"The phenomenon of bidding very high prices for some plots of land, then waiving deposits to manipulate the market"
Recently, the results of land auctions in the suburbs of Hanoi such as Hoai Duc, Thanh Oai, Dan Phuong districts... have shocked many people because the winning prices were many times higher than the starting prices. In addition, immediately after the auction, most of the land lots were advertised for sale at a difference of 400-600 million VND/lot. Not only that, after these auctions, the selling price of land in the surrounding market was also immediately pushed up to 5-10 million VND/m2.
Recently, in the auction of 68 plots of land in Thanh Oai district, 55 plots had deposits forfeited, including the highest priced plot of land at over 100 million VND/m2. Of the 13 plots of land with full payment, the highest price was just over 55 million VND/m2.
According to the Ministry of Construction, the recent auction of land use rights has revealed limitations and negative aspects. In the process of organizing land auctions in some places, there are also phenomena of "auction brokers", collusion... affecting auction participants: "The phenomenon of paying very high prices for some land lots and then abandoning the deposit, creating a virtual price level to manipulate the market, buying and reselling many auctioned land lots to gain illegal profits is quite common in many places and is even organized".
The recent auction of 19 land lots in Hoai Duc (Photo: Duong Tam).
Recently, the Hanoi People's Committee issued a document directing units on land use rights auctions. Hanoi requested the City Police to consider professional measures to promptly detect violations of land auctions, and instruct the People's Committees of districts, towns and cities to take measures to prevent violations of auction regulations from continuing to participate in auctions.
In addition, the police force needs to propose solutions to prevent and limit continued participation in auctions for those who have participated in auctions, paid "unusually" high prices to win auctions but did not pay the auction winning money as prescribed.
Hanoi also asked districts to compile a list of cases where they paid higher than market prices to win the auction but did not pay. This list will then be made public on the websites of the districts and the Department of Natural Resources and Environment.
"The group of people who paid a very high price but abandoned the deposit considered this a joke"
Speaking with Dan Tri reporter, lawyer Pham Thanh Tuan - real estate legal expert - said that there are 2 reasons why recent land auctions have attracted a large number of participants.
Firstly, previously, the supply of subdivided land came from project development enterprises and State auctioned land was usually the Land Fund Development Center and organizations. However, from August 1, the Law on Real Estate Business took effect, prohibiting real estate enterprises from subdividing land in special, type I, II and III urban areas.
Therefore, the supply of land has been narrowed. People who want to buy land to build houses can only look for land auctions organized by the State. This type of land has clear legal status and is safe, so it is favored by many people.
The second is the issue of starting price. In 2017, the starting price was determined by the land price adjustment coefficient method. Specifically, the land valuation consultancy organization will determine the coefficient, then submit it to the local land valuation council and the provincial People's Committee for approval. Therefore, the starting price at that time is close to the market price. Thus, it means that the deposit (20% of the starting price) of the participants is also high.
Lawyer Pham Thanh Tuan - real estate legal expert (Photo: NVCC).
However, Decree 12, effective from February this year, requires the determination of starting prices to be organized by the District People's Committee itself, no longer hiring a price appraisal company.
The method of calculating the starting price now is to use the annual land price adjustment coefficient instead of the previous adjustment coefficient method multiplied by the land price list regulated by the People's Committee of the province or centrally-run city. This leads to low starting prices and deposits.
The low starting price leads to many people participating with the mentality of "if it works, it works, if not, then forget it". Besides, the current bank interest rate is relatively low, people do not have many investment channels. So most people still have the mentality of investing in land to create profits.
Discussing this issue, according to Ms. Pham Thi Mien - Deputy Director of the Vietnam Real Estate Market Research and Evaluation Institute (VARS IRE) - the recent land auctions had thousands of participants, while the number of land lots was limited. Clearly showing the problem of supply and demand being out of phase when the demand for investment and housing is very high.
However, according to her, the winning price is much higher than the average, which is difficult for both investment and residential needs to accept. In addition, directly at the auctions, there are people offering to sell at a higher price, showing signs of speculation and price inflation here.
"The current deposit abandonment rate is high and the lots that have been paid in full are all at moderate prices, which means that the high-priced lots that have had their deposits abandoned show signs of speculation," said Ms. Mien.
Regarding the issue of whether there are groups of "big players" participating in speculation and causing market manipulation, Mr. Pham Thanh Tuan said that current laws do not have any regulations to define, describe and punish price inflation in the real estate sector. Therefore, the handling is still only at the civil level, where the auction winner who does not pay the full amount will lose the deposit.
"The law does not have any regulations on penalties for speculative and price-inflating behavior that disrupts the real estate market. We have only regulated some specific forms of speculative and price-inflating behavior such as fraud, deception, and swindling in real estate business; falsifying documents, intentionally falsifying information about real estate... Therefore, it has not been determined what constitutes price inflation or market manipulation, so there is no legal basis to deal with behavior that is similar to price inflation," said Mr. Tuan.
According to him, identifying the behavior of real estate speculation and price inflation is very difficult, but handling it is even more difficult. Because, even if the behavior of price inflation is identified, the penalty, if applied, is not worth the profit they receive.
The handling of those who pay high prices but abandon their deposits under criminal law depends on the investigation process to discover any collusion between the bidder and the auctioneer. If the organization practicing property auctioning discovers any collusion, we must wait for the results from the investigation agency.
According to Mr. Tuan, some individuals and groups of people pay very high prices but do not deposit because they consider this as a joke. The consequences are causing confusion in the real estate market information and at the same time, creating a mentality among people that real estate prices are rising and they all speculate on auctioned land. In fact, the trend of "auction profession" has now appeared.
Besides, the process of land acquisition by the State and enterprises to implement projects will face difficulties because the people whose land is acquired will compare the compensated land price with the auctioned land price.
The recent auction of 68 land lots in Thanh Oai (Photo: Duong Tam).
When organizing land auctions, the State has two goals: to create housing for people and to generate revenue for the budget. The high bid but no deposit has broken both of these goals.
Some opinions say that participants who forfeit their budget deposits will collect more deposits from participants. However, the plots of land that are forfeited will have to be auctioned again, costing the State budget more.
Talking about the consequences of high-priced auctions but deposit cancellations, Ms. Pham Thi Mien expressed her opinion that the market price of land in the auction area will be anchored high. Although the situation of deposit cancellations occurs, people will only remember the high winning price and use it as a reference to sell land. "The consequences will be very big if the land in the auction area is pushed up and anchored unreasonably high, thereby making it impossible for people with real needs to own land and housing," she said.
Expert: Without specific sanctions, deposit abandonment will recur
According to experts, the situation of high auctions and then forfeiting deposits will continue to recur, especially during the transition period, that is, the transition from the 2013 Land Law to the 2024 Land Law when the old land price list issued previously is still being used by localities.
"Everyone says that bidding high and then canceling the deposit is an act of price inflation that causes market manipulation. However, to determine this act, the law must be clearly defined. When there is no regulation, there is no sanction to punish it.
However, even if there is a penalty mechanism, it is still difficult to prevent speculation and price inflation. For example, in the securities sector, there are regulations on market manipulation, but violations still occur. The problem is that the benefits and penalties currently do not exist and will be difficult to match. Obviously, the current law is still lacking," he said.
Regarding the issue of Hanoi publicly disclosing the identities of those who bid high but withdrew their deposits, Mr. Tuan said that this is only an informational measure and will not cause any consequences for those who withdraw their deposits. Because they are still not banned from participating in the auction or their interests are affected.
According to him, the amended Law on Property Auction has added sanctions to handle violations against auction participants in Article 70. Accordingly, in the case of land allocation or lease to implement investment projects or mineral exploitation rights, the auction winner who abandons the deposit, causing the results to be canceled, will not be allowed to participate in the auction for 6 months to 5 years.
However, this provision only applies to cases where the auctioneer conducts investment projects or mineral exploitation rights. The revised Law on Property Auction will take effect on January 1, 2025.
Finding and identifying the subject of real estate price inflation will not be effective. To prevent speculation, there needs to be a real estate tax tool based on quantity or time of transfer. For example, real estate transferred within a month will have a different tax rate than real estate sold after 5 years. In addition, it is possible to tax according to quantity and area compared to the average usage needs of each person.
Sharing about solutions to prevent speculation, Ms. Mien said that there are now clear regulations that if real estate prices increase abnormally by 20% within 3 months or when the market has other fluctuations that affect socio-economic stability, the State will intervene to regulate.
However, to grasp the unusual increase in real estate prices, it is necessary to build a database system and update it regularly so that the State can have timely intervention measures.
At the same time, she said that it is necessary to use tax tools and credit policies to intervene. Specifically, those who own many real estates but do not put them into use but leave them abandoned will have to pay higher taxes. Real estates that are bought and sold in a short period of time will be subject to high taxes. The longer the real estate transfer period, the lower the tax will be.
Regarding credit policy, Ms. Mien said that if the market shows signs of instability, credit levels will be reduced.
For example, normally the capital outlay is 30%, the remaining 70% will be borrowed from the bank. But if the market fluctuates unpredictably, the credit level will be reduced to about 40-50%, the remaining capital will be the buyer's capital. Higher interest rates may even be applied. However, she noted that this measure should only be applied to those buying a second home or more. For those buying a first home to live in, there should be more preferential policies.
In addition, to prevent the situation of bidding high but abandoning the deposit, Ms. Mien said that there should be measures to evaluate the level of reputation. Those who win the auction but abandon the deposit will be banned from participating for a certain period of time.
Source: https://dantri.com.vn/bat-dong-san/o-at-bo-coc-dau-gia-dat-vai-nhom-xem-day-giong-tro-dua-can-nghiem-tri-20240926170832545.htm
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