Land policy and property price in Hanoi, Vietnam, January 2009

cooperative ownership. This means that the land was in practice either nationalised orconverted into cooperatives following Land Reform Law 1953 although the 1960 Constitutiontheoretically allowed the private ownership. After the reunification in 1975, the 1980Constitution stipulated that the state has the land ownership for the whole country and noprivate right to own the land is allowed. Land was allocated through the central administrativecontrol rather than the market mechanism. However, in 1988, the State enacted the Land Lawpermitting the grant of land-use right both to organizations and individuals (GeneralDepartment for Land Administration, 2000). The principle of no private right of owning landwas changed into “people’s ownership” and “state management” in the 1992 Constitution and1993 Land Law. Furthermore, as a concession to the emerging mixed market economy, theLand Law 1993 allowed various private rights regarding land, which include the land transferand leasing without disturbing the underlying principle of state ownership of land. Theserights were extended and clarified by the 1998 and 2003 Land Laws.2.2.2 Land transfersFormally, private access to urban residential land in land market is primarily gained not bybuying and selling but by land transfers (Nguyen and Hans, 2002). This is because land is“owned by the people” in legislation. 1988 Land Law prohibited any kind of land transaction,encroachment or land lease among private individuals. The land users, in most cases the stateorganizations, were not required to pay for the land allocated to them except for the smallformal amounts of land-use fees. All premises were developed by the state-owned companiesunder the direction of the authorities, thus no property market officially existed. However,although the Civil Code (article 694) required the transfer of land-use right to be based on theprice formula set by the Ministry of Finance, in practice, both officially registered andunregistered land were routinely bought and sold according to the market prices (GeneralDepartment for Land Administration, 2000). Then, 1992 Constitution was introducedrecognizing that the land-use right can be transferred among households and individualsalthough it restated that all land is owned by the State as representative of the people. Basedon the new principles, a new version of the Land Law was promulgated in 1993 making asignificant advance toward the formulation of a legal framework for land administration. Thenew Land Law established a legal basis for land allocation and lease, which secures the landuseright of landholders including the rights of long-term land use, land transfer, inheritance,lease, mortgage, and compensation for expropriation. It should be noted that historically,about 70% of all land transactions took place without a paper trail (Phe, 2002). This meansthat the authorities were unable to tax or manage the sector effectively. Thus, the new law alsoaimed to change it by standardizing land transactions.2.2.3 Land marketBefore the approval of the Land Law 2003Throughout the socialist period, buying and selling of urban residential land/housingcontinued through personal networks in the black market under the tacit approval of localauthorities (General Department for Land Administration, 2000). The indiscreet land traderesulted in the voluntary surrender of surplus land. Even after the “nationalisation” of privateland in 1980, the informal urban housing market continued. The state tacitly accepted thecommoditisation of urban residential, but not commercial land. The state valuated the landuseright with the price formula. The price formulas set by the Ministry of Finance are used todetermine the fees charged for land allotments, leases and transfers and compensation paid forcompulsory acquisition and taxation. In this formula, the values of land-use right aredetermined based on city classification grouping cities into five classes. The classification is