The land auction process needs to be reformed.
Following several auctions with unusually high turnout in rural Nghe An province, the outskirts of Hanoi are now witnessing strange occurrences in land auctions.
Information distortion
First of all, it must be affirmed that the land auctions mentioned above were organized by local authorities in accordance with regulations, so the fact that there were many buyers and the winning bids were higher than the starting price is a positive sign and brings a large revenue to the budget. However, recent developments at land auctions in rural areas are showing signs of instability.
The goal of the land use rights auction for rural land plots was to improve housing for rural residents. However, after the auctions, most of the land plots offered for sale were bought up by real estate agencies and investors from outside the area, making them inaccessible to local residents, especially those with average incomes.
This situation occurred at the land auction in early 2023 in Quynh Hung commune (Quynh Luu district), where the district put 56 plots in the Dong Quan planned area up for auction, but a single household in Quynh Hung commune bid for 43 plots.
Similarly, in auctions held in the communes of Dien Hai, Dien Phuc (Dien Chau), Yen Son, Van Son (Do Luong), Xuan Lam, Xuan Hoa, Nam Thai (Nam Dan), and most recently Hung Thong (Hung Nguyen), the majority of land plots, after the results were announced, belonged to people from outside the district. A resident who wanted to buy land in Van Son commune (Do Luong) said: "I know buying it back is several hundred million dong more expensive, but because I'm not familiar with auctions, bidding too low means I won't win, and bidding too high means I'll be ripped off, so I have to buy land through brokers."
Mr. Tran Doan Phu, Head of the Justice Department of Do Luong District, said: The reason why land auctions in rural areas are somewhat affected is due to the recent participation of professional real estate agencies and investors. Currently, regulations on low auction deposit amounts and conditions and standards for participation do not restrict investors who previously forfeited their deposits. Furthermore, from August 1, 2024, many laws related to land and housing will come into effect, which many people do not fully understand, especially the regulations of the Real Estate Law listing 105 urban areas where land subdivision and sale are prohibited, thus creating some degree of psychological manipulation.
Furthermore, the auction regulations are quite flexible; anyone can become an auction investor simply by purchasing the application form and placing a deposit of 10-20% of the starting price of the land plot. The law does not specify a maximum number of land plots that each individual can bid on. After winning the auction, the deadline for payment is within 4 months. During that time, the winning bidder can either pay for the land or "speculate" to make a profit...
In addition to the reasons mentioned above, an official from the District People's Committee involved in supervising land auctions in Do Luong District stated: Similar to the land auction in Thu Thiem (Thu Duc City), there are also some land plots in the area that real estate agencies had mistakenly purchased a few years ago when land prices were at their peak, but before they could sell them, prices plummeted. Therefore, now that neighboring planned areas are being auctioned, they participate in the bidding to push prices up and create a new market for resale.
Promptly rectify the situation.
In light of the rather complex developments in recent land auctions, Prime Minister Pham Minh Chinh has just signed and issued Official Dispatch No. 82/CD-TTg dated August 21, 2024, directing relevant agencies to promptly rectify the land use rights auction process. To improve the effectiveness and efficiency of land management, create a healthy real estate market, and promote socio-economic development, the Prime Minister also requested:
1. The Chairpersons of the People's Committees of provinces and centrally-administered cities shall direct relevant agencies and units to review the organization of land use right auctions in their localities to ensure compliance with the law, transparency, and openness; promptly detect and strictly handle cases of violations of legal regulations in land use right auctions, and prevent acts of exploiting land use right auctions for personal gain and market disruption.
2. The Minister of Natural Resources and Environment shall preside over and coordinate with the Ministers of Justice, Finance, Construction, and the Chairpersons of the People's Committees of provinces and centrally-administered cities to urgently review and inspect the organization of land use right auctions in cases showing unusual activity, handle violations of legal regulations on land use right auctions within their authority, promptly identify inadequacies in legal regulations to advise and propose amendments, adjustments, and supplements to competent authorities to prevent profiteering, and at the same time, handle and propose strict measures to deal with acts of exploiting land use right auctions to disrupt the market, reporting to the Prime Minister before August 30, 2024.
3. The Minister of Construction shall preside over and coordinate with the Ministry of Natural Resources and Environment and the People's Committees of provinces and centrally-administered cities to study and specifically assess the impacts of the recent land use rights auction results, especially cases with unusually high auction results, many times higher than the starting price, on land and housing prices, on the housing and real estate market (supply and demand), proactively regulate and resolve issues within their authority, and propose effective solutions or solutions to mitigate negative impacts (if any), and report to the Prime Minister.
4. Authorities shall direct units and localities to strengthen monitoring, promptly detect, prevent, and strictly handle violations of legal regulations in land use right auctions, especially acts of collusion to manipulate the market and inflate prices to create an unhealthy and unrealistic market for personal gain.
5. The Ministers of Natural Resources and Environment, Construction, and Finance shall urgently guide and organize training for localities on the new policies of the Land Law, the Housing Law, the Real Estate Business Law, and the tasks directed by the Prime Minister in Official Dispatch No. 79/CĐ-TTg.
Analyzing the developments in land auctions in Hanoi's suburban areas, experts and managers on many forums agree that, similar to the previous land auction in the Thu Thiem urban area, auctions in Hanoi's outskirts are being manipulated by speculators and auction houses to control prices.
Therefore, it is hoped that the upcoming new Decree guiding the Law on Auctioning Assets (which has been issued and will take effect from January 1, 2025) will stipulate that auction buyers must deposit 50% of the proceeds and reduce the deadline for payment after the auction to one month instead of four months as currently.
This solution will curb speculation and restore the purpose of land auctions in rural areas, which is to provide local people with more land for population redistribution and to give localities resources for socio-economic development.
In addition, according to representatives from the Asset Auction Service Center (Nghe An Department of Justice) and representatives from several localities, it was suggested that the upcoming Decree guiding the Law on Asset Auctions should have clear regulations, stipulating that anyone who forfeits their deposit should be banned from participating in land auctions for a certain period of 2 to 5 years to create a healthier market.
A real estate and housing management expert suggested that there should be binding regulations stipulating that auctioned land plots can only be transferred after 2-3 years, and if someone transfers the land immediately after the auction and makes a profit, they must pay all applicable income taxes and fees as stipulated...
