On August 10, Thanh Oai district organized an auction for 68 land lots in Ngo Ba, Thanh Than village, Thanh Cao commune. The land is located on Binh Minh – Thanh Cao road, a two-lane road connecting National Highway 21B and the dike of the Left Red River, more than 30km from the city center and about 15km from Ha Dong district center.
Deliberately high land prices in auctions will have many consequences |
This auction caused a stir among real estate investors and the public when the winning bid was 7-8 times higher than the starting price. With a starting price of VND 8.6-12.5 million per square meter, the highest winning bid exceeded VND 100 million per square meter, while the infrastructure in this area has not seen significant improvements. More than 4,500 land use right auction applications were sold. About 4,000 applications met the requirements, with over 1,500 customers.
On August 19, at the Culture – Information and Sports Center of Hoai Duc district, 19 land plots with an area of 74 – 118 square meters in Lang Khuc village, Tien Yen commune, Hoai Duc district were also put up for auction with a starting price of VND 7.3 million per square meter. After 19 hours (from 8 am on August 19 to almost 5 am on August 20), with 9 rounds of bidding, the auction finally ended with the highest bid reaching VND 133.3 million per square meter, more than 18 times the starting price. Meanwhile, the two lowest winning bids were VND 91.3 million per square meter.
Before Thanh Oai and Hoai Duc, on July 28, 85 land lots in Dan Phuong district were auctioned, with 1,252 applications participating, a ratio of 14.7 applications per lot. The most shocking winning bid was VND 99.2 million per square meter, more than twice the starting price.
Explanation
Regarding the reason for the recent “fever” of auction land in the outskirts of Hanoi, real estate experts believe that the root cause is that some suburban districts are about to become urban districts, and are promoting investment in infrastructure.
Many inter-district and inter-communal roads have been widened and asphalted, bringing a neat look to the rural areas. Especially, the Ring Road 4 around the center of Hanoi is taking shape, promising great potential for economic development. Meanwhile, in the past few years, the real estate market has lacked new supply, and apartment prices have increased. In terms of policies, since August 1, the real estate-related laws that have taken effect have tightened the subdivision for sale. This has influenced investors’ psychology to look for land products in the suburbs with a tight legal framework and a price of about VND 3 billion per lot. This is also the reason why land auctions have become “hot” again recently.
Ms. Do Thi Hong Hanh, General Director of Lac Viet Partnership Auction Company, said that there are three main reasons. First, the low starting price attracts many participants. Second, the deposit amount is low. Third, about 70% of the bidders are investment groups who buy and sell for a profit. According to Ms. Hanh, they are experienced in land auctions. After winning the bid, they will immediately sell at a higher price to make a profit. Outside the auction area, the ceiling and floor prices have been set, and many brokers are waiting for the results, ready to buy and sell land at a premium of VND 200 – 500 million per lot.
Dr. Tran Xuan Luong, Vice Director of the Institute for Real Estate Research and Evaluation, said that land auctions are becoming a prominent issue as land prices are often pushed up much higher than their actual value. According to Mr. Luong, there are many reasons for this situation, with many tricks behind the auctions. “One of those tricks is the tactic of speculator groups from other places. These groups participate in auctions with the aim of pushing up prices, and then quickly selling at a large premium. They do not intend to develop the land but only wait for opportunities to make short-term profits, causing market volatility and creating difficulties for those with real needs,” said Mr. Luong.
According to Mr. Luong, when land prices are pushed up unreasonably, the real estate market is easily pushed into a “bubble” state. The value of land is inflated far beyond its actual value, creating a “bubble burst” risk when the market adjusts. At this point, all risks from the “price trap” will be borne by investors.
Ngoc Mai
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