Abandoned auctions push up land prices: legislators

By Phan Ca
Wed, June 1, 2022 | 2:54 pm GMT+7

Businesses abandoning auctions have caused negative social impacts, including escalating land prices, the National Assembly's Economic Committee stated Tuesday.

The committee was referring to the recent auctions on some plots of land in Ho Chi Minh City's Thu Thiem new urban area. Winning prices are considered so exorbitant that they surprised the market. So far, two of the four winners abandoned the land, accepting to lose auction deposits, while the remaining two have petitioned for permission to phase out payments, having fallen 40 days behind the payment deadline.

In particular, a subsidiary of Hanoi-headquartered Tan Hoang Minh Group, Viet Star, in late January won an auction in Thu Thiem at the price of VND24,500 billion ($1.07 billion), or $107,000 per square meter, which was seven times higher than the starting price. Tan Hoang Minh later decided to abandon the auction, which meant it lost nearly $25.74 million in deposits.

The economic committee stated that winning auctions and then abandoning them by losing deposits could be "a tactic to inflate prices". Specifically, auctioners could abuse the auctions to heighten prices of their land or the land of companies associated with them in HCMC or adjacent areas.

The auctioners might also abuse auctions to polish their image to the advantage of their future bond issuances, inflate their stock prices or capital contributions in joint ventures, or assist trading in debts or projects.

The committee argued that as soaring land prices would raise input costs and drive up real estate prices, it would constrain firms’ ability to invest in affordable projects, making it difficult for individuals to access housing.

As market prices are references for the state to define land rentals for new projects, the new-level prices would also cause harm to investors as they risk paying higher land rentals, while their peers could be at an advantage as they already paid rentals before the auctions.

Higher costs also make land acquisition, compensation, and resettlement more challenging for projects using land for national defense, security, and public purposes.

An aerial view of Thu Thiem new urban area in HCMC. Photo by The Investor/Ly Tuan.

An aerial view of Thu Thiem new urban area in HCMC. Photo by The Investor/Ly Tuan.

Tan Hoang Minh Group in late January triggered enormous controversy when its subsidiary Viet Star won an auction in Thu Thiem and abandoned it. Many people believe the group sought to gain larger proceeds from its bond issuances, or borrow bigger loans given the huge collateral value, or inflate the price of land surrounding the plots.

Many real estate companies in HCMC have also complained that the auctions in Thu Thiem have caused them serious harm.

Vietnam’s stock market watchdog on April 4 called off nine separate bond issuances totalling about $439 million in value by three companies under Tan Hoang Minh Group due to its provision of “false information”.

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