Billionaire Investors Lose Big on Peripheral Land ‘Surfing’

In recent weeks, Mr. Tien from Hai Duong province has been continuously selling 5 land lots obtained through auctions in Soc Son district, Hanoi, under the pressure of the upcoming payment deadline. At the end of March, his group won 5 land parcels with a deposit of nearly VND 1.2 billion (with a starting price of VND 10.6 million per square meter).

This investor quickly signed over the 5 lots to a local real estate agency, with a premium of VND 400-600 million per lot. “Successfully flipping just 1-2 lots can compensate for the deposit of the other lots,” Mr. Tien said.

With winning bids reaching VND 7.5-9 billion per lot (approximately VND 70-90 million per square meter), double the surrounding area’s prices, transferring the auction winnings is not easy. After a month, Mr. Tien has not yet paid for any of the lots but hopes to “save his deposit” and continues to advertise them for sale. Initially planning to sell at a premium of hundreds of millions, he now accepts a “loss-cutting” of VND 100-200 million, expecting to recoup half of his capital.

According to regulations, auction winners must pay 50% of the land use fee within 30 days (first installment) from the tax authority’s notification, and the remaining within 90 days. If he fails to transfer the lots before the deadline, Mr. Tien said they would “forfeit the deposit because they don’t have enough money to pay for all five auctioned land lots,” implying a loss of the initial VND 1.2 billion.

A land auction site in Soc Son district, more than 30 km from Hanoi’s center. Photo: Giang Huy

Similarly, Ms. Thuy, an investor from Phu Tho province, also faced a loss of hundreds of millions of dong due to “surfing” auctioned land in a suburban district. In November last year, she and her group of friends won four land lots in Thanh Oai district at a price of nearly VND 90 million per square meter, equivalent to VND 10-11 billion per lot.

At the auction in Quoc Oai district in the same month, they won three more lots, priced at about VND 8 billion each. The total deposit for these seven land lots was nearly VND 1 billion (with a starting price ranging from VND 4.7-5.3 million per square meter).

Four months after the auction, despite continuous advertising, Ms. Thuy has not yet transferred any of the lots. A local broker said that the supply of auctioned land is vast, and many lots have lower winning bids, so even if investors “cut the deposit” (reduce the deposit amount), it is challenging to sell. As the payment deadline passed, Ms. Thuy and her friends decided to forfeit the nearly VND 1 billion deposit. “We have to accept losing the deposit because we don’t have enough money to pay for all those lots,” she said.

The situation of investors forfeiting their land auction deposits, accepting losses of hundreds of millions to billions of dong, has been common recently. In March, more than 80% of the land lots won at the auction in Ha Dong district in October 2024 were forfeited by investors, totaling more than VND 7 billion.

Similarly, in the August 2024 auction in Thanh Oai district, only 13 out of 68 land lots fully fulfilled their financial obligations with winning bids of VND 51.6 – 55 million per square meter. All the lots with winning bids of VND 80 million to over VND 100 million were forfeited, totaling more than VND 8 billion.

The director of a real estate exchange specializing in auctioned land in Thanh Oai district said that from the end of last year to now, the number of land lots listed on the exchange has increased by 40-50% compared to the same period. In addition to the “auction wave” at the end of last year, the recent information about a potential large-scale project in this area has also pushed the market psychology, causing many investors to rush to sell.

However, he admitted that lots with high winning bids (VND 80-100 million per square meter) are very difficult to liquidate. “Many groups of investors raise prices to create waves in the market, aiming to ‘surf’ the deposit rather than intending to pay for the lots,” he said.

A transaction point specializing in receiving deposits and selling premiums in the auctioned land area in Thanh Oai district. Photo: Ngoc Diem

Mr. Pham Duc Toan, CEO of EZ Property, said that the situation of “surfing deposits” on auctioned land is not new and has spread to many other provinces such as Hung Yen and Thai Binh. The reason, according to Mr. Toan, is that the profit from reselling the winning bids is several times higher than the capital (initial deposit) they put in. If they win multiple lots, the opportunity to “surf the wave” with expected profits becomes even more significant.

According to him, before participating in the auction, professional investor groups are already prepared to “forfeit a small deposit to make a substantial profit.” In addition, contributing capital with many other people in the group also reduces their potential loss.

Sharing the same view, Ms. Do Thi Hong Hanh, CEO of Lac Viet Auction Joint Stock Company – the organizer of many recent land auctions – said that 60-70% of participants in the recent auction were professional groups, “in the business of land auctions.” This group quickly reacts to market information, “knows how to bid to win,” and then calculates the premium to ensure a profit.

Explaining the situation of advertising “loss-cutting” on auctioned land winnings, experts attribute it to investors feeling the pressure of the upcoming payment deadline, along with a declining market as recent auctions have cooled compared to peak levels.

Most recently, 34 land lots in Thach That district were auctioned with the highest winning bid of over VND 56 million per square meter, a 3.3-fold decrease compared to the peak recorded in the January 2024 auction. Similarly, 89 land lots in Thanh Oai district were auctioned with winning bids about 12% lower than at the end of last year.

In a recent report, the real estate service platform OneHousing stated that land transactions in Hanoi in the first quarter decreased by 59% quarter-on-quarter and 54% year-on-year.

The situation of “surfing” auctioned land and then forfeiting deposits has created many negative consequences, causing instability in the market. Assoc. Prof. Dr. Ngo Tri Long, former Director of the Price Research Institute (Ministry of Finance), said that with just a deposit of VND 120-200 million for a land lot, investor groups can create an artificial price benchmark. Brokers will use the winning bid as a “reference point” for many housing segments in the surrounding areas. In the context of a “chaotic” real estate market, investors can profit by reselling their deposits or offloading illiquid inventory.

According to Mr. Long, the situation of mass deposit forfeiture affects the rights of legitimate auction participants. It also wastes resources as the locality has to organize the auction again, affecting socio-economic development plans.

At a meeting on May 15, Deputy Prime Minister Tran Hong Ha also pointed out many worrying signs in the real estate market. Notably, Vietnam’s real estate price increase rate is among the highest in the world, while people’s access to housing is decreasing.

He requested the Ministry of Construction to establish a national database on housing supply and demand, “not to let the lack of transparency cause investors to speculate, push prices up, and disrupt the market.”

Currently, the law does not have specific penalties for individuals who win auctions but forfeit their deposits. According to Decree 102 guiding the Land Law 2024, if the winner does not pay the full amount within 120 days, the auction result will be canceled, and they will only lose their deposit. The Ministry of Finance is studying a plan to tax 20% on the difference between the purchase and sale prices of real estate, similar to corporate income tax. According to many experts, this solution will help curb speculation and price manipulation in the real estate market.