Timely intervention to prevent inflation of housing and land prices.

While the real estate market in many localities remains stagnant, the recent sharp increase in apartment and land prices in Hanoi and some northern provinces and cities has surprised investors. However, the fact that the winning bidder for a plot of land priced at over 100 million VND/m2 in Thanh Oai (Hanoi) forfeited their deposit has led many to realize that this is a tactic used by speculators to inflate prices.

Control multiple resale transactions.

In a document sent to localities last week, the Ministry of Construction noted that the real estate market has recently developed on an unsustainable trajectory and harbors many risk factors. Of particular concern is the phenomenon of some investors and brokers spreading rumors, buying and selling real estate indiscriminately, and creating information chaos in order to drive up real estate prices for their own profit.

The ministry's document refers to the controversial land auctions in the outskirts of Hanoi. According to the agency, the record-high winning bids, many times higher than the starting prices, have negatively impacted socio -economic development and the healthy growth of the real estate market.

To prevent this situation, the Ministry of Construction has requested the People's Committees of provinces and centrally-governed cities to focus on implementing several tasks. These include inspecting and reviewing the real estate business activities of enterprises, investors, trading floors, and brokers in their localities. In addition, relevant agencies need to control the repeated buying and selling of real estate, especially in areas, projects, and apartment complexes experiencing abnormal price increases; conduct inspections and investigations, and take measures to correct price manipulation, speculation, and violations of land laws, real estate business laws, and related laws.

Immediately after the Ministry of Construction issued a reminder, the People's Committee of Khanh Hoa province issued Official Letter No. 9648 instructing relevant agencies to review the organization of land use right auctions in the area 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, especially acts of collusion to manipulate the market, inflate prices to create an unhealthy market that does not reflect reality for personal gain…

According to Mr. Tran Hoa Nam, Vice Chairman of the People's Committee of Khanh Hoa province, to stabilize the local real estate market, the province will continue to promote the development of social housing, effectively implement the project "Investing in the construction of at least one million social housing units for low-income earners and industrial park workers in the period 2021-2030" and effectively implement the "120,000 billion VND credit program".

Meanwhile, Mr. Le Quoc Thanh, Deputy Director of the Khanh Hoa Provincial Department of Finance, said that in 2025, the province will auction off 41 properties (houses and land). These are land plots managed by the Investment and Development Fund and the Urban Management Department of Ninh Hoa town, aiming to generate revenue and supplement resources for development.

In addition, Khanh Hoa province is also focusing on finalizing the zoning plans (scale 1/2,000) in three strategically important areas: the Van Phong Economic Zone (part of Van Ninh district and Ninh Hoa town), Nha Trang city, and the Cam Lam new urban area. Once the plans are completed, bidding and auctioning of new projects can proceed.

Numerous brokerage services selling auctioned land at inflated prices have emerged in the suburban districts of Hanoi. Photo: THUY LINH

Increase the deposit amount and impose heavy penalties.

From an industry perspective, Mr. Le Dinh Chung, General Director of SGO Homes Real Estate Consulting and Development Joint Stock Company (Hanoi), believes that to prevent speculation and price manipulation, the State needs to redefine a suitable land price framework, as the current auction land price framework is lower than the market price.

In addition, raising the deposit amount to 10%-20% of the land plot being auctioned will help minimize speculation and price manipulation by investors. Specifically, Mr. Chung advised that individuals who win the land auction but then do not purchase the land should have their credit rating lowered or be barred from participating in other land auctions. "Managing pricing and auction methods is essential," Mr. Chung emphasized.

According to Dr. Chau Hoang Than, Head of the Department of Administrative Law, Faculty of Law - Can Tho University, in order for land use rights auctions to be optimally effective, the decision to put land up for auction needs to be made uniformly by the provincial People's Committee. It is necessary to review and determine the number and location of land plots and parcels; and to develop a suitable auction plan, avoiding a piecemeal approach that creates scarcity. A list of land plots and parcels for effective auction should be reviewed, organized, and published. In particular, the auction process should avoid an oversupply of land when announced en masse.

"It's premature to conclude that the fact that the winning bids were many times higher than the starting price, as in the land auction in Hoai Duc district, Hanoi, indicates instability, but there is clearly price manipulation in the area. Furthermore, setting a starting price that is too low may not accurately reflect the market price at the time of the auction," commented Dr. Chau Hoang Than.

From a legal perspective, lawyer Nguyen Phuong Lien of SENLAW Law Firm suggests that to prevent price manipulation and market instability, a starting price that is consistent with market value should be set. This is because the starting price serves as the basis for calculating the deposit, and the winning bidder will not receive their deposit back if they fail to pay or pay the full amount.

According to lawyer Lien, although Decree 10/2023/ND-CP has stipulated an increase in the deposit amount for participating in land auctions to 20% of the value of the land plot or area based on the starting price for auction (four times higher than before), it has not been effective because the starting price is still low. "If we keep the starting price low, we must increase the deposit rate higher than the current 20%, because auction participants must be very financially prepared."

"In addition, another solution is to increase the administrative fine for the act of failing to sign a contract for the sale of auctioned assets (abandoning the deposit). Currently, this act is only subject to a fine of 7 million to 10 million VND for individuals (according to point c, clause 1, Article 23 of Decree 82/2020/ND-CP)" - Ms. Lien suggested.

Meanwhile, Dr. Ho Quoc Tuan, Lecturer and Director of the Master's Program in Finance & Accounting at the University of Bristol, UK, cited international experience showing that the only tool to maintain stability in the real estate market is to establish a reasonable tax based on the principle that profits in real estate business should be equal to profits in the business of goods and services. This could prevent price inflation or artificial price fluctuations.

A land plot sales point located right in the auctioned land areas on the outskirts of Hanoi. Photo: THUY LINH

A massive land price surge is unlikely.

Mr. Bui Minh Thanh, Secretary of the Ben Cat City Party Committee, Binh Duong province, said that recently there has been a localized land "fever" in the area, mainly concentrated along the Saigon River in wards such as An Tay, An Dien, Rach Bap… and the area along Ring Road 4. This is evidenced by the bustling number of people conducting transactions at notary offices, and the revenue from land use fees has also increased significantly compared to the same period last year.

However, Mr. Thanh believes that thanks to the new Land Law, speculation and price manipulation have significantly decreased. In addition, the locality is also strictly managing land use planning and functional zoning, as well as actively disseminating information about planning and real estate projects with clear legal status to the people.

Mr. Nguyen Huu Nghia, Director of a real estate company in Binh Duong province, also acknowledged that if the real estate market experiences another boom, speculation and price manipulation will not be as rampant as before, due to two important reasons: firstly, the new Land Law has tightened land prices in each area, thus limiting instances of "buying a 10 billion VND plot of land but declaring only 100 million VND in taxes"; and secondly, the land valuation process for bank loans has become much stricter.

Previously, banks established their own appraisal units, sometimes resulting in the actual value of the land being lower than the bank's appraisal. Now, with independent appraisal units, while not absolutely foolproof, the process is more rigorous than before.

Publicly disclose projects that are ineligible for trading.

In Binh Thuan province, to prevent speculation and price manipulation as the real estate market recovers, the Department of Construction has publicly released a list of 33 real estate projects that still do not meet the conditions for transactions. This includes 17 residential and urban development projects and 16 tourism and resort projects, none of which meet the requirements for real estate business transactions as stipulated by regulations. Most of these projects are located on prime land in Phan Thiet city and neighboring districts and towns.

Previously, these 33 projects were reprimanded by the province because the investors and distributors of some real estate projects in Binh Thuan province were selling and transferring real estate through methods such as reservations, bookings, and registrations to collect money from buyers. These methods are not regulated by the Housing Law, the Real Estate Business Law, or other relevant legal regulations.

Source: https://nld.com.vn/kip-thoi-ngan-chan-thoi-gia-nha-dat-196240916203716217.htm