Massive abandonment of land auction deposits in Hanoi's suburbs: If not prevented, the market will be distorted

Massive deposit cancellation after paying high land price, expert cites "lesson" from Tan Hoang Minh case

The market has been constantly shocked by the winning prices in land auctions in the suburbs of Hanoi. In Hoai Duc district, the winning land prices ranged from over 90 to 133 million VND/m2. In Thanh Oai district, the winning land prices ranged from 51 to 100 million VND/m2, many times higher than the starting price.

However, immediately after the auction, most of the winners offered to sell their lots for a difference of 400 million to 600 million VND per lot. At its peak, many lots were offered to be resold for 800 million VND more than the winning bid. However, just a few days later, the difference dropped to around 100-200 million VND.

Not only that, after these auctions, land prices in the surrounding market were also immediately pushed up to 5-10 million VND/m2. At that time, brokers did not even dare to buy in to wait for a sale difference because they thought the land prices were too high compared to the surrounding infrastructure.

Notably, the situation of deposit abandonment has occurred massively. For example, in the auction of 68 plots of land in Ngo Ba area, Thanh Than village, Thanh Cao commune (Thanh Oai district, Hanoi), there were 55 plots of land with deposit abandoned, including the winning lot with the price of 100.5 million VND/m2. Of the 13 plots with full payment, the highest price was just over 55 million VND/m2.

Speaking to Dan Tri reporter, Mr. Dinh Minh Tuan - Director of Batdongsan.com.vn in the Southern region - said that the story of the auction in Hanoi lies in the fact that the initial price for buyers to deposit is too low. For example, the average price in some successful auctions is 30 million VND/m2 but the starting price is only 7 million VND/m2. This shows that the input price is too easy.

In addition, the supply of products to the market is too low, causing depositors to want to buy for transfer. Meanwhile, allowing short-term transfers also causes certain limitations, affecting the general market.

Dr. Dinh The Hien - an economic expert - stated that those who really want to buy will often spend time and effort to learn very carefully about land prices and the real estate market in the area. Putting down a deposit shows that they really want to buy.

However, at present, some land auctions in Hanoi have seen massive deposit abandonment. According to Mr. Hien, we need to ask whether the participants really want to buy or sabotage the correct policy of the State?

Deposits were forfeited on 55 plots of land at the auction of 68 plots of land in Thanh Oai on August 10 (Photo: Duong Tam).

"Land auctions demonstrate openness and transparency. This is the right policy and is consistent with the market economy. The State auctions land hoping to sell it at a price that is appropriate to the market. The target audience is those who have a real need to live or invest long-term, not those who are speculating to inflate prices," said Mr. Hien.

According to Mr. Hien, the recent land auctions in the suburbs of Hanoi have shown unusual signs. Those who won high bids and then massively abandoned their deposits are also responsible for disrupting the real estate market. He cited the "lesson" from the Tan Hoang Minh land auction, which also involved paying sky-high prices and then abandoning their deposits. That created a ripple effect, a wave of very high real estate price increases taking place in Thu Thiem.

"From there, I think that the recent high auction and then forfeiting the deposit was intentional and calculated, not simply paying a high price. Maybe, through the auction, they created a buzz in the area where they own a lot of land," said Mr. Hien.

If left unchecked, the practice of abandoning deposits could continue.

Regarding the consequences of bidding high and then canceling the deposit, Dr. Dinh The Hien said that, firstly, it affects the State's auction policy. Second, such auctions will become a tool to disrupt and distort the local real estate market. From there, it will have an unhealthy impact on the general economy and the real estate market. Meanwhile, the State is trying to stabilize the real estate market to promote economic development.

According to Mr. Hien, if there is no drastic action to prevent the practice of paying high and then forfeiting the deposit, the incident could continue at other auctions.

Mr. Dinh Minh Tuan added that after the auctions that caused a stir in the market, not only investors but also ordinary people will think of the mark of 100-130 million VND/m2, which is 25-30km from the center of Hanoi. This mark is also the mark for land prices in this radius to increase abnormally, regardless of the business value or the value of use. Besides, the next auctions, if any, in other areas will have much higher prices.

Unusual winning prices will lead to many consequences for home buyers, investment businesses, and even cause instability for the entire market.

Specifically, people who really want to buy a house will find it difficult to buy during this period when sellers will increase the price compared to the market value. People with money will rush to buy land hoping to make a profit. In addition, people who do not really want to live will focus their cash flow on real estate instead of circulating it for other economic activities. People who need a house do not have enough money to buy, while people with money will put it in land.

The next consequence is that domestic and foreign investment enterprises will have more difficulty in site clearance when implementing large projects and capital will even increase many times.

In addition, the chain effect may occur for both the market and other segments. For example, apartment projects in the center of Hanoi will increase sharply in price, sometimes up to 100 million VND/m2 in the context of scarce land fund, high demand, and increasing new land prices; adjacent projects may also increase by 300-400 million VND/m2... These fluctuations will cause instability for the real estate market in the short term.

Experts say that if we do not prevent the situation of bidding too high and then abandoning the deposit, it could happen again (Photo: Duong Tam).

This expert emphasized that if there are no measures to handle it, the general price will increase. Because after the auction, people will no longer remember how many people have put down their deposits. They will only remember the final result, the final price. This will leave an imprint in people's memory of how many times the price in this area has increased, which will certainly affect the general market.

Sanctions are needed

Regarding preventive measures, Dr. Dinh The Hien said that organizing auctions in localities needs to have a strict and safe plan. In addition, the land valuation process to set the starting price needs to have an appraisal company and take responsibility. In particular, the starting price must be consistent with the market. Therefore, the deposit before participating in the auction must be appropriate.

In particular, there should be measures to prohibit or not allow those who have previously withdrawn their bids from participating in the auction for a certain period of time. Before the auction, the organizing committee must screen the documents like other bidding methods. In addition, each locality can also come up with additional plans and regulations suitable for each place to ensure efficiency for the State and the people.

According to Mr. Dinh Minh Tuan, the solution is to increase input prices and limit participants from "surfing". At the same time, the management agency should develop sanctions, such as a fine 2-3 times higher than the deposit to ensure that participants fulfill their obligations.

Also proposing a solution, Mr. Le Dinh Chung - Member of the Market Research Working Group of the Vietnam Association of Realtors (VARS) - said that it is necessary to have a measure to set the starting price higher than the current one. In addition, instead of stipulating the deposit at 20% of the starting price as it is now, it should be raised to about 30-50%. From there, those who intend to participate in land auctions with bad intentions will consider.

In addition, according to him, investors can be required to transfer a security deposit to the organizer's account. If the investor wins the auction, the security deposit will be retained by the organizer for payment, and if there is a shortage, additional payment will be made.

Source: https://dantri.com.vn/bat-dong-san/o-at-bo-coc-dau-gia-dat-vung-ven-ha-noi-khong-ngan-chan-se-meo-thi-truong-20240918131201640.htm