Unveiling the Unreasonable: A Midnight Land Auction in Hanoi’s Outskirts

Why the need for a minimum of six rounds?

The auction of 19 land lots in Thon Long Khuc, Tien Yen, Hoai Duc, was conducted through a direct voting process with a minimum of six rounds. Each bidding round had a minimum increment of VND 6 million per square meter, and the auction continued until there were no more bidders. If there were no bidders in any round (from 1 to 6), they would be eliminated, and the auction would be considered invalid.

Participants had to make a deposit of between VND 109 million and VND 173 million per lot, equivalent to 20% of the starting price, to be eligible to participate.

During the auction, all participants publicly revealed their bid prices for each round. After several rounds, the highest bid for a lot reached VND 133.3 million per square meter, 18 times the starting price.

Finally, the results were announced, and the winning bidder had to complete the necessary procedures to officially own the land, including paying related fees and taxes such as notarization fees and pre-transfer taxes, among others. Failure to pay on time could result in the bidder forfeiting their deposit and land ownership rights. This process ensured transparency and helped detect any potential price manipulation.

According to the Hoai Duc Land Development Center, after nine bidding rounds, lot LK03-12 (a corner lot with three frontages) with an area of over 113 square meters received the highest bid of VND 133.3 million per square meter (equivalent to a value of over VND 15 billion for the lot). Compared to the starting price of VND 7.3 million per square meter, this lot was purchased for over 18 times the initial price. The remaining 16 lots were auctioned off at prices ranging from VND 97.3 million to VND 127.3 million per square meter, while the two lowest-winning bids were at VND 91.3 million per square meter.

The Hoai Duc Land Development Center explained that the minimum of six bidding rounds was intended to ensure transparency and fairness in the auction process and prevent collusion among investors. According to the Law on Asset Auction, conducting multiple bidding rounds increases competition and ensures a more accurate valuation of the auctioned asset, as opposed to the usual single-round format.

The approval of the starting price was carried out in accordance with Government Decree 12, with a starting price of VND 7.3 million per square meter. By requiring a minimum of six rounds with a minimum increment of VND 6 million per square meter, this helped determine a fair final price and prevented collusion, which could result in winning bids at extremely low prices. “Although this procedure may prolong the auction process, the goal is to efficiently collect revenues for the state budget and ensure competition in the auction,” explained an official.

It is worth noting that the 19 land lots (LK03-LK04) in Thon Long Khuc, Tien Yen, Hoai Duc, Hanoi, are located approximately 20 kilometers from the center of Hanoi. They are situated near the Tien Le dike road and adjacent to the Tien Yen B Kindergarten, and they are about 100 meters away from the under-construction Ring Road 4. The auctioned land plots have been equipped with synchronous infrastructure, including roads, greenery, electricity, and drainage systems.

Irrationalities and the wave of land price adjustments

The land auction in Tien Yen, Hoai Duc, highlighted some irrationalities, particularly in the starting price, which was significantly lower than the market price, and the winning bid, which was astoundingly high. Specifically, the starting price was only VND 7.3 million per square meter, but the winning bid was over 18 times higher.

Previously, the starting price was determined based on advice from consulting firms, which considered comparable assets and market trends. However, according to new regulations, consulting services cannot be hired, and the starting price must be calculated using a coefficient (K) multiplied by a price table. Meanwhile, the 2024 Land Law stipulates that localities can continue using the current land price tables until December 31, 2025. This has resulted in starting prices that are much lower than market values.

Additionally, conducting land auctions through multiple rounds not only consumes time but also creates tension for investors. In the Hoai Duc auction, this process lasted for more than 19 hours with a minimum of six bidding rounds. Each round required incremental bids, making the process more complex and prolonged compared to other locations like Thanh Oai, where auctions are completed within five hours due to a one-time bidding format.

Some investors have suggested the need to modify the organization method and incorporate technology to streamline and expedite the process, saving time and effort for all involved. It is important to note that the 5th National Auction Joint Stock Company, located at 193 Hoang Van Thai, Thanh Xuan, Hanoi, was responsible for organizing this auction.

Surveys indicate that winning auction prices in Hoai Duc have surged to notably high levels compared to market prices. Recent auction results demonstrate this significant disparity.

For instance, land lots in these auctions have been sold for prices two to three times higher than typical listing prices. In the second quarter of 2024, land in Tien Yen, Hoai Duc, was advertised at around VND 43 million per square meter. However, in the recent auction, the highest winning bid reached VND 133.3 million per square meter, approximately 30 times the initial starting price and two to three times the current market price.

This price surge is not just a number but also reflects a significant shift in market psychology. This psychological effect has triggered a wave of land price adjustments, with many landowners raising their asking prices. This trend not only leads to land price increases but also fuels speculation. Many participants have taken the risk of purchasing land, anticipating further price increases in the future.

However, participating in auctions with such record-breaking prices also carries risks. It may encourage investors to focus solely on real estate instead of exploring other sectors of the economy, potentially causing unwanted fluctuations and instability in the real estate market.