The CEO of a real estate firm in Hanoi told VietNamNet that he knows groups of people who are professional bidding buyers attending land auctions, bidding for land plots and reselling the land plots at higher prices for profits. The ‘profession’ allows them to earn big money after every land auction.

“There are familiar faces who usually turn up at land auctions, not only in Hanoi, but also in Hung Yen, Hai Duong and Ha Nam. They pay high to buy the land plots at the auctions and then resell the land plots immediately after the auctions for profit,” he said.

In principle, bidding buyers have to pay a deposit, but the required deposit is just VND100-200 million per land plot. If they win the bids to buy two land plots, they just need to sell one plot at VND200-300 million higher than initial prices to make fat profits, even if they give up bidding for the second land plot and lose the deposit money.

“The opportunity cost is really good, while the risk cost is acceptable. They won’t lose big money if they give up bidding and lose deposit money. Meanwhile, if they win the bids, the money they can pocket will be high,” he explained.

Pham Duc Toan, CEO of EZ Property, said after land auctions, land plots are offered publicly at prices higher by hundreds of million dong. As such, auctioning land seems to be a new kind of good in the real estate market, and bidding buyers and resellers have appeared.

A lot of auctions of land plots in suburban areas in Hanoi have been organized recently. At some auctions, the starting prices were just VND10 million per s qm, but the winning prices were over VND100 million per sq m. Analysts believe that the winning prices don’t truly reflect the market value.

In Thanh Oai district, the highest winning price was VND100.5 million per sq m, while in the same area, the land in Thanh Ha residential quarter, with well developed infrastructure and nearer to the central area, has the real market price of VND60-80 million per sq m only.

In Hoai Duc district, bidding buyers paid VND133.3 million per sq m to buy a land plot put into auction recently. Meanwhile, terraced houses in An Khanh Urban Area in the same locality are priced at just VND80-90 million per sq m.

“Why are the land plots in deserted areas so expensive?” Toan said, expressing his worry that land prices in the same area may increase after the auction. If this happens, new real estate price levels would be created, thus heating up the Hanoi real estate market.

Land price inflator

Tran Xuan Luong, Deputy Director of Vietnam Real Estate Market Research and Evaluation Institute, commented that it is a big problem that land prices are inflated and overvalued. Luong attributed this to the ‘tricks’ played by bidding buyers.

Many speculators from other localities attend land auctions with an aim to push land prices up to create artificially high prices. After the auctions, they resell the land plots they buy at auctions at high prices for profit.

“They don’t intend to develop properties on the land they buy at auctions. They just target short term profits, causing the market to fluctuate and preventing those who have real demand for accommodations from accessing land,” he explained.

A report found that at a land auction in Thanh Oai district on August 10, where 68 land plots Ba alley in Thanh Thanh hamlet were put into auction, only two of 1,500 participants were from Thanh Oai and no one was from Thanh Cao commune. Many bidding buyers were from Bac Ninh, Bac Giang, Hai Duong and Phu Tho.

Also according to Luong, another trick used by speculators is inflating land prices. Exploiting the changes of the laws and the application of new regulations, they fabricate news which makes people think that there is a shortage of land, which allows them to sell land at prices higher than the actual value.

Some experts, voicing their concern about the land price inflating, have proposed raising the required deposit on auction attendees to be sure that only those who have real demand for land can buy land at auctions.

Hong Khanh