There should soon be more mechanisms to control land speculation by imposing taxes

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There should soon be more mechanisms to control land speculation by imposing taxes on those who accumulate and speculate. Photo: Internet

Land auction price is unusually high

After the auction of 19 land plots in Tien Yen commune, Hoai Duc district (Hanoi) on August 19 with unusually high winning bids, on August 22, the Hanoi People's Committee issued a directive to inspect, detect and handle violations of the law related to unusually high winning bids for land use rights in Hanoi.

19 plots of land in Tien Yen commune were put up for auction with areas ranging from 74 - 118m2, with starting prices of VND 7.3 million/m2. The highest winning price was up to VND 133.3 million/m2, the lowest price was VND 91.3 million/m2, many times higher than the starting price.

The Ministry of Natural Resources and Environment then also sent a surprise inspection team to grasp the situation and report on the land use rights auction in Thanh Oai and Hoai Duc districts.

Official dispatch No. 82/CD-TTg dated August 21, 2024 of Prime Minister Pham Minh Chinh directing relevant agencies to promptly rectify the work of auctioning land use rights, was assessed by experts as issued at the right time and right focus.

Previously, one day after the auction in Hoai Duc district, the Prime Minister also issued Official Dispatch No. 82/CD-TTg to the Ministers of Natural Resources and Environment, Construction, Finance, Justice, and Public Security; Chairmen of People's Committees of provinces and centrally run cities to direct specific work contents to improve the effectiveness and efficiency of land management, improve the real estate market, and promote socio-economic development.

After the Prime Minister's dispatch was issued, the People's Committee of Hoai Duc district (Hanoi) also announced the temporary suspension of the auction of the remaining 20 land lots in Long Khuc area, belonging to lots LK01 and LK02 on August 26.

According to experts from the Vietnam Real Estate Brokers Association, with a low starting price and low deposit (from VND 100 to 200 million), it creates great appeal to buyers. This high winning price reflects the normal reality of the supply-demand gap, when the number of applications participating is many times greater than the number of lots in the auction.

However, the fact that land prices in locations with unremarkable infrastructure and utilities, in a suburban area with the potential for normal price increases, are up to more than VND 100 million/m2, equal to land prices in urban areas and densely populated areas, is abnormal, far exceeding the actual value, and is the result of unhealthy purposes.

Specifically, many investors participating in these auctions are people with a "profession" in land auctions. They often participate with the purpose of "surfing", not caring about the real value, just need to win the auction and then buy and sell immediately to make a profit or are ready to forfeit their deposit if the market does not respond.

Or the more dangerous purpose is to create virtual price of land. These individuals take advantage of the auction deposit to inflate the price of related land. Even disregarding the risks, legalizing the price by paying in full according to the winning bid price, to use this price as a basis to stimulate land prices in outlying districts, causing land prices in many places to escalate, even creating a virtual price

Sudden high auction land prices may create land speculation trend

According to information from Batdongsan.com.vn, according to the price history tool of the Batdongsan.com.vn technology platform, the common selling price of land in Tien Yen commune, Hoai Duc, Hanoi in the second quarter of 2024 is VND 43 million /m2. Over the past year, land prices in this locality have increased by more than 48%. However, the winning land price in the recent auction is still 2 to 3 times higher than the common price level.

Mr. Dinh Minh Tuan, Southern Regional Director of Batdongsan.com.vn, commented that the land auction results with such high prices will make the cost of site clearance for new projects more expensive. With the winning auction price being 2-3 times higher than the average, land owners in the surrounding area have the mentality of pushing up the selling price of their land.

The sudden increase in land prices can also create a trend of land speculation, as many people rush to buy land in the hope of making a profit from the continued increase in land prices. However, this can cause a situation where money is stagnant in land, instead of being circulated in other economic activities.

In order for auction activities to take place transparently and increase revenue for the budget, the Real Estate Brokers Association believes that the State needs to soon have more mechanisms to control speculative activities by imposing taxes, targeting those who accumulate and speculate instead of those who buy real estate for living purposes or to organize production and business, the factor of accumulated assets will decrease.

Tax rates may increase gradually for real estate transactions where the seller has a short holding period or if the real estate owner does not put the real estate into business activities or does not carry out construction after receiving the land...

Taxing real estate in the right direction will limit or eliminate the motivation for people to speculate in real estate because with interest costs and other opportunity costs, owning speculative real estate becomes riskier. Buying and selling real estate to make a profit or creating virtual supply and demand to inflate real estate prices gradually becomes meaningless.

Idle money in the population will therefore be channeled into production and business sectors, creating products and added value for society. This will help the real estate market develop more healthily and effectively in the long term, instead of land fever and price turmoil.