Vietnam Prime Minister requests land auction inspections as prices skyrocket 'abnormally'

Prime Minister Pham Minh Chinh on Wednesday ordered local authorities to review the organization of land auctions in their localities and strictly handle violations.

He requested them to prevent manipulation of land auctions for illicit gains that might lead to market disruptions.

The prime ministerial request came after auctions in Hanoi’s outlying districts had seen land prices skyrocketing, raising concerns about potential negative effects on the real estate market and the local economy.

A land auction in Tien Yen commune, Hoai Duc district that concluded on early Tuesday morning after 18 hours, with over 700 registrations and 19 plots sold, is a typical example. The highest winning bid hit VND133.3 million ($5,345) per square meter, 18 times the starting price.

Such a spike in land prices is not unique to Hoai Duc. In Thanh Oai district, auction prices recorded last week ranged from VND63 million to VND100 million ($2,526-4,000) per sqm, 5-8 times the initial offer.

In late July, Dan Phuong district organized an auction of 85 land lots in Dan Phuong, Ha Mo and Phuong Dinh communes, with 1,252 applications. A land lot in Ha Mo commune was bid for more than VND99 million ($3,969) per sqm.

The PM requested the Minister of Natural Resources and Environment to coordinate with the Ministers of Justice, Finance, and Construction as well as the chairpersons of the people's committees of provinces and cities to urgently inspect land use rights auctions, handle violations, and propose regulatory amendmends. Auctions with winning prices many times higher than starting ones will be subject to special attention.

According to experts, the continuous increase in prices of auctioned land will push up the prices of nearby land areas, negatively impacting the real estate market.

Nguyen Van Dinh, chairman of the Vietnam Association of Realtors (VARS), argued that the winning auction prices in Hoai Duc, which are many times higher than normal, would certainly affect the real estate market in this area.

"Such a price hike will create virtual price levels for the entire market in that area, making it difficult for people with real needs to buy real estate," he noted.

It will also affect the overall development of the area, as land price hikes often drive up land taxes, land rents and site clearance fees, hindering investors from developing projects under local planning schemes, Dinh added.

He observed that apart from people who had real investment needs, there were those participating in auctions for other purposes.

"Regulators need to make adjustments. Before each land auction, the financial capacity of bidders must be reviewed. They must prove their financial capacity," he suggested.

Dinh recommended that those who abandon auction deposits should be investigated to find out their purposes and be strictly prohibited from participating in future auctions.