Land valuation methods to build land price lists

Article overview

Land valuation method to develop a land price list to help authorities determine land prices accurately and transparently, which is the basis for taxes, compensation, and real estate transactions. Thanks to these methods, such as direct comparison, deduction, income, and costs, land price lists are built in accordance with the market, creating favorable conditions for people and businesses. Let’s take a look at land valuation methods in the article below.

Land valuation methods to build land price lists
Land valuation methods to build land price lists

Principles of land valuation

Land valuation principles are strictly regulated in Article 158 of the Land Law 2024, requiring all methods to comply with market principles, honesty, objectivity, openness and transparency. These principles ensure that the valuation process is not dominated by any party and that the interests between the State, land users and investors are balanced.

  • Land valuation method according to market principles: Land price must be determined based on actual transaction prices on the market, accurately reflecting supply and demand;
  • Comply with the correct methods, order and procedures for land valuation: The land valuation method must comply with the prescribed legal process, ensuring transparency;
  • Ensuring honesty, objectivity, openness and transparency;
  • Ensuring independence between the land price determination consulting organization, the Land Price List Appraisal Council, the Specific Land Price Appraisal Council and the agency or person with authority to decide land prices;
  • Ensuring harmony of interests between the State, land users and investors.

These principles create the foundation for building an accurate land price list, helping the State manage and plan land appropriately.

Conditions for applying land valuation methods

According to Article 158 of the Land Law 2024, each land valuation method has separate application conditions, depending on each specific situation and type of land.

  • Comparison method: Applicable to cases where there are at least 3 plots of land with the same use purpose and similar elements, which have been transferred or won at auction on the market.
  • Income method: Usually applied to agricultural land and non-agricultural land (not residential land), where income from land use can be determined through production and business activities.
  • Residual method: For investment project lands where total development costs and revenues can be estimated.
  • Land price adjustment coefficient method: Applicable to land plots with the same use purpose but not eligible to apply the above methods, and the land price in the land price list is adjusted according to the coefficient.

These conditions ensure that each plot of land is valued according to the most appropriate method, avoiding discrepancies in the land value determination process.

Conditions for applying the land valuation method
Conditions for applying the land valuation method

Land valuation methods

Comparison method

The comparative method is the most common land valuation method. According to Article 4 of Decree 71/2024/ND-CP, the value of a plot of land will be determined by comparison with similar plots of land traded on the market.

  • Information survey: Collect data on land plots that have been transferred or won auctions in the area.
  • Selecting comparative land plots: Select land plots with similar factors such as location, area, and purpose of use.
  • Determination of value: After excluding the value of assets attached to land, determine the value of the comparative land plot according to the formula.

This method provides direct insight from the market, helping land valuation to be closer to actual transactions.

Income method

The income method is specified in Article 5 of Decree 71/2024/ND-CP. This is a method of determining land value based on profitability from land use.

  • Income survey: Collect information about income from leasing land or using land in business and production activities.
  • Determine net income: Calculate the average annual net income of the land plot.
  • Calculate value: Based on net income and bank deposit interest rates, determine the value of land use rights.

This method is especially useful for commercial, service or agricultural lands with a stable source of income.

Surplus method

The residual method is specified in Article 6 of Decree 71/2024/ND-CP, often applied to investment project land. This method is based on calculating the total development revenue of the land plot after deducting the total development costs.

  • Revenue estimate: Estimate the total development revenue of the land plot based on land use planning.
  • Estimate development costs: Calculate the total development costs of the project, including construction, infrastructure, etc.
  • Determination of value: Total revenue minus development costs gives the remaining value of the land plot.

This method is suitable for land valuation in projects with high development potential.

Land price adjustment coefficient method

According to Article 7 of Decree 71/2024/ND-CP, the land price adjustment coefficient method is the use of the current land price list multiplied by the adjustment coefficient to determine the value of the land plot.

  • Information survey: Collect land prices at similar locations in the area according to the land price list.
  • Determine the market land price of each land location and area.
  • Determine the adjustment coefficient: Based on the difference between the market price and the land price list, determine the adjustment coefficient for each area.
  • Calculate land price: Multiply the land price in the price list with the adjustment coefficient to give the actual value.

This method is often applied in cases where the State recovers land and calculates compensation.

Land valuation methods
Land valuation methods

Land valuation is a complex process, requiring extensive understanding of the law as well as the market. To receive detailed and professional advice on related issues, please contact via the hotline: 0906735386 for dedicated support.