Bids for Thu Thiem land harm real estate companies

The auction of some prime land plots in Ho Chi Minh City’s Thu Thiem new urban area last December, with winning prices up to seven times higher than the starting price, have caused serious harm to realty firms in southern Vietnam.

Winning prices are considered so exorbitant that they surprised the market. So far, two of the four winners abandoned the lands, accepting to lose auction deposits, while the remaining two have petitioned for official permission to phase out payments.

Phu Dong Real Estate JSC last December finalized its purchase of a land plot of more than 1 hectare in neighboring Binh Duong province’s Di An town to develop an apartment project. However, when the buyer and seller came to the notary office in January to complete the deal, the latter cancelled the transaction, stating the price should be higher since the four plots of land in Thu Thiem were priced at up to VND2.45 billion ($107,000) per square meter at auction.

"It took us more than three months to search for land, negotiate the price then prepare the payment. However, the irrational Thu Thiem auction outcomes deprived us of business opportunities," said Phu Dong JSC Business Director Nguyen Thanh Thao.

A similar case happened to company M.B in District 2. It took the firm lots of time to negotiate to become the sole distributor for a housing project in Binh Duong. Both sides had agreed upon selling prices and relevant issues, but just two days after the Thu Thiem auctions, the project investor decided to delay procedures to recalculate sales prices.

Many developers are facing even tougher issues. Vo Van Be, CEO of Thuan Viet, developer of the New City apartment project in Thu Thiem, said he is much worried since his firm and many others are waiting for HCMC authorities to set land use fees for their projects.

He said his firm has completed procedures to pay land use fees for its project for a long time, but such fees are still unknown because land prices have not been announced. Given the exorbitant winning price for Thu Thiem land, Be said he did not know how much the city administration would charge his company.

In the same shoes are developers like Novaland Group, Him Lam Land, and Hung Thinh Corp, who cannot calculate themselves land use fees payable to the state, therefore failing to issue housing ownership certificates to customers.

Nguyen Van Hau, CEO of Asian Holding Real Estate JSC, said the auction prices could be an important reference for HCMC developers to set new sales prices, which may be much higher.

“The trend of higher prices may expand in Thu Duc city, pushing up prices in HCMC as a whole as developers may manipulate figures,” he said.

Housing prices of the Metropole Thu Thiem project in Thu Thiem have gradually increased since 2018. Similarly, the prices of phases one and two of Empire City have increased by 44-64%. Phases three and four were offered for sale 3-4 years ago at VN120-140 million ($6,123) per square meter, but the current prices are VN160-180 million, which are the highest in Thu Thiem at present.

Le Hoang Chau, Chairman of the Ho Chi Minh City Real Estate Association (HoREA), said if land prices in the megacity go up too much, the city’s housing price stabilizing plans would face challenges or even fail.

He added that the Thu Thiem land auctions are not a reference for current housing prices but for the future since it takes time to develop projects. "It’s an expectation for the future. A misunderstanding could lead to big gaps in supply and demand in the coming years," Chau warned.

Hanoi-headquartered Tan Hoang Minh Group recently triggered enormous controversy when its subsidiary Viet Star won an auction in Thu Thiem. The winning price was VND24,500 billion ($1.07 billion), or VND2.45 billion ($107,000) per square meter, which proved so unbelievably high that 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 the land surrounding the plot.

Tan Hoang Minh later decided to abandon the auction, which meant it lost nearly VND588.5 billion ($25.74 million) in deposit.