ranges, land values can be assessed based on current market conditions, demand, and actual characteristics of the property. This increased transparency can improve market efficiency and attract more investors. The elimination of fixed price brackets might introduce more volatility and fluctuations in land prices, as valuations become more sensitive to market changes and demand-supply dynamics. This could impact the behavior of speculators in the market.
4/ In your opinion, which country in the world is doing well in valuing land prices? What can Vietnam learn from this country’s practices?
[DMVN] In my opinion, Singapore is doing well in valuing land prices since it is often regarded as having a robust and transparent land valuation system. The government of Singapore regularly reviews and updates land prices based on market conditions, development plans, and other relevant factors.
Some practices that Vietnam can learn from Singapore are (i) establishing a comprehensive land registry with transparent access to transaction data, (ii) regularly updating land prices based on market conditions and development plans and (iii) involving independent valuation experts to enhance objectivity and credibility.
5/ Currently, the draft regulation on land valuation is being consulted by the Ministry of Natural Resources and Environment. It is expected that there are only 3 methods of land valuation: Comparative method, income method and land price adjustment coefficient method. What are your thoughts on these methods?
[DMVN] This amendment is expected to change the land valuation from using the out-of-date price bracket to another method in accordance with market principles. The change is especially important as it will help attract investors and develop the real estate market and the economy.
6/ In Vietnam, when the budget for infrastructure development as well as many key projects cannot be allocated due to problems in site clearance. There are legal precedents for fair market compensation to ensure a timely process of site clearance. What do you think about the importance of applying market prices in compensation for site clearance?
[DMVN] Applying market prices in compensation for site clearance is a critical step in safeguarding property rights, maintaining social harmony, and supporting sustainable development. It demonstrates a commitment to the principles of fairness, transparency, and respect for individuals’ rights during times of significant urban and infrastructure changes.
Using market prices ensures that affected landowners receive fair compensation for their land, which aligns with the principles of fairness and equity. It can also help minimize disputes and conflicts between landowners and the authorities, reduce opportunities for corruption and bribery.
7/ In the amended draft Land Law, an important content is to remove the regulations on the land price bracket and applying market-based approach in valuing land price. What do you think about this change?
[DMVN] The change is expected to significantly help the development of the real estate market and the economy. The removal of the land price framework would be a breakthrough to bring the price back to its real value and prevent land corruption. In addition, owners of acquired real estate will receive a more reasonable compensation value and closer to market price, which will help speed up the land compensation and allocation process to build new projects.
8/ Should Vietnam develop a new suitable and persuasive land price system? What policies are needed to build a standard pricing framework that is suitable for market fluctuations?
[DMVN] Vietnam may benefit from developing a new and suitable land price system that is transparent, persuasive, and able to accommodate market fluctuations. Creating a standard pricing framework can contribute to more accurate land valuations, reduce disputes, and foster a conducive environment for investment and economic development.
Some policies needed to build a standard pricing framework are:
• Comprehensive Land Data Collection and Management: Establish a comprehensive and updated land registry that records all land transactions and relevant information. Accurate and accessible data are essential for determining market trends and setting appropriate land prices.
• Transparent Market-Based Valuation: Base land valuations on objective market data and apply well-accepted valuation methods. Utilize a combination of approaches (e.g., sales comparison, income capitalization, cost approach) to cross-validate results and ensure more accurate valuations.
• Regular Land Price Updates: Establish a schedule for regular land price updates to reflect changes in market conditions and land demand. Land prices should be reviewed periodically to maintain their relevance and accuracy.
• Anti-Corruption Measures: Implement measures to combat corruption in the valuation process. This could include strict enforcement of laws, transparent auditing, and public reporting of valuations.
• Consistent Land Use Classification: Establish clear and consistent land use classification to avoid ambiguity and uncertainties in the valuation process.
• Economic and Social Considerations: Take into account the economic and social impacts of land valuation decisions. Strive for a balance between economic development and social welfare to minimize negative consequences on vulnerable populations.
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Please do not hesitate to contact Dr. Oliver Massmann under omassmann@duanemorris.com if you have any questions or want to know more details on the above. Dr. Oliver Massmann is the General Director of Duane Morris Vietnam LLC.