What are regulations on extraction method regarding valuation of real properties in Vietnam?

What are regulations on extraction method regarding valuation of real properties in Vietnam?

Pursuant to Point 3.a, Section II of the Vietnam’s Valuation Standard No. 11 issued together with the Circular 145/2016/TT-BTC stipulating as follows:

The extraction method is a price appraisal method which is used to determine the value of the land use right over the land plot with properties on land by subtracting the contributory value of the properties on land from the total value of the real property (which is the sum of the value of the land use right and the value of properties on land).

What are procedures for extraction method regarding valuation of real properties in Vietnam?

Pursuant to Point 3.b, Section II of the Vietnam’s Valuation Standard No. 11 issued together with the Circular 145/2016/TT-BTC stipulating procedures for extraction method regarding valuation of real properties in Vietnam as follows:

Step 1: Make a survey and select at least 03 pieces of real property of which land plots have the same features with the land plot of the subject real property, particularly the location, area, shape, land use purposes, legal features, technical and social infrastructure factors and other factors that may cause impact on the land price. At the same time, the information about the properties on land of comparable pieces of real property.

Selected pieces of real property are those which have been transferred or offered to purchase or for sale on the market with the location of transfer or offering for sale/ purchase similar with that of the subject property at the valuation time or within the close proximity to the valuation time provided it must not longer than 2 years since prices are set forth in the Vietnam’s Valuation Standard with respect of the market approach.

Step 2: Value the properties on land of the comparable real property (which has been selected in Step 1) at the valuation time.

Value of the properties on land of comparable real property		Current costs of constructing the properties on land of comparable real property at the valuation time		Amount of depreciation of the properties at the valuation time
	=		-

Where:

- Current costs of constructing the properties on land of the comparable real property at the valuation time shall be determined as the reproduction or replacement costs for generating the properties on land. Methods to determine reproduction or replacement costs are provided for in the Vietnam's Valuation Standard with respect of the cost approach.

- The amount of depreciation of properties on land of the comparable real property at the valuation time shall be determined by adopting guidance provided in the Vietnam's Valuation Standard with respect of the cost approach.

Step 3: Value the land use rights of the comparable real property at the valuation time.

Value of land use rights of comparable real property		Transaction price of the comparable real property		Value of the properties on land of the comparable real property
	=		-

Where:

- Transaction price of the comparable real property refers to the price of the successful transaction or unsuccessful transaction of which the price has been adjusted and which has the potential to become a successful transaction.

- Value of the properties on land of the comparable real property has been determined in Step 2.

Step 4: Value the land use rights of the subject real property.

The value of the land use rights of the subject real property shall be determined on the basis of values of land use rights of comparable pieces of real property upon the adjustments for differences in payment conditions, legal features, location, area, shape, technical and social infrastructure factors, and other factors that may cause impact on the land use rights as regulated in the Vietnam's Valuation Standard with respect of the cost approach. The valuer should present strong arguments for selecting the adjustment ratio of factors that influence on the land price.

The example of the extraction method is stated in Appendix No. 01 enclosed with this Standard.

Best regards!