The Perimeter of Hanoi: When Auctioned Land Reaches $10 Million per Square Meter

Winning bid for a plot of land was 18.2 times higher than the starting price

Mr. Nguyen Quang Huy, CEO of Finance – Banking at Nguyen Trai University, frankly stated that it is unusual for land auction prices to exceed 100 million VND per square meter, as seen in the recent auctions in Hoai Duc and Thanh Oai districts.

” In the absence of significant changes in factors such as transportation infrastructure, regional planning, master plans, and detailed plans; no sudden investment projects or large-scale investments with potential to create numerous jobs and significant budget revenues; no breakthroughs in tourism or trade between the region and other areas that could attract a large number of people to live, work, invest, and produce in the future, there is no basis for land prices to surge far above market prices. There must be something unusual going on, ” said Mr. Huy.

Sharing the same view, Associate Professor Dr. Dinh Trong Thinh, an economic expert, also attributed the auction price of up to 100 million VND per square meter to the “heat” of the land auction market in the outskirts of Hanoi. However, in terms of value, the price is too high considering the limited social infrastructure surrounding the auction area.

According to Mr. Pham Duc Toan, CEO of EZ Vietnam Real Estate Investment and Development Joint Stock Company (EZ Property Vietnam), comparing the auction price of over 100 million VND per square meter with market prices clearly shows that it does not reflect the true value.

For example, in Thanh Oai, the highest auction price reached 100.575 million VND per square meter, while in the same district, land in the Thanh Ha urban area, which has complete infrastructure and is closer to the center, is only priced between 60 and 70 million VND per square meter.

Similarly, at the An Khanh urban area (Hoai Duc district), the price of a townhouse is approximately 80-90 million VND per square meter, including both land and house. This is far lower than the recent auction price of 133.3 million VND per square meter on August 19th.

” There is no reason for barren land in remote areas to have such a sudden surge in prices, ” emphasized Mr. Toan.

Mr. Toan also predicted that land prices could increase due to the market’s scarcity of supply, especially investment-oriented products. Currently, apartment prices in Hanoi are at their peak, with few new launches, and there is almost no new land supply around the city, mainly secondary land. Meanwhile, the new law has restricted land subdivision and sale, leading to a rush of people participating in the two recent land auctions.

Attorney Nguyen Van Tuan, Director of TNHH TGS Law Firm, analyzed that it is understandable for investors to look for investment opportunities in “undervalued” areas when inner-city land prices are extremely high. However, the recent auction prices are certainly “speculative.” Thanh Oai is not yet a favored location for land investors, so the price range of 52-100 million VND per square meter in Thanh Cao commune (Thanh Oai district) is fictional compared to its actual value.

According to surveys on real estate buying and selling websites, the average land price in Thanh Cao commune, Thanh Oai district, fluctuates around 30-35 million VND per square meter. In some alleys and lanes in the area, land prices are even lower, falling below 25 million VND per square meter.

” In my opinion, the extremely high land auction prices that are out of touch with reality could be a tactic used by land speculators, ” stated Mr. Tuan.

The market is being manipulated

Dr. Nguyen Van Dinh, Chairman of the Vietnam Real Estate Brokerage Association (VARS), warned that land auctions are being exploited to manipulate the market. This will disrupt the market, causing distortions and negatively impacting investors.

” Although there are legal regulations on land auctions, there are still loopholes, especially in terms of taking advantage of auction activities for personal gain and market manipulation, and there are no specific provisions to address these issues, ” said Mr. Dinh.

Evidence of this manipulation can be seen in the tactics used by real estate investors to inflate prices and create land fever to maximize profits through speculative activities and land flipping.

Some investors deliberately offer ridiculously high prices, multiple times higher than the market value, only to back out later, negatively impacting the market.

Expert Dinh Trong Thinh also attributed the unrealistically high prices to the involvement of land speculators, who buy land in advance and then quote higher prices to create a new price level, intending to sell other nearby land parcels they have invested in for a profit.

Land auctions are primarily a game for speculators. In reality, the recent land “fevers” have exposed the tactics employed by speculators and brokers to profit. Groups of land hoarders often use local auctions to drive up prices and create a higher price level. In cases where they are unable to sell the winning auction plots quickly, they may choose to forfeit their deposits.

Attorney Nguyen Van Tuan also emphasized that the phenomenon of offering extremely high prices during auctions to inflate real estate values is quite common. Many participants in the auctions (usually groups of speculators) bid excessively high prices to set a new price level and then back out, forfeiting their deposits, to sell other properties they own in the area at a profit.

” In my opinion, the extremely high land auction prices that are out of touch with reality could be a tactic used by land speculators. According to regulations, participants in land auctions must make a deposit of 20% of the starting price. In some cases, land speculators bid high prices during the auction and then cancel their bids, forfeiting 20% of the deposit. Their purpose is to drive up land prices in the area to make a profit, a tactic known as “releasing the hunting dog to catch the roach.” In fact, there have been numerous instances of high bids followed by canceled deposits, ” explained Mr. Tuan.

Mr. Tuan emphasized that this behavior is a form of real estate market manipulation, no less dangerous than stock market manipulation. Manipulating the real estate market can be very subtle, leading to bubbles and sky-high prices.

Mr. Tuan provided an example of market distortion and manipulation: after failing to catch the “wave” of investors despite multiple attempts to inflate prices, most of the land auction plots in Thanh Oai were “exposed” by real estate speculators and brokers, who lowered the prices to 90-200 million VND per plot to offload their investments.