HCMC farmland investors sell out as fee rise looms for conversion into residential lands

Talk that land prices in HCMC are set to soar once the new price list replaces the previous fixed price framework next year has made them anxious about the fee to change land use, and investors are scrambling to sell their agricultural lands at a discount.

The fee is calculated on the price difference between the original and new land uses. The Ministry of Finance on Monday announced that the new land prices and fees will be applicable from 2026.

Nguyen Tan Phong, 43, is selling his 3,800-square-meter plot on Binh Chanh District’s Truong Van Da Street for VND12.5 billion (US$497,000).

He had bought it in 2021 for VND16.3 billion amid rumors property prices in Binh Chanh would rise by 30-40% since the district was to become a city.

"I bought the plot hoping to convert it into residential land," he said.

But the market slumped last year with virtually no demand for agricultural lands, and he has been unable to sell it since.

In the city's draft price list, residential lands on Truong Van Da Street are up 18 times to VND14.4 million per square meter.

"I cannot afford the fees to convert the land, and so I have reduced my price by nearly VND4 billion just to be rid of it. Even so, I have not found any buyers," Phong said.

Nguyen Van Manh, who owns several 1,000- to 2,000-square-meter agricultural plots along National Highway 50 in Binh Chanh, is in a similar predicament.

He bought them in 2019 and 2020 but has yet to convert them.

With prices in the area expected to increase by 10-20-fold he estimates the conversion fees to rise to between three and five times.

"Large agricultural plots are difficult to sell, and now with the increased conversion costs, those holding land like me have much to worry about."

Agricultural lands are being sold at 20-30% discounts in the rural districts of Binh Chanh, Hoc Mon, Cu Chi, and Can Gio.

Dinh Minh Tuan, southern regional director of real estate trading platform Batdongsan, said the fire sales began in 2023 and have escalated in recent months, especially following the announcement of the new price list.

He says this trend is not limited to HCMC as investors in neighboring provinces are also trying to sell off their lands.

Data from Batdongsan shows that land prices, both agricultural and residential, in HCMC and southern provinces such as Dong Nai, Long An and Binh Phuoc decreased by 6-13% year-on-year in the second quarter.

The Vietnam Association of Realtors reports that in the first half of the year the agricultural-forestry land segment was sluggish and saw few transactions.

Tran Hieu, a seasoned real estate investor in HCMC, says he is not surprised that many investors holding agricultural land are rushing to sell now.

The profits in this segment are typically 20-25% a year, rising to 30-40% if converted into residential land, he says.

The new list is expected to increase the cost of converting agricultural land by as much as nine-fold, he says, citing the example of a 1,000-square-meter plot off Nguyen Van Linh Street in Binh Chanh.

The fee to convert this plot of land, currently at VND6.6 billion, will rise to VND61.8 billion, he says. At that price, people are better off directly buying residential land, he points out.

The amendments to the Land Law also stipulate that agricultural lands left unused for 12-24 months will result in fines and possible confiscation if not put back into use.

This means owners of agricultural land will need to quickly convert it into residential land use or use it for agriculture to avoid losing their investment.