Home Real Estate The Curious Case of Land Auction Anomalies in Hanoi: Windfall or Sabotage?

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The Curious Case of Land Auction Anomalies in Hanoi: Windfall or Sabotage?

1 December, 2024

Illustration. (Photo: Manh Khanh/VNA)

Immediately after an unusual auction in Soc Son district, Hanoi, where 36 out of 58 plots were left unsold due to no bids in the sixth and final round, on November 30, 22 land lots in Van Quan village, Do Dong commune, Thanh Oai district, also failed to find buyers.

The authorities of Thanh Oai district affirmed that the process of implementing the project, determining the starting price, and organizing the auction was carried out in accordance with legal regulations, ensuring publicity, transparency, fairness, and objectivity.

However, in this auction, while the first few rounds proceeded normally, in the eighth round (when the highest bid reached VND 70.3-80.3 million per square meter), customers suddenly stopped bidding, resulting in the lots remaining unsold.

The land lots up for auction had areas ranging from 85 to 135 square meters, with a starting price of about VND 5.3 million per square meter (corresponding to a deposit of VND 90.89-143.84 million per lot). The auction was conducted through a direct secret ballot with six mandatory rounds and a minimum bid increment of VND 5 million per square meter. Therefore, participants had to bid at least VND 35.3 million per square meter to be eligible to win the land ownership rights. Notably, among the more than 100 customers participating in this auction, most were from real estate agencies, and very few were local residents living near the auctioned land.

Previously, on November 16, also in Van Quan village, Do Dong commune, Thanh Oai district, 25 land lots were successfully auctioned. With the same starting price of VND 5.3 million per square meter, the highest winning bid was VND 90.3 million per square meter (for two corner lots, corresponding to a value of over VND 11 billion and VND 10 billion per lot, respectively, an increase of 17 times the starting price); the lowest winning bid was over VND 45 million per square meter. On December 7 and 21, Thanh Oai district is expected to auction 39 more land lots in Van Quan village, with prices ranging from VND 5.3-5.4 million per square meter.

Also in November, after 12 rounds of bidding, the auction of 34 land lots in Huong Ngai commune, Thach That district, determined the highest winning bid of VND 59.3 million per square meter (an increase of nearly 25 times the starting price); the lowest winning bid was VND 38.3 million per square meter (an increase of nearly 16 times the starting price). A total of 313 customers participated in the auction on November 24, registering to purchase 1,314 dossiers. The average area of the land lots was 150 square meters, with a starting price of nearly VND 2.4 million per square meter, and a mandatory bid increment of VND 3 million per square meter for 6-8 rounds.

According to the leadership of Thach That district, if the winning bidders pay the full amount, the district will collect more than VND 241 billion for the state budget.

As planned, in the last month of 2024, the Land Development Fund Center of Me Linh district will auction 66 land lots in Trang Viet commune. Among them, there are 62 land lots in Point X1, Dong Cao village (with areas ranging from 87.4 to 198 square meters) and four land lots in Ao Dau, Trang Viet village (with areas of 150.90, 164.70, 496.20, and 1,111 square meters).

All these land lots are located along the dike road in Trang Viet commune, with a starting price of VND 1,515,000 per square meter. The minimum bid increment applied to these land lots is VND 5-6 million per square meter, and the auction will be conducted through a direct secret ballot with a minimum of five mandatory rounds.

Land auctions are an important task for local governments, aiming to provide housing for residents and increase budget revenues to invest in infrastructure development. However, the reality of land auctions in the outskirts of Hanoi has revealed concerns about abnormal land price increases and sudden withdrawals from auctions, non-payment after winning bids, and the acceptance of losing hundreds of millions of dong in deposits. These issues are causing disturbances in the real estate market of the capital city.

Soc Son district, Hanoi, halted the auction of 36 land lots due to abnormally high bids at the land auction in Quang Tien commune on November 29. (Photo: Minh Nghia/VNA)

According to experts, land auctions in Hanoi are an attractive investment channel for many people, especially speculators, due to the very low starting prices, small deposits, clear land legal procedures, and growth potential. Currently, based on the current regulations, local authorities and functional units still apply the old land price frame from 2020 to determine the starting price because Hanoi has not issued a new land price frame.

Land auctions have helped “unblock” the housing supply to meet the needs of the people, but the auction results in some places have pushed land prices to extremely high and even unrealistic levels, not reflecting the actual value, causing the real estate market in Hanoi to develop “unhealthily.” The winning prices and the number of participants, with thousands of registered dossiers, have set new records in land auctions.

In most of the auctions held in the past four months, there have been groups of people from different provinces and cities or families registering to bid for dozens of land lots. Notably, outside the auction area, there are often “brokers” offering land that has just been won at auctions or land that has been “held” for a long time in nearby areas. Many auctioned land lots are sold immediately with a premium of up to several hundred million to billions of dong.

The most unusual situation occurred at the auction of 58 land lots in Dong Lai village, Quang Tien commune, Soc Son district, on November 29. In the fifth round, three land lots were bid up to over VND 30 billion per square meter, 23 land lots were also pushed to extremely high prices (VND 98.488 million and VND 101.488 million per square meter), and six land lots were bid up to nearly VND 68.5 million per square meter.

Land auction in Soc Son district, Hanoi. (Photo: Minh Nghia/VNA)

In the sixth and final round, all these cases stopped bidding. As a result, 36 land lots were left unsold, and only 22 land lots were successfully auctioned, with the lowest winning bid of VND 32.4 million per square meter and the highest of VND 50.4 million per square meter.

In March 2024, at an auction of 33 land lots in Hoai Duc district, there were also similar signs of violations. Specifically, in the first round of the auction, 15 land lots were bid up to VND 100-180 million per square meter, while the starting price was only about VND 57-62 million per square meter.

However, in the second round, the customer who had bid the highest price in the first round did not continue bidding, intentionally forfeiting their right to bid, creating an opportunity for the customer who had bid lower in the first round to win the auction. The auction organizing unit of Hoai Duc district reviewed the case and found signs of violations, so they sealed all the dossiers and canceled the auction.

The issue here is to clarify the behavior and motives of the group of people participating in the land auction, who intentionally bid abnormally high prices and then withdrew, forfeiting their deposits. The cancellation of auctions for hundreds of land lots not only seriously affects the land auction process (reducing budget revenues and incurring auction organization costs) but also creates negative public opinion and disrupts the real estate market in the area and Hanoi in general.

“The acts of bidding up to over VND 30 billion per square meter of land or hundreds of millions of dong in the first few rounds and then withdrawing need to be investigated by the functional authorities of Soc Son district. If legal violations are identified, they must be strictly handled to deter subjects from taking advantage of land auctions for profit and sabotaging the local government’s performance,” said Lawyer Nguyen Thai Hoa, a member of the Hanoi Bar Association.

In reality, the auction-winning land prices have been inflated by speculators far beyond their actual value, creating an “illusory” price basis for profiteering. They disregard the risks and are willing to pay the full amount of the winning bid to legalize the transaction and then use this price as a basis to “inflate” land prices in the area and neighboring regions.

Therefore, housing prices in Hanoi, from the outskirts to narrow alleys in the inner city, are advertised at hundreds of millions of dong per square meter, making homeownership a distant dream for many residents.

To prevent this situation, experts suggest that auction organizing units need to thoroughly review and ensure that all auction procedures and processes comply with legal regulations. At the same time, state management agencies should continue to take timely measures when detecting abnormal signs and soon consider mechanisms, policies, and stricter regulations to overcome existing problems and inadequacies in land auctions.

According to the leadership of Thanh Oai district and the opinions of many local people, the multi-round auction format is currently not really suitable, with some auctions lasting through the night, causing fatigue and inconvenience for both the organizing units and the people.

Auctions should apply a one-round format, determining the winners from high to low bids, corresponding to the number of land lots. Especially, the deposit amount should be higher because the current regulation of a deposit equivalent to 20% of the land lot value, combined with a very low starting price, leads to many people accepting the risk of losing their deposit.

Another important issue is that all levels and sectors must resolutely remove difficulties for many projects, avoiding resource waste and “unblocking” the housing supply.

Ensuring a balance between supply and demand, the real estate market will return to its true value, develop healthily and sustainably, and people will have the opportunity to access housing at reasonable prices.

Linh Khanh