Abnormalities in the rural land auction market in Nghe An.
In some rural areas, an unusual phenomenon has occurred where, in certain planned zones, the number of applications to participate in auctions has increased significantly, and the winning bids for some lots have nearly doubled the starting price...
Are investors rushing to "create a wave"?
An examination of real estate transactions and land auctions in recent months shows that, compared to two years ago, the real estate market nationwide in general and in Nghe An in particular has recovered to some extent. A representative from the Vinh City Land Use Rights Registration Office confirmed this, stating that land transactions processed through the city's one-stop service center have increased from 220-240 applications per day compared to the previous 180-190 applications per day.
In particular, some recent auctions have seen a surge in the number of applications. In Hung Thong commune, despite only auctioning 92 land plots, there were 1,000 applications, and the auction resulted in a total value of 150 billion VND, nearly three times higher than the planned starting price of 60 billion VND. Similarly, the land auction in Xuan Lam (Nam Dan) in early May 2024 saw a record number of applications with 1,100 bids for 108 land plots.
In Do Luong district, several auctions also attracted a large number of applications, with winning bids many times higher than the starting price. The most recent auction, held on August 12th in the Dong Mau area, near the new Do Luong district administrative center in Yen Son commune, saw the provincial auction service center offer 30 lots for sale, but one lot had a price difference of 1.8 billion VND compared to the starting price (5.969 billion VND / starting price of 4.161 billion VND).
Observing land auctions, we noticed that the general trend is that auctions in rural areas are quite active. However, the large number of applications is due to the manipulation by real estate agencies and investors. For example, in the planned auction area in Xuan Lam commune (Nam Dan district), out of 108 land plots offered for sale, only 7 belonged to local residents, while 101 were purchased by real estate agencies.
In Hung Thong commune (Hung Nguyen district), out of 92 lots auctioned, 90 were won by real estate agencies from Vinh City and other communes in Hung Nguyen. Similarly, 30 lots in the Dong Mau planned area, Yen Son commune, Do Luong district, were mainly bought up by external real estate agencies.
Because the primary purpose was to accumulate plots for investment, immediately after the auction ended, real estate agencies rushed to put up banners and stationed people at the auction site to resell the plots and profit from a price difference of around 100 million VND per plot.This situation is recurring in many areas, leading to land speculation in rural areas, driving up land prices, creating a speculative bubble, and ultimately harming those with genuine needs the most.
Mr. Tran Doan Phu, Head of the Justice Department of Do Luong District, said: "The applications for land auctions in the district mainly come from real estate agencies from Vinh City and Dien Chau. To buy land, many local people in Do Luong District have to buy it from these agencies at a markup, with the lowest being 70 million VND and the highest 200 million VND higher than the initial auction price..."
Monitoring and management solutions are needed.
According to some experts, the phenomenon of land brokers creating artificial price surges at auctions in rural areas is due to the fact that the starting prices offered in recent auctions have been set lower than during the land speculation boom. In addition, according to Decree No. 10/ND-CP, the maximum time to fulfill financial obligations after an auction is up to 4 months, giving investors a chance to sell; if the winning bid is too high and the land cannot be sold after a period of time, the likelihood of forfeiting the deposit is also high...
Representatives from the Asset Auction Service Center of the Department of Justice acknowledged that the auction market has become more active compared to previous periods, but the situation remains unclear. Compared to the same period last year, successful auctions have yielded better results, with winning bids averaging 30-50% higher than the starting price. However, due to the relatively long payment deadline, up to 120 days, it is uncertain whether investors will pay in full, wait for an opportunity to increase the price, or forfeit their deposit.
While land auctions in rural areas are booming, progress remains slow in urban areas, especially in the city center. For example, out of 47 land plots in Trung Thanh and Trung My hamlets, Hung Dong commune, only 8 have been sold after 8 auctions. Mr. Tran Van Tan, Chairman of the People's Committee of Hung Dong commune, said: "The continuous announcements and unsuccessful land auctions over the past period have wasted a lot of time and affected the local infrastructure upgrade investment plan." In Cua Lo town, before the Win Wonders Cua Hoi entertainment complex opened, the land auction market was vibrant but the results were not high. Similarly, in Thai Hoa town, due to the large land plot sizes and high starting prices, many auctions have failed to attract buyers...
Mr. Tran Van Son, Head of the Finance and Planning Department of the Do Luong District People's Committee, shared: "The auction for land exploitation has attracted many participants, and after the auction, some land plots have nearly doubled in price compared to the starting price. This is a positive sign, providing the local budget with additional resources for development investment, and if managed well, the state can also collect various taxes and fees."
However, when the results were announced, it was found that the majority of the winning bidders were not from the area, meaning that local residents in need of housing had to accept buying the land at a markup of 70-200 million VND per plot. This is truly worrying because it indicates price manipulation by speculators.
In Nghe An province, there are approximately 25 establishments and businesses providing auction services. Recently, the Legal Assistance Department of the Nghe An Department of Justice has continuously received complaints and petitions regarding the conditions and capabilities of these auction units. After review and processing, five auction service establishments were found to be in violation of regulations or operating inefficiently, resulting in their dissolution and cessation of operations.
Mr. Nguyen Ngoc Minh, Director of the Asset Auction Service Center under the Department of Justice, stated: To ensure that auction activities operate legally and fairly, and to prevent the practice of trading platforms accumulating shares and creating fictitious transactions to generate hype, relevant authorities need to strengthen inspections, handle violations, and publicize them through mass media for monitoring purposes.
In the long term, the center recommends amending the regulations to increase the deposit amount to 50% of the property value and shortening the time for fulfilling financial obligations to 30 days. In addition, it is necessary to utilize information channels and monitor land resale transactions after auction, ensuring that any additional income generated is subject to income tax.
