The Ministry of Construction has called for a comprehensive review and potential overhaul of the current land auction regulations. The ministry said there must be stricter requirements, both legal and financial, for firms to partake in land auctions in the future.

A recent report from the ministry said there have been many incidents in which significantly higher winning bids in an area have resulted in a much higher local property price and the surrounding areas. They have contributed to higher cost of housing and higher barrier to entry for developers of affordable housing projects, making it more difficult for low-income households to afford homes.

There have been reports of much higher asking prices for properties in the new urban area Thu Thiem in HCM City, likely a result of last December's record-breaking winning bid by property developer Tan Hoang Minh.

Earlier in January, Tan Hoang Minh said it will not go ahead with its purchase of a 10,060sq.m land lot in Thu Thiem at VND2.45 billion (US$108,000) per square metre, the highest price for a land auction in Viet Nam.

Following Tan Hoang Minh, Binh Minh Investment and Commercial trading LLC has pulled out of a bid they won for Lot 3-9 at over VND1 billion per square metre in Thu Thiem. Binh Minh won the bid in the same auction session as Tan Hoang Minh won Lot 3-12.

Binh Minh and Tan Hoang Minh were two among a total of four winners at the auction held on December 10, 2021. The damage done to the country's property market has been profound, according to industry experts and policymakers.

In response to the debacle, Prime Minister Pham Minh Chinh has ordered the ministry to work with local governments to carry out an overhaul of current land auction activities. The ministry has been told to conduct investigations into cases in which the winning bids were reported to be significantly higher than starting price or average price in the region.

An initial review of land-auction activities did not raise too many red flags with a majority of localities across the country reporting bid-winning deals within acceptable price ranges. For example, the average winning bids compared to the asking price were 53 per cent higher in Can Tho, 24 per cent in Dong Thap, 50 per cent in Dak Nong, 34.4 per cent in Tuyen Quang, 17 per cent in Phu Yen and just 20 per cent in Lai Chau. In addition, no irregularities were detected in said localities.

There have been instances in which firms deliberately pulled out of land deals, willing to give up on deposits after successfully setting a higher price range for properties in a region. Oftentimes, the same firms hold numerous properties in the same region and benefit tremendously from the higher price, allowing them to absorb the loss of deposits.

In some cases, bid winners said they could not come up with profitable solutions to develop the land due to the enormous cost. Meanwhile, abnormally high bidding price was said to help incite social unrest and grievance from the population who had to relocate to clear the land.

The ministry has requested assistance from the Ministry of Public Security and the Ministry of Finance to help conduct reviews into cases with irregularities to prevent land speculation, abuses and exploitations of the financial system. — VNS