The Great Land Auction Fiasco: Eradicating the ‘It’s Just a Deposit’ Mentality

Recently, on November 29, Soc Son District held an auction for 58 land plots in Dong Lai Village, Quang Tien Commune, Soc Son District. During the auction, by the fifth round, three plots had reached a bidding price of 30 billion VND per square meter. However, in the sixth round, the bidders suddenly dropped out, causing the auction to be halted.

The following day, on November 30, the People’s Committee of Thanh Oai District organized an auction for 22 land plots in Do Dong Commune, Thanh Oai District. By the seventh round, the highest bid reached 70.3 million VND per square meter. But in the eighth round, the bidders simultaneously stopped bidding, resulting in an unsuccessful auction.

When this information was shared, many people believed that there was an attempt to sabotage the auctions and that strict handling was necessary.

However, according to a leader of the People’s Committee of Thanh Oai District, there was no intervention in the land auction held by the district on November 30.

Regarding the auction in Soc Son, real estate legal expert Nguyen Van Dinh stated that the bidding price of 30 billion VND per square meter was not a form of price manipulation or market disruption. If there was an intention to disrupt the market, the bidders would have offered a price higher than usual but still within a range that would make people question the reasonableness of the price. For example, in auctions in districts on the outskirts of Hanoi, such as Thanh Oai and Hoai Duc, some land plots have been auctioned for over 100 million VND per square meter.

In the case of Soc Son, the bidding price of over 30 billion VND per square meter indicated that the bidder no longer wished to participate due to the extremely high price, beyond their financial capacity. Therefore, they decided to bid an extremely high price and accept the loss of the deposit.

Elaborating on the loss of the deposit, expert Nguyen Van Dinh stated that this could be considered a deliberate attempt to “sabotage” the auction. The bidder was aware and had to be aware that bidding over 30 billion VND per square meter would result in the auction being halted without a winner.

Loopholes in the auction process

Mr. Nguyen Van Dinh, Vice Chairman of the Vietnam Real Estate Association, stated that there are still many loopholes in the land auction process. To improve this situation, he suggested screening bidders based on their financial capacity and implementing regulations on the time frame for land development and transfer. He also emphasized the need to reassess the starting bid price to discourage bidders from forfeiting their deposits.

According to a representative from the Vietnam Auction Joint Stock Company, the partner company that organized the auction with Thanh Oai District on November 30, the current regulations on auctions do not provide a basis for confiscating the deposits of bidders in cases where the auction is halted midway, as in the case of Thanh Oai. Specifically, Clause 6, Article 39 of the Law on Auction of Assets 2023 clearly states the cases in which participants are not entitled to a refund of their deposits. If bidders do not violate any of these clauses, they will not lose their deposits. In the case of Thanh Oai, bidding is the bidders’ right, and they are free to bid as they see fit.

The representative also acknowledged that the current auction regulations are loose and have many loopholes. Meanwhile, many participants thoroughly study their rights and responsibilities and exercise their rights to the fullest.

“While the phenomenon of high bidding followed by withdrawal may seem unusual, determining whether it constitutes sabotage is the responsibility of the authorities. This incident also highlights the need for the authorities to consider amending and supplementing the regulations on asset auctions,” the representative added.

Need for a new Land Price Table

Mr. Dinh also attributed the recent incidents to the fact that many participants in land auctions were willing to bid extremely high prices, even at the cost of losing their deposits. According to Article 159 of the 2024 Land Law, the starting bid price for land use rights auctions is based on the Land Price Table. However, the current Land Price Tables of Hanoi and many other localities are too low, resulting in extremely low starting bid prices. Additionally, the deposit, which is calculated as 20% of the starting bid price, is also very low, making auctions attractive to many participants.

In recent auctions, many participants have been willing to “compete” and bid high prices, thinking that “at worst, they will lose their deposit.” This has led to intense bidding competitions and created a psychological pressure that may have contributed to the desire to sabotage the auction, as seen in the example of Soc Son.

To rectify this situation, expert Nguyen Van Dinh suggested that localities strictly adhere to the provisions of the 2024 Land Law and promptly review and update the Land Price Table to ensure market principles. By aligningsectioning the starting bid prices in land auctions closer to market prices and increasing the deposit amount, auctions will become more professional and healthy, replacing the chaotic situation witnessed in recent times.