March 24, 2022

Everything You Need to Know About Property Valuation in Vietnam


Thousands, if not tens of thousands, of real estate transactions take place in Vietnam every day, with prices ranging from hundreds of millions to hundreds of billions of Vietnamese Dong (VND). How do you know you are getting a good deal? How do you know how to price your property for sale?

The following article will provide you with information crucial to determining the value of any real estate product in Vietnam. Read on to find out and become a savvy real estate buyer and seller!

What is real estate valuation?

In short, real estate valuation is the collection, analysis, and evaluation of information and data to estimate real estate value.

Let us take real estate to mean land and other assets attached to the ground. The value of the real estate can be converted into money. This monetary value can then be used for various purposes, including the purchase, sale, transfer, auction, donation, inheritance, investment, capital contribution, and so on.

Real estate is one of the most complex asset classes, as a wide range of factors impacts it. As a result, determining the correct value of the real estate is a subjective and challenging task.

Real estate valuation is critical because it directly impacts the entire real estate market in general and each real estate transaction in particular.

Real estate valuation's seven core principles

Many principles are used in evaluating the price of a house. We have chosen seven core principles that you should always use throughout the valuation process.

The seven core principles are:

  • Highest and best use: Properties are assessed as having the highest and best use if they can be proved at the valuation to b.e used legally and generate the highest income.
  • Substitution: The price of a property tends to be dictated by the sale price of another similar property.
  • Supply and demand: As for most goods, the property's value is impacted by supply and demand for that type of property. When demand for that type of property exceeds the amount that can be supplied, the market price of the property rises, and vice versa.
  • Value is changeable: The value of a property is constantly changing because it is affected by natural, economic, legal, social, and environmental factors.
  • Anticipation:  Estimating future profitability can indicate the value of an asset.
  • Conformity: When real estate is used in a way appropriate to a given area's economic and social conditions, it has greater value.
  • Competition: Land or real estate, like other goods, faces competition when there is a ready supply on the market.                  

Three basic evaluation methods

With the core principles in mind, these are three methods for you to gauge real estate value.

  • Directed comparison method: This method is the most common and simplest way of valuing a property. When you need to know a specific price for a house, you can find information about similar homes depending on the location, size, use, rental price, and so on.

Example: You want to assess the value of house A. House A is three stories high with a total area of 70m2 in an alley in Ho Chi Minh City's Go Vap district. When using the comparison method, you search the web, newspapers, and brokers in the area for a similar property and come across House B.

B has an area of 72m2, it has four floors, and is located in the alley next to House A. House B is listed for sale at 5 billion VND. From this, you might estimate that the selling price will likely range between 4.8 and 5.2 billion VND (depending on some other secondary factors such as design, construction, feng shui, etc.).  

  • Potential income method: The second method of valuing real estate is based on the property's ability to generate income. This method is commonly used in commercial real estate such as apartments, downtown houses, etc., that might be rented out.

The relative value of the property is linked to the property's average annual rental yield.

Example: Let's look at a two-bedroom apartment that can be rented out for VND 20 million per month. The one-year rental revenue from this apartment will be 240 million VND. The average income rate for rental apartments is 3.5 – 4% per year. Hence, the market value of this apartment will be between 240/4 percent - 240/3.5 percent = 6 - 6.8 billion VND.

  • Costing method: This method is a way of valuing real estate using the total cost of building the property.

Example: Let us look at House A in Bien Hoa city, Dong Nai province. House A was built in 2015 and had a total area of 150 sqm on a land area of 220 sqm. There are no similar houses in this area. To calculate the price, we can use the following cost method:

Value of House A = the total value of the land (220m2) + the construction cost of the entire house.

At the time of valuation, the average land price in Bien Hoa city center was 20 million/m2, resulting in a total land value of 4 billion 400 million VND. The house is 150m2 and has one floor; the construction unit price is 5 million per sqm, so the construction value is 750 million. Assuming we are calculating the price in 2021, after six years, the depreciation due to temporary wear and tear is 20%, so the construction value in 2021 is 750 million x (100% - 20%) = 600 million. Thus, The total value of the house, including land and construction, is 5 billion.

At Homebase, we combine all three methods with continuously updated and validated data from other related and most recent transactions. This data allows us to provide our clients with accurate real estate valuation information.          

The elements of real estate

The above methods are basic and relative valuation methods. Other factors can affect the market value of the real estate. Let's take a look at five physical elements that affect the value:

  • Location: This factor is the most important physical element in valuing real estate.

Every single property's location is unique; no two properties will have the same location. It is not surprising that many investors look for real estate near city centers or economic areas with infrastructure development, traffic flow, public works, and residential areas. As a result, a house on the main street near the city center can be priced dozens of times more than a house of the same size in a small alley a few kilometers away. When determining the value of the real estate, always consider its location first.

  • Appearance:  Appearance is essential for many types of goods, including real estate. A house with a square shape that has recently been built and painted can cost 20-40% more than an old, dilapidated house. Here, personal taste and aesthetic quality come into play; the property's architecture, exterior, and interior design affect the property's value.
  • Size and shape: The size and shape of the land are best when it is optimal for the intended use and meets the buyer's specific needs. Square plots of land with an extensive frontage are typically valued at high prices.
  • Nature and environment: The property itself and the entire surrounding environment will also affect the selling price. Here is where you consider how the weather and the climate will affect your property. For example, think about the land elevation, the sea level of the area, whether it is in a flood or drought zone, or whether the soil is suitable for high-rise buildings. The surrounding living environment is also critical; if the property is in a polluted, noisy place, the property's price may fall.
  • Property type: Because real estate is a complex commodity, we have many perspectives to consider the value of the real estate. Apartments and townhouses in residential areas will cost more if close to schools, hospitals, and supermarkets. Commercial real estate, such as offices, will be more expensive if close to the administrative center or a functional area. Industrial real estate, such as factories, are generally better located far from residential areas to avoid noise and environmental pollution. Depending on the type of property, Homebase has different standards to assess them.            

Liquidity and net income of the property

All investors are interested in the profitability of their real estate. Thus, the ability of the real estate product to generate income and the total annual revenue or profit from the property has a significant impact on the selling price of that property.

These are essential factors to consider:

  • Liquidity refers to whether the property can be quickly sold on the market and without price adjustment. Property has high liquidity when it can be sold with ease if desired. For example, a house with street frontage in District 3, HCMC, can be sold quickly; a buyer can likely be found within one month.
  • Net income: This amount is the money earned by the real estate after deducting all related costs. For example, let us assume that the revenue from your rental apartment is 20 million VND per month, while the utility bill and income tax come up to a total of 3 million VND per month. So the net income from your property per year is (20-3) x 12 months = 204 million VND.

The greater a property's liquidity and potential net income, the better. However, these will vary depending on the market's current situation.            

Consider the health of the market

Supply and demand are worth mentioning again. It is essential to understand how the market demand for that property is changing when evaluating the property. For example, if a house is in a densely populated area, the supply for similar properties will likely be below. The demand from the surrounding area will drive the price up.

Macroeconomic factors can also affect the value of a property. Consider the rate of economic growth, unemployment rate, population growth, bank interest rates, etc. The health of the market has a cyclical impact on real estate prices. Typically, a real estate market cycle lasts 7 to 10 years and consists of the five stages: Growth – Phenomenon – Recession – Freeze – Recovery.

Considering the bigger picture of the economy will help you value the real estate produce more accurately.

Legal and planning issues

Homebase can confidently tell you that every real estate buyer or seller is concerned about the safety of their transaction. Whether or not buying or selling a property is safe depends on the legal status of the property. The following documents are crucial:

  • Certificate of land use right, ownership of a house (pink book)
  • Permit for construction and completion certificate
  • Sales and Purchase agreement

Properties missing crucial documents or having legal violations will have a much lower value and may be subject to future evictions, penalties, and disputes.

When it comes to real estate prices, the government's plans for the area cannot be ignored. The majority of the real estate price increases in Vietnam are due to the area's new planning information released by the government.

Real estate will increase in price when there is information on development planning of the area; look out for:

  • Infrastructure development: Infrastructure can increase connectivity of the area. For example, a newly built highway or metro station can cause immediate property prices to rise in the surrounding area. It is expected that the area will have great potential for economic development in the future.
  • Public work development: For example, building an additional hospital, a school, and an entertainment complex will increase the surrounding real estate value.
  • Real estate law and direct from the government: Policies on investment, house purchase, tax, economic development in each area cause the real estate value to change.                  

Homebase is here to help

Real estate valuation is a job that requires a lot of knowledge, time, and effort. Homebase is always ready to share more insight with you and make your real estate investment process easier and faster. We have a dedicated team prepared to welcome all of your questions; contact Homebase at +84 94 823 00 33 or email:


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